It is expected that 2024Q2 results will increase sequentially, leading PU leather performance will gradually be released, maintaining the 2024 semi-annual performance forecast issued by the “buy” rating company. 2024H1 is expected to achieve net profit of 88-98 million yuan, an increase of 9348.14% to 10421.8% over the previous year, and is expected to achieve net profit after deduction of 78-88 million yuan. Among them, 2024Q2 expects to achieve net profit of 46.73-56.73 million yuan, an increase of 13.2%-37.5% over Q1, and an estimated net profit of 40.18-50.18 million yuan after deduction. It is expected to increase 6.2%-32.7% from Q1. The company's performance is excellent. We raised the company's profit forecast for 2024-2026. The net profit for 2024-2026 is 2.00 (+0.14), 2.76 (+0.16), 3.47 (+0.18) billion yuan, and EPS is 0.92 (+0.06), 1.27 (+0.07), and 1.60 (+0.08) yuan, respectively. The current stock price corresponds to PE 16.1, 11.7, and 9.3 times, respectively. We are optimistic that the company, as a leader in the domestic PU leather industry, is expected to fully benefit from the recovery in demand for shoe materials, the continued increase in demand for new TPU products and new energy vehicles, and maintain a “buy” rating in the future.

The product and customer structure continues to be optimized. According to the company's announcement, the volume and price of 2024H1's main products rose sharply, operating income increased dramatically, and profits increased dramatically, making the best results in the same period in history. Among them, many indicators for the second quarter set the highest record in a single quarter. 2024H1 2024H1's main product sales increased by about 19.7% year on year, sales revenue increased by about 29.1% year on year. The company's main business development trend was good, gross margin increased significantly compared to the same period last year, and profit increased. At the same time, according to the company's announcement, the company deepened cooperation with brand customers, optimized customer structure and product structure, and continued to increase the proportion of high-margin, high-value-added products such as sports, electronic products, and automotive interiors.

With the help of multiple factors, PU synthetic leather leaders can be expected in the future

According to the company's announcement, emerging demand for automotive interiors, electronic products, sports equipment, and engineering decoration is currently developing well, and such demands are all high value-added fields, which are expected to contribute significant profit increases to the company in the future.

At the same time, the influence of new TPU products on high-end sports brands at home and abroad is increasing, and the company's shipments may continue to grow in the future. Furthermore, with the gradual increase in customer orders and the gradual release of production capacity, Amway Vietnam's sales volume in the second half of 2023 increased by about 316% compared to the first half of the year, and its overall profit is expected to improve in 2024. Finally, for the shoe materials sector, which is one of the company's main traditional needs, demand may also experience marginal improvement as domestic and foreign downstream customers continue to leave the warehouse, which in turn will further drive the growth in demand for PU leather.

Risk warning: Downstream demand falls short of expectations, large fluctuations in raw material prices, large fluctuations in energy costs, etc.