Introduction to this report:
The 2023 and 2024Q1 results are in line with expectations. Automotive interiors are expected to continue to grow rapidly in 2024, and the main leather industry is expected to grow steadily.
Key points of investment:
The investment proposal takes into account equity incentive fees, and we lowered the 2024-25 EPS forecast and added 2026 to 0.90/1.17/1.52 yuan (1.06/1.29 yuan for 2024-25, respectively). Considering the rapid expansion of the company's automotive interior business, the growth rate is faster than that of the traditional textile business. In 2024, PE was given 16 times higher than the industry average, maintained a target price of 14.78 yuan, and maintained a “gain” rating.
The company's results in 2023 and 2024Q1 are in line with expectations. In 2023, the company's revenue/net profit to mother was $2,70/186 million, respectively, +35.8%/+23.7% (after excluding the impact of equity incentive expenses, net profit to mother was about 198 million yuan, up 31.4% year on year), which is in line with expectations. 2024Q1's revenue/net profit to mother was 597/035 million yuan respectively, +28.6%/+22.0% respectively, in line with expectations.
The automotive interior business grew beautifully in 2023, and the main leather industry grew rapidly. 1) Main leather industry:
Revenue in 2023 was 1,867 billion yuan, up 19.59% year on year. The gradual removal of overseas markets led to a recovery in procurement volume. 2) Automotive interior: Revenue of 599 million yuan in 2023, up 94.21% year on year, ideally contributing most revenue; gross margin increased 6.1 pct year over year to 29.9%, mainly due to scale effects. 3) Two-layer collagen: Revenue in 2023 was 134 million yuan, an increase of 165.52% over the previous year. Baotai factory was put into operation in 2023Q1, and production capacity is still being released.
Automotive interiors are expected to continue to grow rapidly in 2024, and the main leather industry is expected to grow steadily. 1) Main leather industry: Currently, the company's Indonesian factory is under construction. It is expected to be put into operation in Q3, and overseas customers continue to be developed. We expect the main business to maintain steady double-digit growth in 2024. 2) Automotive interior: The ideal year-round order guide for old customers is active, and new customers continue to be developed. We expect the automotive interior business to continue to grow rapidly in 2024.
Risk warning: Automotive terminal sales fall short of expectations, India's production capacity expansion falls short of expectations