The company is the largest ODM manufacturer of outdoor leisure furniture and supplies in China. The company's products mainly include outdoor leisure furniture, umbrellas, tents, etc., which are mainly sold to the United States, Germany and other developed countries and regions. Lowe's Companies Inc, The Home Depot Inc, Carrefour and other large international supermarkets and outdoor leisure products stores have established a long-term cooperative relationship. The products are mainly leisure furniture, and the sales areas are mainly in Europe and North America. By product classification, the income of 2019H1 leisure furniture and shade products is 1.972 billion yuan / 697 million yuan respectively, accounting for 71% of the total revenue respectively; by region, the income of 2019H1 in North America and Europe accounts for 53% and 41% respectively.
The performance of the income side is sound, orders gather to the leader under the trade friction environment, and the main business profits are expected to be repaired. The company's overall revenue over the years is relatively sound, and the marginal improvement over the past 19 years is significant.
During the period 2006-2017, the company's revenue CAGR11 was 12%, which basically reflects the company's robust R & D, production and sales capabilities. After excluding the impact of non-recurring items' profit and loss on the company's net profit, the company's main business profit performance is more robust. In the environment of trade friction, orders are concentrated to the leader, and the company itself has made a breakthrough in channel and production management in the past two years. In the production year of 2020, the negative impact of trade friction on the company has been exhausted. It is expected that the company's profitability will pick up steadily in the future.
There is an off-peak season in production and sales, with improved marketing layout, stable customer relationship and production expansion plan to support sustained growth. As the company's main customers are distributed in Europe and the United States, the peak consumer season is from March to September each year, while the company's production season is concentrated from September to April of the following year, the company's cash flow and income fluctuate seasonally. From the point of view of the sales side, the company has a global marketing system, customer concentration is relatively stable, and Europe has improved rapidly in recent years; from the production side, the company plans to invest 500 million yuan to build an outdoor leisure products production line project in Henan Province. it forms a strong supplement to the company's original production capacity. These will support the long-term and steady development of the company as a leader in the industry.
Dividend planning and incentive programs demonstrate management confidence: in order to fully mobilize the enthusiasm of core management and employees and achieve consistency of the interests of the company, shareholders and employees, the company plans to roll out the employee stock ownership plan from September 2019. In addition, under the trend that the improvement of internal management and the improvement of the external environment has pushed the performance out of the trough and steadily upward, the superimposed company has more realizable financial assets on its accounts. in December 2019, the company announced a three-year shareholder return plan for 2019-2021, promising cash dividends of no less than 60 per cent. These two measures fully demonstrate the management's confidence in the future of the company.
Profit forecast and investment rating: the company's 2019-2021 performance is expected to be 420 million / 630 million / 760 million yuan, with a growth rate of 494%, 48% and 20% respectively, corresponding to a price-to-earnings ratio of 23, 15, 13. Considering that the company is a typical target with low valuation and growth, as well as the attribute of high dividend, it is covered for the first time and given a "buy" rating.
Risk hint: great changes have taken place in the international trade environment, the progress of production expansion in Henan is not as expected, and the risk of exchange rate fluctuations
