Incident: The company recently released its 2023 annual report. Revenue in 2023 was 640 million yuan/YoY +27.7%, net profit attributable to mother was 91 million yuan/YoY +11.1%; single Q4 revenue was 190 million yuan/YoY +39.8%, and net profit to mother was 0.15 million yuan/YoY -7.9%.
Taking advantage of the dividends of cross-border e-commerce, finished shading products are growing rapidly. 1) By product, revenue from shading fabrics/finished shading products was +10%/+133% to 47/150 million yuan, respectively. Of these, revenue from sunshading fabrics/shading fabrics/dimmable fabrics was +14.0%/-1.1%/+25.5% to 1.8/110 million yuan respectively. As a strategic product that extends the company's industrial chain to the front end, the rapid increase in revenue is mainly due to the rapid expansion of overseas online business. 2) By channel, overseas/domestic revenue was +36%/+13% compared to 42/210 million yuan, respectively. The leading overseas revenue was mainly due to rapid growth in finished products+cross-border e-commerce business.
The increase in production capacity utilization rate+high-margin finished product business led to an increase in gross margin, and profit margins fluctuated due to increased brand marketing investment. 1) Gross profit margin: The gross margin for 23 years was +4.4pct to 38.7%. Among them, the gross margin of shading fabrics/finished shading products was +3.9/2.4pct to 36.5%/46.6% year over year, respectively. The increase in gross margin of shading fabrics was mainly due to increased capacity utilization rate due to order demand; in addition, strong momentum in the finished product business led to an increase in revenue share of finished shading products. 2) On the cost side, sales/management/R&D expense ratios were +5.1/-0.5/+0.2pct to 14.9%/6.0%/4.0%, respectively. Among them, the increase in sales expenses was mainly due to the company actively expanding cross-border 2C overseas, increasing e-commerce platforms, publicity and exhibition efforts to promote sales; 3) Net interest rate: Net interest rate: 23-year net interest rate of -2.1 pct to 14.3% year on year.
The shading industry has a small but beautiful segmented track. Overseas demand is leading, and prosperity is rising. Overseas functional shading materials account for more than 70% of the market, are frequently replaced, and demand is stable. The domestic building shading industry started late, with a penetration rate of less than 5%, and there is plenty of room for growth. There are many participating domestic shading fabric companies and competition is fierce. The pattern is scattered. The leading companies are mainly export-oriented. Among them, first-tier companies have high-quality productivity and high-quality products, and going overseas in a 2B/2C manner is expected to gain more room for growth.
Profit forecast and investment advice: The company is deeply involved in R&D, production and sales of functional shading materials. As a leading enterprise of functional shading materials in China, the production process is mature, the product matrix is complete, and the OEM has accumulated rich production experience in the past. The company follows the trend of China's supply chain going overseas and leverages the rapid rise of cross-border e-commerce platforms to lay out the finished product business to create a second growth curve. We estimate that the company's net profit for 2024/25/26 will be 1.15/1.58/ 203 million yuan, respectively. The PE corresponding to the current stock price is 16/12/9 times, respectively, giving it a “buy” rating.
Risk warning: Cross-border e-commerce expansion falls short of expectations, industry competition intensifies, raw material prices fluctuate, etc.