Incident: The company disclosed its 2024 quarterly report, achieving operating income of 526 million yuan, a year-on-year decrease of 1.99%; net profit to mother of 12.2657 million yuan, a year-on-year increase of 50.98%; after deducting non-net profit of 1.0677 million yuan, an increase of 368.56% over the previous year. Comments on this are as follows:

Q1 There was a high increase in performance due to non-deduction, and the expense ratio declined slightly. Q1 The company's revenue fell slightly by 1.99% year on year to $526 million. Net profit performance was impressive, with a year-on-year increase of 50.98%, mainly due to improved product structure and reduced interest expenses. At the same time, compounded by a decrease in non-recurring profit and loss, the company's net profit after deducting non-return to mother increased 368.56% year over year. 1) Revenue from finishing materials and films is increasing. The sales volume of Q1's home decoration finishing materials/automotive interior finishing materials/film/artificial leather/building fireproof veneer materials was 2339.73 tons/2499.26 tons/9260.20 tons/775.26 tons/624,200 sheets respectively, with year-on-year changes of +27.55/+7.59/+18.01/-41.30/ -37.42%; revenue was 0.60/1.04/0.95/0.40 billion yuan, respectively, year-on-year changes +28.06/+4.05/+ 16.40/-39.25/ -35.72% 2) Gross margin rebounded slightly year-on-year due to multiple factors. In terms of price, the prices of the company's products have remained stable. Among them, the average price of home decoration materials/automotive interior finishing materials/ film/ artificial leather/ building fireproof panel Q1 changed +0.40/ -3.28/ -1.37/+3.49/ +2.73% year-on-year, respectively. In terms of cost, the prices of the company's main raw materials rose and fell. Among them, the average price of resin powder/plasticizer/surface agent/decorative paper/kraft paper Q1 changed -9.45/+11.30/-9.09/-5.51/ +2.65% year-on-year, respectively. In terms of revenue structure, Q1 home decoration materials and film product structures changed, and sales of high-margin products increased. Under the combined influence of the above factors, the company's gross margin/net margin was 21.25/ 2.45%, respectively, up 0.25/0.53 pct. 3) The fee rate has decreased slightly. Q1 Company's net operating cash flow was RMB 11.48,800, a year-on-year decrease of 71.44%, mainly due to increased payment of supplier notes and employee remuneration due in the current period. The company's expense ratio for the period was 18.79%, a year-on-year decrease of 0.42pct. Among them, the sales/management (including R&D) /finance expense ratios were 7.56/9.73/1.50%, with year-on-year changes of +1.44/ -1.04/-0.82pct, respectively.

Deepen and expand channel resources, and the pan-home strategy opens up room for long-term growth. The company continued to sink its channels and expanded its distribution stores across the country through continuous investment promotion and promotion. By the end of 2023, Yingpai had 1,373 dealers and 1,397 stores, with a distribution area of more than 300,000 square meters. The company continues to lay out around the pan-home furnishing industry chain, using the holding subsidiaries Yingpai Company and Tianhui Jianke's channel resources for home improvement and official decoration to focus on driving the accurate export of architectural ceramics, door and floor cabinets, and polymer composite finishing materials to the terminal sector, and jointly build a three-dimensional collaborative organizational structure of “marketing front desk, empowering the middle office, and supporting the back office”. The company applies environmentally friendly high-quality interior fabric production technology and environmentally friendly assembly technology in the automotive space to the field of assembly to provide customers with one-stop assembly solutions for systematic product output.

Launch a share repurchase plan to boost confidence in development. On February 18, the company reviewed and approved the share repurchase plan. It plans to use no less than 30 million yuan (inclusive) and no more than 60 million yuan (inclusive) of its own capital to repurchase the company's shares through centralized bidding; the repurchase price is no more than 8 yuan/share. The repurchased company shares are not less than 10 million yuan (inclusive) and no more than 20 million yuan (inclusive) are necessary (sold) to maintain the company's value and shareholders' rights and interests, and the remaining shares will be used for equity incentives or employee stock ownership plans. On April 11, the company adjusted the upper limit of the original share repurchase price from 8 yuan/share to 14 yuan/share and extended the repurchase implementation period to 12 months. As of April 12, 2024, the company repurchased 226,000 shares for the first time through centralized bidding transactions. The repurchased shares accounted for 0.1035% of the company's total share capital.

Investment advice: Excellent performance in Q1. Repurchasing shares boosted confidence and maintained an increase in holdings rating. The company's net profit from 2024 to 2026 is estimated to be 1.6, 2.0, and 250 million yuan, respectively, up 35%, 23%, and 23% year-on-year, respectively. The corresponding PE price-earnings ratio is 13, 10, and 9 times, respectively. Downstream demand in the automotive decoration industry is improving; the company integrates holding subsidiaries such as Eagle Brand, Decorative Materials and Tianan Integration to create a complete platform to create business collaboration and create new growth points for performance.

Risk warning: raw material prices have risen or exceeded expectations; downstream demand for real estate may fall below expectations; prices of automotive interior finishing materials products have declined; industry competition has intensified; impairment meters mention merger and acquisition integration risks, etc.