Key points of investment

The company released its annual report for the year 23, achieving annual revenue of 640 million yuan, +27.7% YoY net profit/net profit of 9113.8/87.922 million yuan, +11.1%/+15.9% YoY, Single Q4 achieved revenue of 190 million yuan, +39.8% YoY, net profit attributable to mother/ net profit of 1529.1/15.416 million yuan, respectively. Sufficient order revenue accelerated quarterly, and profit fluctuated due to increased sales expenses.

The unit cost of shading fabrics dropped significantly. Revenue from finished shading products doubled. By product, revenue from shading fabrics was +9.7% to 470 million yuan, gross margin was +3.9 pct to 36.5% year on year, and production/sales volume was +31.2%/+20.9% year-on-year to 4224/39.5 million square meters, respectively. The average cost/average unit price was -21.2%/-9.3% to 7.1/12.0 yuan/square meter, respectively. Among them, revenue of sunshading fabrics/shading fabrics/dimmable fabrics was +14.0%/-1.1% /+ From 25.5% to 1.8/1.8/110 million yuan, the gross margin was 38.7%/36.0%/33.1%, respectively. It is expected that the increase in production capacity utilization will drive the average cost of shading fabrics to drop sharply, which in turn will drive a significant increase in gross margin.

Revenue from shading products in '23 was +136.6% to 150 million yuan, and gross margin was +2.4pct to 46.6% year over year. As a strategic product for the company to extend the industrial chain and cultivate the terminal consumer market, the gross margin continued to lead, and the doubling of revenue was mainly due to the rapid development of overseas online business.

Overseas performance is impressive. Overseas e-commerce business for finished shading products is developing rapidly by region. Revenue in mainland China/other regions was +13.4%/+35.6% to 21/420 million yuan in 23, with gross margins of -1.7pct/+6.7pct to 25.7%/44.6% respectively. Overseas revenue and gross margin continued to lead the shading market penetration rate of major developed countries reached 70%, with prominent FMCG attributes. The overseas e-commerce business of superimposed shading products is developing rapidly; China's shading market space is vast, and domestic sales of functional shading products are expected to grow rapidly in 2030 It can reach 65 billion yuan per year, with a CAGR of 14.1% in 22-30. The penetration rate of the shading market in mainland China can be expected to increase.

The gross margin improved significantly, and the profit margin fluctuated due to a sharp increase in brand marketing investment, and the gross margin ratio of +4.4pct/+5.1pct/-0.5pct/+0.2pct to 38.7%/14.9%/6.0%/4.0%, respectively. It is expected that the increase in gross margin is mainly due to the increase in capacity utilization to drive down unit costs, but the company increased investment in e-commerce platforms, advertising and exhibition expenses to promote sales. As a result, the increase in sales expenses offsets the improvement in gross margin. Interest rates were -2.5pct/-2.1pct to 15.9%/14.3%, respectively, and there is still room for improving profitability.

Profit forecasting and valuation

The company's net profit for 24-26 is estimated to be 1.2/16/210 million yuan respectively, corresponding to a growth rate of 30%/37%/29%, and the PE corresponding to the market value as of 2024/4/1 is 16/12/9X. As a leading domestic company for functional shading materials, Seodaemun has long benefited from the increase in “domestic penetration rate+overseas market share”. The main plant of the key project “New Construction Shading Materials Production Expansion Project” was basically completed in 23, and the future will enter a period of accelerated growth and maintain a “buy” rating.

Risk warning: raw material prices fluctuate; cross-border e-commerce business development falls short of expectations