The company issued a performance pre-profit forecast. It is expected to achieve net profit of about 110 million yuan to 130 million yuan in 2023 (-165 million yuan in the same period last year), turning a loss into a profit; it is expected to achieve net profit of 66 million yuan to 86 million yuan after deduction in 2023 (-180 million yuan for the same period last year), which will also reverse losses.

The quality of operations improved, and performance turned losses into profits. The company expects to achieve net profit of about 110 million yuan to 130 million yuan in 2023 (-165 million yuan in the same period of the previous year), turning a year-on-year loss into a profit; it is expected to achieve net profit of 66 million yuan to 86 million yuan after deduction (-180 million yuan for the same period last year). Looking at the 2023Q4 single quarter, the company is expected to achieve net profit of 35.0295 million yuan to the mother (-184 million yuan in the same period last year), and is expected to achieve net profit of 11.1569 million yuan to 31.1569 million yuan (-191 million yuan for the same period last year). In 2023, the company's non-recurring profit and loss amount was about 46 million yuan. The main source of growth was the following three aspects: First, for real estate clients' debt-bonded real estate, the company carried out accounting treatment according to debt restructuring standards to confirm debt restructuring benefits. At the end of 2023, the company carried out debt restructuring with Zhongliang Real Estate, Zhongnan Real Estate, Longguang Real Estate, Greenland Holdings, Guiyang Hongyi and enterprises under their control in order to reduce the risk of bad debts and losses in accounts receivable. Second, the operating performance of the company's foreign shareholding companies improved during the reporting period, and earnings from changes in fair value increased. Third, government subsidies included in current profit and loss increased during the reporting period.

The architectural ceramics business bucked the trend and increased revenue, and the gross margin of automotive interior/fireproof panels improved. In 2023, the company achieved new breakthroughs in sales of architectural ceramics products and automotive interior finishing materials. 1) Building ceramics business: Orders for architectural ceramics increased, and revenue increased by about 21% year-on-year in 2023, respectively. According to data from China Ceramics Network, the cumulative production of 2023H1 ceramic tiles in China fell 15.1% year on year. Compared with the industry, the company's ceramic tile business has achieved contrarian growth. On the one hand, considering Eagle's asset-light model, it is beneficial for OEM production capacity to quickly achieve a national layout and accurately respond to regional needs. On the other hand, the company gradually upgraded from providing a single decorative material to providing overall space delivery services through the new model of “tiles+rock plate+wall panel+floor”. 2) Automotive interior business: In 2023, China's automobile production and sales volume reached 30,113 million units and 30.94 million units respectively, up 9.3% and 12.0% year-on-year respectively, with annual production and sales both reaching record highs.

Benefiting from the increase in the domestic automobile boom, the revenue of automotive interior finishing materials increased by about 15% year on year, and gross margin increased by about 2% year on year. Currently, the company's automotive interior product customers cover well-known domestic and foreign automobile manufacturers such as BYD, Aian, Changan, Smart, GAC, Xiaopeng, Geely and Great Wall. 3) Fireproof board business: Revenue of fireproof board products increased slightly, benefiting from the increase in domestic sales of high-margin products. The gross margin of fireproof board increased by about 6% year-on-year.

Extend the pan-home furnishing industry chain and build a complete value chain. Through category expansion, brand acquisition, and channel construction, the company gradually transformed from a single product manufacturer to be able to provide consumers and customers with efficient, environmentally friendly, one-stop complete delivery services and medical transformation services. In 2021, the company acquired Yingpai Ceramics and established two major complete brands, “Eagle Life” and “Eagle Renovator”, based on the three major ceramic brands “Eagle, Eagle Brand 2086, and Huapeng”. At the same time, the company used refined management experience to enhance the efficiency and efficiency of Yingpai production management and supply chain management. In addition, the company recently announced that it plans to acquire 10% of Zhejiang Ruixin's shares to complete 100% of its holdings. The company's acquisition of Yingpai and Zhejiang Ruixin enabled the ceramic business and fireproof board to be integrated into the layout of the Tian'an New Materials Pan-Home Furnishing Industry Chain, and opened up the entire production, sales and service supply chain process.

All three businesses are in the phase of revenue growth+profit improvement, and maintain an “increase in wealth” investment rating. The company's traditional business has a clear first-mover advantage. After active mergers and acquisitions, it has formed a three-dimensional collaborative organizational structure of “marketing front desk, empowering the middle office, and supporting the back office”. The operating efficiency of Yingpai ceramic tiles has improved markedly, and Ruixin fireproof panels have helped open up the field of medical renovation. Considering the steady, moderate and positive trend of the company's main businesses, we raised our profit forecast. We expect the company's EPS for 2023-2025 to be 0.57 yuan, 0.92 yuan, and 1.14 yuan respectively, and the corresponding PE will be 17.3x, 10.6x, and 8.6x respectively, maintaining an “increase in holdings” investment rating.

Risk warning: Real estate and infrastructure investment growth has declined, raw material and fuel costs have risen sharply, and automobile sales have declined.