A leading domestic panel furniture machinery company, strong demand for furniture supports continued growth in performance. The company focuses on the field of panel furniture machinery. In recent years, the revenue indicators of furniture enterprises in China have shown an increasing trend. According to data from the National Bureau of Statistics, the revenue CAGR of enterprises above scale in 2011-2016 was about 11.39%, and the revenue in 2016 reached 856 billion yuan. Strong demand for panel furniture is driving manufacturers to buy and update equipment in large quantities. As a leading enterprise in the panel furniture machinery industry in China, the company's orders are growing rapidly. According to the company's announcement, in 2016, the company achieved revenue of 503 million yuan, an increase of 8.26% over the previous year, net profit of 66 million yuan, an increase of 32.39% over the previous year, 2017Q1 performance achieved revenue of 139 million yuan, an increase of 48.85% over the previous year, and net profit of 17 million yuan, an increase of 71.04% over the previous year. The company currently has plenty of orders on hand, and is expected to continue to grow at a relatively rapid pace throughout the year. The trend of custom furniture is on the rise, and automated production equipment will become a competitive field in the future. With the increase in individualized consumer demand and the space utilization requirements of small and medium-sized homes, custom furniture has begun to rise in China. According to the Zhiyan Consulting Report, the current penetration rate of domestic custom furniture is around 20%, far below the level of more than 70% in Europe and the US. There is huge room for growth in the long run. According to the performance estimates of custom furniture companies such as Sophia and Hollyke, the current revenue growth rate of domestic custom furniture companies is over 30%, which is significantly higher than the overall growth rate of the furniture industry. It is estimated that in the next 5 years, the CAGR of domestic custom furniture will reach more than 18%, and the market size will reach 16.6 billion yuan by 2020. Under the custom furniture model, numerical control equipment and flexible production lines have become the key to balancing the contradiction between individual furniture needs and large-scale production. The expansion of the custom furniture market will surely release a large demand for equipment upgrades. The company's technological advantages are obvious, and the processing center is expected to become a new growth engine. The company actively grasps the new market opportunities brought about by the custom furniture trend, increases the intelligent upgrading of equipment, and establishes barriers to competition. The flexible production unit and high-end CNC equipment of the processing center independently developed by the company are fully suitable for flexible production of customized furniture. The company can provide furniture manufacturers with overall customized furniture solutions, support other manufacturers' equipment to optimize equipment connections and production layout, and cooperate with the order unpacking system to unpack orders, schedule production, etc., to achieve automated and intelligent production. In 2016, the flexible production unit of the company's processing center achieved revenue of 112 million yuan, a year-on-year increase of 182.46%, and the share of processing centers in total revenue rose to 22%. Nanxing Equipment has industry-leading R&D capabilities. The company has 116 R&D personnel, accounting for 11.68% of all employees, and the company invested 18.39 million yuan in R&D in 2016, accounting for 3.66% of revenue. The company currently has rich product reserves in the fields of processing centers and intelligent edge banding machines. Driven by the trend of customized furniture, intelligent equipment such as processing centers is expected to become a new growth engine. Investment advice: The company is a leading domestic panel furniture equipment enterprise. It has many high-end core products, and will fully benefit from the custom furniture trend. We expect the company's revenue from 2017 to 2019 to be 644 million yuan, 865 million yuan and 1,193 million yuan respectively, with growth rates of 28.1%, 34.3%, and 38.0%, respectively, and net profit growth rates of 45.6%, 38.9%, and 41.4% respectively, with outstanding growth; the initial buy-A investment rating was given, with a target price of 51.00 yuan for 6 months. Risk warning: Demand for custom furniture falls short of expectations, and market competition is intensifying.