Q3 Net profit increased year-on-year, maintaining the “increased holdings” rating
The company released its three-quarter report. 23Q1-Q3 achieved revenue of 1,768 billion yuan (yoy +27.3%), net profit of 78.73 million yuan (yoy +65.35%), net profit of 78.93 million yuan (yoy +95.3%), and net profit of 78.93 million yuan (yoy +95.3%). Among them, Q3 achieved revenue of 676 million yuan (yoy +11.2%) and net profit of 43.31 million yuan (yoy +574.4%). The company's profit performance in the first three and single three quarters was relatively good, mainly due to: 1) the company strengthened refined factory management and reduced costs and efficiency; 2) the reduction in exchange losses after repayment of foreign currency loans; and 3) the Qinzhou plant formed a new profit growth point after it was put into operation. Considering that demand is still recovering, the revenue forecast was slightly lowered. Net profit for 23-25 is estimated to be 1.31/1.56/179 million yuan (previous value 1.50/1.84/219 million yuan), corresponding EPS is 0.11/0.14/0.16 yuan, and BPS is 2.57/2.70/2.86 yuan. Referring to the company's average value of 1.35 times PB (LF) since 2018, the target price is 3.47 yuan (previous value: 3.48 yuan), maintaining the “increase in holdings” rating.
The Qinzhou factory's increased contribution helped its revenue performance outperform the market, demonstrating that its leading edge was affected by the transmission of the real estate cycle and the slow pace of consumption recovery. Since this year, household consumer demand performance has generally been weak. According to data from the Bureau of Statistics, retail sales of furniture increased by 3.1% from January to September '23 to 108.1 billion yuan. As an upstream supplier to the home furnishing industry, the company gradually formed a stable customer base after the Qinzhou factory was put into operation. The expansion of new customers around the Huizhou factory progressed well, the product side promoted product differentiation and upgrading, the share of middle and high-end panels increased, and revenue grew against the trend. Looking at 23Q1/Q2/Q3, quarterly revenue increased by 12.9%/64.8%/11.2% to 4.25/6.68/676 billion yuan, respectively, and the revenue performance was superior to the industry market.
In Q3, gross sales margin increased by 3.17 pct year on year, and cash flow performance was better 23Q1-3. Sales margin also fell 1.44pct to 9.5%. We judge that this was mainly due to pressure on wood-based panel prices and a decline in the revenue share of the forest business with high gross margin. Among them, Q3 single-quarter gross margin increased by 3.17 pct to 10.9%, mainly due to the company's strengthening of cost reduction and efficiency, and it is expected that Q4 gross margin will continue to recover. The expense ratio for the 23Q1-3 period also fell 2.74pct to 6.1%, of which the sales expense ratio was 0.6%, the same as the previous year; the management+R&D expense ratio also fell 1.42pct to 5.5%; and the financial expense ratio also fell 1.32pct to -0.1%, mainly due to the company's exchange losses and reduced interest expenses. In addition, the net operating cash flow of 23Q1-3 increased by 154.78% year-on-year to 258 million yuan, mainly due to: 1) increased sales payback due to increased revenue; 2) reasonable control of inventory inventories to reduce inventory consumption; and 3) increased cash flow from the Qinzhou plant.
The leader in the wood-based panel industry, with high quality and rich customer resources
On the manufacturing side, the company has 3 fiberboard factories in Nanning, Baise, and Chizhou, Anhui, and 3 chipboard factories in Nanning, Guangxi, Qinzhou, and Huizhou, Guangdong, with a total production capacity of 1.8 million meters. At the same time, the level of fine management has been improved through intelligent manufacturing, leading manufacturing advantages. On the sales side, the company's customers are widely distributed in various fields such as customized and finished furniture, wooden floors, wooden doors, curtain products, PCB circuit boards, washing machine covers, real estate, etc., and the customer resources are high quality and rich.
Risk warning: downstream demand falls short of expectations, raw material costs are rising, and customer expansion falls short of expectations.