The company is a leading domestic panel furniture machinery with an excellent financial level. The company was founded in 2006 and is now the leading panel furniture machinery in China. Its products range from single equipment to segmented partial equipment connections, to automated production lines+intelligent robots. Since its listing, the company has expanded upward and horizontal mergers and acquisitions to improve the business layout. The company's performance maintained medium- to high-speed growth. Driven by the property guarantee policy, etc., the performance bucked the trend. In '23, revenue also increased 26.1% to 2.683 billion yuan, and net profit to mother also increased 29.8% to 0.59 billion yuan. The company has increased its overseas layout in recent years. Overseas revenue increased 6% to 0.812 billion yuan in '23, and the 14-23 CAGR was 23.6%. The company's gross margin/net profit/ROE center in recent years was 34.7%/23.3%/22.6% respectively. The net present ratio is around 1. Combined, the peak of the company's capital expenditure has passed. The company's dividend ratio reached 6.76% in 2023, and is expected to continue to be maintained in the future.
Domestic: Wait for terminal home decoration demand to pick up, the localization rate of furniture machinery increases, and the pattern is concentrated or continuously interpreted. According to Huajing Industry Research Institute, China's panel furniture machinery market will be about 21 billion yuan in 2022. Historically, the demand transmission logic from the real estate end to panel furniture machinery is as follows: housing completion, sales - rising demand for home decoration - rising revenue of custom furniture makers - custom furniture makers adjust future expectations and make capital expenses to drive up revenue for panel furniture machinery manufacturers. Therefore, the company showed strong correlation with the real estate completion side in terms of revenue and stock price.
Real estate side: Although it may be difficult for China's real estate cycle to return to its previous high in the future, real estate policies continue to be introduced or underpin the new housing market, smoothing cycle fluctuations, compounding the increase in decoration demand driven by second-hand housing transactions and stock housing renovation, etc., and China's overall home improvement demand may remain stable.
Household side: The peak of capital expenditure for custom furniture makers in the last round was 2016-2017. Based on the 5-8 year life span of the equipment, it is expected that they will enter the replacement cycle. Furthermore, automation equipment helps furniture makers improve quality and efficiency. Currently, there are still a large number of small and medium-sized enterprises in China that have a low automation rate of production lines, and there is plenty of room for corresponding equipment updates.
Equipment side: Domestic panel furniture machinery products have a cost-effective advantage over overseas competitors. In the context of the downward real estate cycle, their penetration rate will continue to increase. According to our estimates, in 2023, the domestic woodworking machinery business revenue of Germany's Haomai and Bias was about 2.01/0.35 billion yuan, 18-23 CAGR was +0.5%/-7.6%, while the revenue volume and domestic market share of Hongya and Nanxing have continued to increase in recent years, confirming the trend of increasing localization rates.
Overseas: Countries such as Southeast Asia/South Asia have plenty of room to increase their urbanization rate, and there is plenty of room for potential home improvement and equipment needs. The urbanization rate of Southeast Asian and South Asian countries such as India and Vietnam is generally below 50%. Currently, the per capita GDP of local residents is similar to China's level before 2010, but these countries have a low aging rate and a relatively relaxed geopolitical environment in the context of anti-globalization. In the future, GDP may maintain a high growth rate, and there is plenty of room for improved residential demand and potential demand for panel furniture machinery. Take India as an example. The median age of India's population is 29.2 years old. After the epidemic, demand for home buyers was strong, and the housing price income ratio in India was in the 3-3.5 range in 2018-2023, and the cost of buying a home was relatively low. As of '23, residential real estate loans in India increased 49.6% year on year to 31 trillion rupees. The real estate market is hot, which is expected to drive demand for custom furniture and even panel furniture machinery.
The high-end development of the company's products has taken advantage of cost performance and other advantages to the world. After years of development, most of the company's products, such as CNC drills and board saws, have also reached leading overseas levels, and continues to shorten the gap with overseas countries through technology research and development and improving the self-production rate of non-standard parts. Facing the future, the company has successively launched high-end new products such as PUR/laser edge banding machines and high-speed flexible edge banding machines in recent years, and some products have broken overseas monopolies. Furthermore, the company continues to consolidate its cost performance advantage. Under the condition of products with the same performance, its unit price is less than 50% of European products. The company has gone abroad with advantages such as cost performance and after-sales service, providing many business support to overseas dealers, increasing brand awareness through active participation in exhibitions and social media promotion, and continuing to explore overseas markets. By the end of 23, the company had cooperated with more than 120 dealers around the world, and its business covered more than 70 countries/regions, including the Belt and Road, Europe and the United States, and the global business map may continue to expand in the future.
Investment advice: We expect the company to achieve net profit of 0.714/0.828/0.974 billion yuan in 24-26 years, respectively, and the corresponding PE is 10.2/8.8/7.4 times, respectively. The company is a leading domestic woodworking machinery company. It has a high dividend rate or continuous maintenance. The overseas business is extremely growing, and maintains a “highly recommended” rating.
Risk warning: risk of domestic macroeconomic fluctuations, risk of changes in the international political situation, risk of increased industry competition