The 3C paint leader is active in high-end fields such as automotive coatings. The “buy” rating company is expected to be a leading enterprise in the 3C electronic coatings field, and with the company's consumer electronics paint production capacity implemented in 2024-2026, it is expected that the future will fully benefit from the recovery in consumer electronics demand. At the same time, the company's passenger car paint business layout is beginning to show results, and there will be enough orders for passenger car paint in the future. The company's consumer electronics and passenger car businesses are working in both directions. In the future, it will enter the higher-end coating field and continue to build a high growth curve. We expect the company's 2024-2026 net profit to be 0.127, 0.186, and 0.247 billion yuan, EPS 1.14, 1.66, and 2.21 yuan, respectively. The current stock price corresponds to PE of 29.15, 19.91, and 14.98 times, respectively. This is covered for the first time, giving it a “buy” rating.
Demand for consumer electronics coatings is gradually recovering, and demand for domestic automotive coatings is booming. In terms of consumer electronics coatings, demand for H2 global 3C electronic products gradually recovered in 2023. According to Wind data, in 2023 H2, global smartphone, tablet, and PC shipments totaled 0.827 billion units, up 16.79% from 2023 H1 and 0.81% higher than 2022 H2. As global demand for traditional 3C products recovers, future consumer electronics demand may increase or continue to drive paint demand growth. In terms of automotive coatings, according to our estimates, in 2023, China's automobile paint usage was about 0.67 million tons, an increase of 8.96% over the previous year. In the future, as China's NEV industry continues to develop, domestic car companies will drive domestic paint companies to gain more market share.
Using innovative research and development as a starting point, the company continues to advance in the field of high-end coating applications, building a high-growth curve company that provides systematic solutions to end customers in the high-end consumer electronics and passenger vehicle sectors as the starting point of technological innovation, and continues to increase investment in R&D. Since 2019, the company's R&D expenditure has accounted for more than 10% of the company's total revenue. In the consumer electronics sector, the company already has the ability to compete on the same stage as international giants. According to the company's announcement, in 2019, among the major suppliers of 3C coatings, the company ranked 4th in the world and 2nd in the country in terms of production. In 2023, the company and customers jointly built a series of industry benchmark projects such as the new model Mate 60 for major domestic customers and Vision Pro for major consumer electronics customers in North America. In the passenger car sector, the company continues its innovative genes and innovatively develops coating products for use in fields such as light-emitting bumpers and anti-fog car lights, and has made the leap from interior paint to exterior paint. In the future, the company will continue to strengthen R&D and production, push the company to advance into higher-end coating applications such as special equipment and original automobile paint with strong product competitiveness, and create a high growth curve.
Risk warning: demand recovery falls short of expectations, order execution falls short of expectations, sharp expansion of industry production capacity, etc.