Container/wind power paint advantage leader, product/brand/service advantages support growth.
The company has been deeply involved in the field of industrial coatings for more than 20 years, with outstanding product technical strength. The downstream customers cover high-quality customers for containers and wind power. The brand influence continues to expand, and field service capabilities bring long-term stickiness. The company has gradually grown into a high-quality private leader in container coatings and wind power blade coatings, with market share exceeding 20% (2022) and 50% (2023H1) respectively, winning the title of the wind turbine blade coating individual champion, and expanding the wind turbine tower coating business, which is expected to further increase the market share in the segment. Revenue in 2019-2022 increased from 701 million yuan to 1,387 million yuan, CAGR 25.56%, net profit to mother increased from 29 million yuan to 260 million yuan, CAGR 107.40%, and net interest rate increased sharply from 4.16% to 18.75%. Among them, 2020 and 2021 were affected by the explosion in demand for wind power and containers, respectively, and the company's revenue performance increased year-on-year.
The competitive pattern of high barriers is highly concentrated, and the recovery in downstream demand promotes performance recovery.
Industrial coatings have high barriers of technology and certification. The market is highly concentrated, new brands are difficult to enter and the cycle is long, and the position of leading companies is relatively stable. At present, environmental protection requirements for industrial coatings are becoming stricter, and the trend of domestic substitution is gradually emerging, which is expected to provide development opportunities for domestic brands with outstanding product technology. On the demand side, 2024-2025 is a major year for container ship deliveries, and container production is expected to pick up strongly. It is estimated that 2024-2025 will be 2.39 million TEU and 3.25 million TEU (only 1.30-1.5 million TEU in 2023), which will drive the release of demand for container coatings; wind power installations continue to grow, and both blades and towers create paint demand, benefiting from the recovery in downstream demand, and the company's short-term performance can be expected to recover quickly.
Expand marine and new energy coatings, and create long-term growth with production capacity+products.
Based on its main business, the company lays out marine coatings, photovoltaic frame coatings and energy storage coatings businesses. It has carried out product research and development, and has technical reserves to create new growth points. The company has product certification advantages for terminal shipowners in the container coating industry, and is expected to collaborate with the development of marine coatings and enter the global marine paint market of about 38 billion yuan. In the field of photovoltaic frame coatings and energy storage coatings, the company has carried out product technology research and development or industrial chain strategic cooperation to create a new growth pole. As the IPO fund-raising project progresses, the company's total paint production capacity is expected to increase from 90,000 tons/year to 140,000 tons/year in the future, helping to expand production scale, improve location advantages, and optimize product structure.
Investment advice:
The company is a high-quality leader in the high-barrier segment of the industrial coatings industry. It has outstanding product technical advantages, abundant downstream high-quality customer resources, product strength, brand power and coating service capabilities to create industry competitiveness, and its market share in the container and wind power blade coatings field is rapidly increasing. The company is actively expanding its business segment and expanding wind power tower coatings. It has received orders for tower paint one after another, and is expected to quickly achieve market promotion. Using the resource advantages of shipping customers in the container coating sector, the company lays out marine coatings to create a long-term growth support point. In the future, the company's total paint production capacity is expected to increase from 90,000 tons/year to 140,000 tons/year, and production capacity and location advantages will increase simultaneously. In 2024, container production is expected to pick up strongly, which is expected to drive a rapid recovery in the company's performance and release long-term demand in the wind power and shipping markets. We are optimistic about the long-term growth brought about by the company's increased market share and new business expansion as a leader in the high-barrier industry. For the first time, we gave the company a “buy-A” rating. Based on the overall valuation level of comparable companies, the company was given a PE valuation of 20 times in 2024, corresponding to a target price of 55 yuan for 6 months.
Risk warning: Economic growth falls short of expectations; container demand recovery falls short of expectations; wind power installed capacity falls short of expectations; risk of rising raw material prices; risk of deterioration in customer operations.