Main points of investment

Marketing promotion efforts to increase the release of superimposed engineering business, driving Q3 revenue to accelerate growth: during the period, the company through multi-channel expansion and increase marketing efforts to actively expand the market, revenue scale to maintain rapid growth. From a quarterly point of view, the company's Q1-Q3 achieved revenue of 89 million yuan, 198 million yuan and 167 million yuan respectively, an increase of 34%, 33% and 55.8% over the same period last year, mainly due to increased marketing efforts and new product promotion by the company during the period. at the same time, Evergrande order implementation brought about engineering channel increment. Since the second half of 16 years, the company has increased its marketing efforts and engineering business expansion, and its revenue has maintained a growth of more than 30% for four consecutive quarters. The market expansion effect is more obvious, and the market share has increased rapidly.

The gross profit margin fell 4.5 percentage points from the same period last year, mainly due to the increase in the proportion of basic modules with relatively low gross profit margin. During the period, the company achieved a gross profit margin of 45.12%, down 4.5 percentage points from the previous year. As the products in marketing and engineering business are mainly basic modules with relatively low gross profit margin, we expect that the volume growth of the basic module will lead to an increase in its revenue share, resulting in a decline in the overall gross profit margin. At the same time, with reference to the financial data of the China Daily, it is expected that the basic module products will be affected by the rising prices of major raw materials such as aluminum and steel, and their gross profit margin will also decline.

Marketing and promotion efforts have been continuously strengthened, and the rate of sales expenses has increased significantly. During the period, the company achieved an annual net interest rate of 20.1%, a decrease of 6.1 percentage points compared with the same period last year. The decline in net interest rate was larger than that of gross margin, mainly due to the increase in expense rate. During the period, the company's expense rate was 24.2%, an increase of 5.8% over the same period last year, mainly due to the increase in sales expense rate. 1) in the first three quarters, the company's sales expenses nearly doubled compared with the same period last year, and the sales expense rate was 13.84%, an increase of 3.7%. The company began to strengthen its brand and advertising efforts in the second half of last year, and continued to strengthen since the beginning of this year. Successively launched a quality of life festival, CCTV advertising and other activities, resulting in a substantial increase in advertising expenses during the period It is expected that there will be a significant increase in the company's advertising fees and dealer decoration subsidies during the period. 2) the rate of management expenses was 11.64%, an increase of 1.4% over the same period last year, mainly affected by the increase in consulting fees of the company and the increase in the cost of managers in the new holding subsidiaries.

Investment income thickens company performance: during the period, the company achieved investment income of 10.89 million yuan, mainly from investment in financial products, which was only 360000 yuan in the same period last year; after deducting non-recurrent profit and loss, the company's return net profit decreased by 5.5% compared with the same period last year.

Investment suggestion: as the leader in the integrated ceiling industry and the only listed company, the effect of brand promotion, management optimization and channel adjustment has gradually emerged in the past few years, multi-channel expansion and strengthening marketing efforts to promote terminal sales since the beginning of this year, at the same time Evergrande project business orders have begun to carry out supply, resulting in sustained and rapid growth of revenue scale and rapid increase in market share. We estimate that the company's EPS from 2017 to 2019 will be 1.66,2.28,2.87 yuan respectively, corresponding to 33,25 and 20 times PE respectively, maintaining a "buy" rating.

Risk hint: the decline in real estate sales is higher than expected, and the new business expansion is lower than expected.