Key points of investment:
The advent of wood-based panels was revolutionary for wood processing. Before the advent of wood-based panels, wood processing usually only changed the shape of wood, but the advent of wood-based panels changed the material properties of wood, greatly improved the production and use efficiency of wood, and broadened the application scenarios of wood. China's wood-based panel production has been rising steadily, with a slight decline in 2022. Wood-based panels are being concentrated. In 2020-2023, the annual production capacity of plywood will drop from 256 million cubic meters to 205 million cubic meters year by year, while the number of enterprises will gradually drop from 15,200 to 7,400, close to half. Backward production capacity will gradually be cleared, the average production capacity of enterprises will continue to grow, and the competitiveness of leading enterprises will increase.
The OEM model is asset-light operation, and suppliers and channels are growing rapidly. Dehua Bunny Decorative Materials Co., Ltd. was founded in 1992. The company specializes in decorative panels and integrated furniture, and also operates brand licensing business. The company's distribution revenue accounts for 60%, and OEM accounts for about 80%. Through OEM operation, the company breaks the transportation radius limit, rapidly expands the sales market, maintains efficient asset-light operations, and enhances competitiveness. By the end of 2023, the number of suppliers in the company's new decoration materials supply center was 135, and the number of suppliers in the home supply center was 238. From 2019 to 2023, the number of stores specializing in decorative materials increased from 1971 to 3,765, a significant increase. At the same time, the company has accelerated the coverage of empty peripheral markets. In recent years, it has focused on the township market. According to the company's announcement, in 2023, the company's decoration materials business completed the investment of 744 township stores and the construction of 627 township stores. OEM and brand licensing test the company's brand strength. The company's marketing investment scale is large. In 2019-2023, the company's marketing promotion expenses increased from 79.1708 million yuan to 105.427 million yuan, and the CAGR was 7.42%. The company focuses on online marketing, carries out e-commerce and new media operations such as Tmall, JD, and Douyin, and has established a media matrix to help brand communication and increase performance.
The layout of the home was customized, and accounts receivable were gradually improved. In 2023, the company's accounts receivable repayment efforts began to bear fruit. The company's custom engineering business currently focuses on controlling scale, reducing risk, and seeking transformation. The business mainly focuses on central and state-owned enterprise customers, actively develops engineering agency business, and increases the revenue share of engineering agents. Yufeng Hantang's customers are mainly real estate customers, mainly Vanke. Considering that the real estate market is under great pressure, the capital chain is relatively tight. On the one hand, the company will carry out risk control on newly signed projects, and the number of contracts signed may continue to shrink. On the other hand, collection of accounts receivable has become the company's key task. After the company's repayment work in 2022 to 2023, the company's accounts receivable decreased by 18.58% year-on-year to reach 1,170 billion yuan. In terms of account age and book balance, the recovery results of accounts receivable within 2 years were remarkable, and the balance of accounts receivable in 2-3 years was still quite large. The company will analyze and arrange such accounts receivable one by one, and process part of the work to comprehensively reduce the risk of accounts receivable.
Investment analysis: We expect revenue of RMB 100.0, 112.0, and 12.78 billion yuan respectively in 2024-2026, with growth rates of 10.3%/12.1%/14.0%, respectively; net profit to mother of RMB 8.0, 10.5, and 1.23 billion, respectively, with growth rates of 15.7%/31.0%/17.7%, respectively, with corresponding price-earnings ratios of 11.7, 8.9 and 7.6 times, respectively. Reference is that comparable companies gave the company 13 times PE in 2024. Currently, it has a target space of more than 10%, and for the first time, coverage has been given an “increase in wealth” rating.
Risk warning: Increased industry competition, public events that damage brand image, rising costs beyond expectations, real estate credit risk.