Introduction to this report:
The company's performance fluctuates in the short term due to sales of disinfectant wipes. It is expected that along with the continued implementation of the “two vertical and one horizontal” strategy and active expansion of business boundaries, the performance is expected to achieve steady growth.
Key points of investment:
Conclusion: Considering the decline in sales of the company's high-margin products, the company's 2024-2025 EPS forecast was lowered to 1.46/1.65 yuan (originally 1.80/2.04 yuan), and the 2026 EPS forecast was added to 1.82 yuan. Referring to comparable company valuations, the target price was lowered to 37.96 yuan (originally 42.72 yuan) to maintain the “gain” rating.
The company's performance was slightly lower than expected, and the decline in revenue from export products with higher unit prices dragged down profits. The company achieved revenue of 623 million yuan/ -6.60% in 2023, achieving net profit of 115 million yuan/ -18.28%; 2024Q1 achieved revenue of 130 million yuan/ +1.43%, and achieved net profit of 14 million yuan/ -62.70%. Revenue pressure in 2023 was mainly due to a 57.01% year-on-year decline in revenue for medical and antibacterial disinfectant wipes, and +15.65% year-on-year revenue for mask products in 2023.
Implement the “two vertical and one horizontal” strategy and actively broaden business boundaries. The company vertically increased its layout of the main raw material, non-woven fabrics, and integrated supply chain resources through participation in Sateri to ensure the long-term stability of the supply of main raw materials; horizontally increased the layout of the beauty business, the Shanghai R&D center with cosmetics research and development as its main function was officially put into operation, and Jiechuang Medical, which was jointly invested and established with Jiangsu Chuangjian, obtained two Class II medical device registration certificates, which is expected to broaden the scope of business on the basis of ensuring the steady development of the main wet wipe industry and contribute to profit growth.
Leading technology in all category layout, transformation and upgrading to supply chain providers. The company has a complete range of wet wipe products, covering six series of more than 60 varieties of wet wipes. It is expected to consolidate cooperation with core customers with significant advantages in customized development of solution formulations, gradually realize transformation and upgrading from traditional foundries to professional ODM supply chain providers, and drive steady growth in performance.
Risk warning: risk of losing key customers; weak overseas demand.