Key points of investment:
Core view: Matsui Co., Ltd. is a leading domestic paint company and has great advantages in terms of technology, products, and capacity layout. In the field of consumer electronics coatings, the company is a domestic leader, accounting for 10.3% of the domestic market in 2019, second only to AkzoNobel, and is expected to benefit from the recovery of the consumer electronics market. In the field of automotive coatings, with the rise of domestic substitution and the development of China's NEV industry, domestic paint companies ushered in a good opportunity for development. We believe Matsui Co., Ltd. is expected to use its deep PVD technology accumulation to develop the automotive parts paint market. Looking forward to the future, we believe that the company is expected to grow through overseas layout+category expansion.
Matsui Co., Ltd.: A leading domestic paint company. Matsui Co., Ltd. focuses on the market for new functional coating materials for high-end consumer goods, and continues to expand the product matrix and achieve efficient collaborative development of multiple categories of “paint+ink+adhesive”. The core technology corresponding to the product UV silicon feel paint achieved 1000 friction levels 3 in the denim friction test, and the number of passes was 2 times that required by downstream customers. In addition, the company promoted the innovation and upgrading of high-wear-resistant PVD coating technology. The medium paint layer was replaced with macromolecular polyester polyurethane acrylic resin to improve the adhesion of the paint to the metal coating. The RCA test was increased from more than 500 times to more than 1,500 times, and the wear resistance of the product was significantly improved.
The automotive coatings market space is vast, and Matsui's automotive coatings business is facing a good opportunity for development. The automotive coatings market space is vast, with a global market size of about 140 billion yuan and a domestic market of about 50 billion yuan. Overseas companies occupy a major share of the market. With the rise of domestic substitution and the development of China's NEV industry, domestic paint companies have ushered in a good opportunity for development. Matsui Co., Ltd. has accumulated deep PVD technology and is expected to use its technical advantages to develop the automotive parts paint market.
Leading 3C coatings companies are expected to benefit from the recovery of the consumer electronics market. China's 3C coatings market is about 6.5 billion. Matsui Co., Ltd. is a leading domestic company and ranked 2nd in the 2022 National 3C Coatings Top 10 list, after AkzoNobel. We expect the company will benefit as the consumer electronics market recovers moderately.
Benchmarking Kansai Paint, the future growth path is clear. Through endogenous and epitaxial two-wheel drive, Kansai Paint entered the Asian markets through plant construction and achieved good results in Southeast Asia and South Asia; in Europe and Africa, Kansai Paint entered the local market through mergers and acquisitions, and achieved relatively rapid growth in performance. We believe that the company is expected to achieve continuous growth as Matsui's overseas layout continues to advance and expand into the three major business fields of high-end consumer electronics, passenger cars, and special equipment.
Profit forecasting and investment advice. We expect the company's EPS from 2024 to 2026 to be 0.77 yuan, 1.24 yuan, and 1.81 yuan respectively. According to 2024 BPS of 12.33 yuan and 3.5-4 times PB, a reasonable value range of 43.16-49.32 yuan will be given, maintaining the “superior to the market” rating.
Risk warning: Downstream development falls short of expectations, project construction falls short of expectations, and progress in technology application falls short of expectations.