Event: The company released its 2024 quarterly report. 2024Q1 achieved revenue of 331 million yuan, an increase of 106.06% year on year; net profit to mother was 35.65 million yuan, an increase of 339.52% year on year.
24Q1 revenue recovered significantly year over year. The year-on-year growth rate of PVC flooring exports turned upward. The month-on-month year-on-year decline in exports of vinyl chloride polymer flooring products narrowed to -9.08% in August 2023, and corrected year-on-year in September, and the export boom of PVC flooring increased. The company's strategy of “continued leadership in intelligent manufacturing capabilities+rapid expansion of production capacity in North America” was implemented steadily, and the 2024Q1 revenue growth rate was significantly restored, achieving revenue of 331 million yuan, an increase of 106.06% over the previous year.
Gross margin increased sharply year over year, and performance exceeded expectations. 2024Q1's gross sales margin was 24.08%, year-on-year change +14.33pct, month-on-month change +2.33pct, mainly due to factors such as lower raw material costs, product sales structure and increased capacity utilization in the company's Q1. In terms of the cost ratio for the period, 2024Q1's sales expense ratio was 1.11%, year-on-year change -1.19pct; management expense ratio was 6.69%, year-on-year change -6.96pct; R&D expense ratio was 2.55%, year-on-year change -1.28pct; financial expense ratio -0.58%, year-on-year change -2.71 pct, mainly due to the fact that expenses were diluted during the 2024Q1 sales scale increase.
Production capacity in North America is being deployed at an accelerated pace, and the company's mid-term business development is more flexible. The company began construction of a production base in the US in 2021. At present, the North American production base has basically been completed, trial production has begun, and production and operation will gradually begin; in July 2023, the company plans to establish a new subsidiary in Mexico and invest no more than 30 million US dollars to build a factory. The company has completed the signing of a plant lease agreement with a wholly-owned Mexican subsidiary, which is expected to further enhance the company's overseas delivery capacity in the future.
Profit forecast and investment rating: The company has been deeply involved in PVC flooring for many years, has established stable cooperative relationships with internationally renowned flooring traders and brand VERTEX, and has been incorporated into the supply chain system of world-renowned home building materials supermarkets such as HOMEDEPOT. As the overseas real estate boom increased and the downstream gradually began the inventory replenishment cycle, the impact of low raw material prices, shipping prices, and RMB exchange rate factors decreased, and the company's profit level gradually recovered. Taking into account the company's revenue growth and the flexibility of profit recovery, we raised our forecast for 2024-2026 net profit to be 1.48/2.03/247 million yuan (previous value was 136/1.92/241 million yuan), and the corresponding PE was 16X/11X/9X, respectively, maintaining an “incremental” rating.
Risk warning: risk of fluctuations in raw material prices, risk of exchange rate fluctuations, risk of US trade policy, risk of high customer concentration.