Introduction to this report:
The company's board and custom home furnishing business is expected to achieve steady growth along with channel refinement and decline. The mature distribution+OEM model helps the company maintain sufficient cash flow, high shareholder returns are highly sustainable, and the investment value is outstanding.
Key points of investment:
Covered for the first time, a “gain” rating was given. As a leader in high-end furniture panels in China, the board business is expected to grow steadily with channel refinement and decline. The custom home retail sector is expected to accelerate market penetration with the company's strong brand, product and channel capabilities, and the risk exposure in the engineering sector gradually narrows. The company's mature distribution+OEM model helps the company maintain sufficient cash flow, high shareholder returns are highly sustainable, and investment value is prominent. The company's 2024-2026 EPS is expected to be 0.86, 1.05, and 1.15 yuan, and the target price is 15.00 yuan based on comparable company valuations.
Refining efforts are being made to increase the share of small B channels, and the brand operator model has matured. The wood-based panel industry presents a “big industry, small company” pattern. Among them, the market size of panels for home decoration exceeds 200 billion yuan, and CR3 is less than 10%. However, in recent years, along with B-side demand and the adjustment and reshaping of the bottom of real estate sales, leaders have shown significantly stronger resilience than the industry, and concentration has increased at an accelerated pace. Bunny grasped the expansion window in a timely manner, further deepened the OEM+ brand licensing model, and gradually extended the layout to peripheral markets; at the same time, promoted refined and exclusive channel operations to achieve more specialized operation management, while increasing market decline and increasing coverage. Multiple strategies in parallel led to a gradual upward trend in market share.
Customized home retail differentiation creates strong brands, and engineering risk exposure gradually improves. The company's custom home furnishing business, retail and engineering two-wheel drive has entered the leading scale in the industry. The retail sector relies on the advantages of the Bunny Bunny brand, high-end product positioning and integrated layout, and strong channel building capabilities to differentiate its positioning to create a strong brand, and has maintained a high revenue growth rate in recent years. The engineering sector entered through the acquisition of Yufeng Hantang. Credit risk has been exposed in recent years, the business scale has shifted mainly to risk control, and risk exposure has gradually narrowed.
Cash flow and dividend performance lead the industry, and high shareholder returns highlight investment value. The retail+OEM business model has made the company's net operating cash flow excellent in recent years. At the same time, the historical dividend intention is strong. The average dividend ratio in the past 10 years reached 53%, and the dividend ratio increased to 66% in 2023. The company's shareholder return plan proposes a dividend ratio of not less than 50% for 2024-2026, and the announcement is that an interim dividend may be made. We believe that the company's business scale and profit are expected to increase steadily in the context of stabilizing real estate demand and optimization of the industry pattern. Cash flow is expected to remain excellent. Combined with high dividend ratio arrangements, high shareholder returns are highly sustainable, and investment value is prominent.
Risk warning: Real estate demand has declined sharply; raw material costs have risen