Incident: The company's revenue continued to pick up in 23Q2 and 23Q3, and the Federal Reserve raised interest rates or came to an end (pressure on the overseas economy and real estate market eased, which contributed to the increase in orders from China's export chain companies). We believe that export chain companies may usher in a small cycle of revenue growth. According to the 2023 quarterly report released by the company, the 23Q3 company achieved operating income of about 175 million yuan, a year-on-year increase of about 26.14%, achieved net profit of about 27.58 million yuan, an increase of 11.55% over the previous year, and net profit after deducting non-return to mother was about 26.82 million yuan, an increase of 17.95% year-on-year.

Comment:

Promote finished shading products to help increase revenue. 2023Q3 achieved an impressive year-on-year revenue growth rate of 26.14%. We expect it to be inseparable from the company's efforts in the finished shading product business (in the first half of 2023, revenue from sales of finished shading products on overseas online platforms such as Amazon increased 240.85% year on year, achieving explosive growth).

The gross margin remained high, and investment in sales expenses was increased. The company's gross margins from 22Q1 to 23Q3 were 33.8%, 34.0%, 31.2%, 38.3%, 36.5%, 39.4%, and 39.5%, respectively. We believe that the company has broken out of the 2022 gross margin trough. The 23Q3 sales expense ratio surged 6pct to 14.9% year-on-year, and the company increased its business development efforts and increased investment in sales expenses.

The expansion of the finished product market is beginning to bear fruit. The company plans to expand the finished shading products department, using offline and online marketing strategies at home and abroad, to test overseas e-commerce business for the foreign finished product sales market, and continue to expand overseas customers by establishing sales channels through overseas online platforms such as Amazon; for the domestic finished product sales market, the company has expanded the service scope of offline direct offices, with a professional sales team and installation service technical team. In the first half of 2023, sales revenue from overseas online platforms such as Amazon increased by 240.85% year-on-year, achieving explosive growth; 33 domestic offices have been set up nationwide, responsible for sales of finished shading products and after-sales installation technical services, covering more than 40 cities.

Give it an “better than the market” rating. The company's sunshine fabric business is stable and stable, providing abundant cash flow, and the results of finished sunshade products are beginning to show results. We expect net profit to be 1.11, 1.44, and 174 million yuan respectively from 2023 to 2025, corresponding EPS of 0.81, 1.05, and 1.27 yuan/share. Based on comparable company valuations, we will give the company 16-20 times PE in 2024, corresponding to a reasonable value range of 16.80 to 21.00 yuan, and give it a “superior to the market” rating.

Risk warning. Demand declined more than expected, and there is a risk of exchange rate fluctuations.