Equity incentives guide growth targets, and growth has entered a period of acceleration. The company's business is mainly the production and export of functional shading materials, and is actively building a second growth curve — expanding the finished shading product business through cross-border e-commerce. The overseas shading market has strong consumer attributes, high penetration rate, and broad market space, and the domestic penetration rate is also expected to gradually increase. With its competitive advantage, the company's market share will gradually increase. The company implements an equity incentive plan and clarifies revenue growth guidelines. The revenue target value for 2023/2024/2025 is not less than 6.05/8.15/1.071 billion yuan, respectively. On the one hand, the growth momentum comes from the restorative growth of the traditional shading fabric business under customer development and equity incentives; on the other hand, it comes from the rapid expansion of overseas shading products based on cross-border e-commerce sales. Furthermore, along with the optimization of sales expenses and the increase in the share of high-margin products, an increase in net interest rates can be expected, and the net profit growth rate may be greater than the revenue growth rate.

More than short-term performance, there is more room for long-term growth. According to the company's equity incentive guidelines and development logic, the market appreciates the growth in short to medium term performance, but is still concerned about the bottleneck of long-term growth. In this regard, we believe that the market space for shading fabrics is vast, the company's market share is still very low, and there are many gaps in the market that need to be developed urgently. Compared with domestic and foreign competitors, the company has its own strong competitive advantage. As it enters a superposition cycle of capacity expansion and market development, growth may accelerate, and the development ceiling is far more than that.

ROE is expected to enter an upward channel and drive the return of corporate value. Since 2018, the company's overall ROE has shown a downward trend. In 2018-2022, it was 22%/19%/10%/9%/7%, respectively. The main influencing factors were asset turnover and net interest rate. The company's asset turnover ratio is expected to pick up as fund-raising capacity is released and revenue increases. In anticipation of an increase in the share of high-margin business and a decrease in the cost ratio, the company's net interest rate may recover. Under the dual impetus, the company's ROE will gradually return in the future.

We forecast that the company's earnings per share for 2023-2025 will be 0.71, 1.04, and 1.46 yuan, respectively. We are optimistic about the dual growth of the company's shading fabrics and finished shading products, and there is room for improvement in profitability. Referring to the comparable company's price-earnings ratio, we gave the company 18XPE in 2024, with a corresponding target price of 18.72 yuan. For the first time, we gave it a “buy” rating.

Risk warning

The development of the shading fabric business fell short of expectations; sales growth of overseas e-commerce finished products fell short of expectations; net interest rate growth fell short of expectations; international trade & exchange rate risks.