Domestic panel furniture equipment leader, 2018-2022 return net profit CAGR is 14%, the company is the domestic panel furniture equipment leader, with endogenous growth + brand mergers and acquisitions, product power continues to improve. With the continuous improvement of technical capability, it has gradually gained recognition in the domestic middle and high-end market, and at the same time actively expand overseas markets. The company provides a full range of CNC manufacturing equipment, automatic production lines and intelligent manufacturing solutions for the intelligent production of furniture. Core products include edge sealing machines, multi-row drills and machining centers, etc., and its sales revenue has consistently ranked first in China in recent years. The company's operating income CAGR was 16% in 2018-2022, and the return net profit CAGR was 14%.
The improvement of fine decoration penetration promotes equipment demand, and the global scale of panel furniture equipment is expected to increase to 50 billion yuan in 2025. Due to the weak downstream demand affected by the macro environment and other factors in 2019-2020, the demand of panel furniture equipment industry has been negative for two consecutive years. According to the Duer annual report, the market scale of panel furniture machinery in China and the world in 2020 is about 20 billion yuan and 35 billion yuan respectively. At present, there is much room for improvement in China's urbanization rate, and under the promotion of local government fine decoration policies, brand furniture is expected to fully benefit. We believe that under the dual catalysis of "urbanization + fine decoration", the demand for panel furniture machinery will usher in a breakthrough. According to the data of the Dour Annual report, the size of the Chinese market is expected to be 25 billion yuan in 2025, about 5% of CAGR in 2020-2025, 50 billion yuan in the global market and about 7% of CAGR.
Core logic: a new round of stock equipment transformation is expected to open; domestic substitution + to go global, performance valuation is expected to double enhance the marginal repair of the industrial chain: the transmission mechanism from commercial housing sales to furniture equipment enterprises is: commercial housing sales area-housing completed area-furniture enterprises-furniture equipment manufacturing industry. The revenue of household equipment enterprises is highly correlated with the real estate completion cycle. The year-on-year data of housing completed area in China has rebounded since December 2022, and + 20% in May 2023 compared with the same period last year. Real estate completion has ushered in a recovery inflection point and is optimistic about the repair of downstream demand for household equipment.
Stock renewal demand: with the urbanization rate increasing, housing renewal, demolition, improvement demand and so on are the influencing factors that drive housing sales. The domestic market is expected to gradually enter the era of stock housing, second-hand housing transactions, renovation of housing and other incremental markets bring furniture industry renewal demand.
Valuation is at the bottom of history: the valuation range of the company's historical PE-TTM is about 10-50 times, depending on different stages of the industry boom; at present, the boom is in the bottom reversal stage, considering the incremental drive brought by the company's production capacity and market expansion, the industry chain upside down, the valuation is expected to be gradually repaired.
We expect that in 23-24, the furniture industry is expected to usher in a new round of stock equipment upgrading + incremental investment (fine decoration permeability improvement and domestic substitution) cycle, the company as a shovel seller competition pattern is better than the downstream customized panel furniture manufacturers. The current real estate policy is marginal and the inventory of furniture and equipment dealers is expected to be low as a whole. With a new round of upgrading of inventory equipment expected to start, and after the release of the production capacity of the company's latest fixed projects in Guangzhou and Foshan, the market share at home and abroad is expected to further increase. We expect the company to have more definite room for improvement on the performance side and valuation side in the future, and we are optimistic about the double-click opportunity at the bottom.
Profit forecast and valuation
The company is expected to achieve net profit of 5.6,6.8 and 820 million yuan from 2023 to 2025, an increase of 23%, 21% and 21% over the same period last year, corresponding to 1.32,1.60,1.94 yuan of EPS, and 13,11,9 times of PE before the corresponding period, maintaining the "buy" rating.
Risk hint
1) downstream investment in fixed assets is lower than expected; 2) prices of raw materials fluctuate greatly