Investment highlights:
A leading enterprise in the domestic daily-use porcelain industry. The company is a daily-use porcelain supplier located in the middle and high-end markets, integrating R&D, design, production, sales and service capabilities. After years of operation, the company has developed strong process technology and marketing channel advantages, forming core competitiveness. The company's main products include daily-use porcelain, fine porcelain and ceramic wine bottles. The products are mainly sold overseas through the ODM/OEM model, and this business accounts for about 80% of revenue. In 2014, the company achieved operating income of 307 million and net profit of 48.57 million, up 5.32% and 13.2% respectively over the previous year.
Don't invest in early technology; e-commerce helps private brands take off. Since its own brand lacks influence, there is a risk that products will be replaced, so in recent years, the company decided to continue to invest in building its own brand through the form of “online sales and operation+offline brand promotion”. The company joined Beizao Technology in December 2015 and entered the field of social e-commerce operations, using the advantages of a professional team to make up for the company's shortcomings in the fields of social marketing, sales channel management, customer relationship management, and e-commerce operations for daily necessities. Furthermore, the company invested offline to build a display center to concentrate the brand promotion process offline, enhance consumers' intuitive perception of products, and further expand brand influence.
Set up an industrial investment fund and plug in the wings of the “Internet.” In August 2015, the company and Qianhai Chuangying jointly set up an industrial investment fund with an investment scale of 800 million yuan, focusing on equity mergers and acquisitions in emerging industries such as “Internet +”. The establishment of an industrial merger and acquisition fund this time can, on the one hand, effectively revitalize the company's own capital and transfer part of the capital to investment areas with high growth and high returns, which helps to contribute richer returns to shareholders; on the other hand, the industrial investment fund, as the company's own investment platform, can use the professional advantages of professional investment institutions to seek excellent investment targets in emerging industries, achieve synergies with the company's original daily-use porcelain business, and create a new industrial channel for the ceramics industry. Fundraising projects have greatly reduced pressure on production capacity. The capital raised when the company went public was mainly used to expand the daily-use porcelain production line. Currently, the company's capacity utilization rate and production and sales rate remain high, and production capacity bottlenecks have become the main obstacle limiting the company's development. This construction project accounts for about 60% of the existing daily-use porcelain production capacity, which will effectively relieve the pressure on the company's production capacity.
Profit forecast: In a situation where the growth rate of daily-use porcelain OEM/ODM business demand is slowing down, increasing investment in private brand building can effectively increase the company's gross margin level, optimize the product structure, and further enhance its own development capabilities. At the same time, the company is actively entering emerging industries such as e-commerce through industrial funds and direct investment, which is conducive to the expansion of traditional business channels and future business transformation. Furthermore, the company's fund-raising project will provide strong production capacity support for the company's future development. In summary, it is estimated that in 2015-2017, the company achieved net profit attributable to the parent company of 40.45 million, 58.98 million yuan, and 68.93 million yuan respectively, and EPS was 0.46, 0.67, and 0.78 yuan/share respectively, giving it a “buy” rating. Risk warning: (1) fluctuations in raw material prices; (2) poor progress in fund-raising projects; (3) the impact of exchange rate fluctuations.