Foshan's manufacturing advantage is representative, and the merger and acquisition strategy is showing results. The company was founded in 2000 and listed on A-shares in 2017. It is headquartered in Foshan, Guangdong, and has five major production bases in Foshan, Guangdong, and Quanjiao, Anhui. The company acquired four subsidiaries of Ruixin Packaging Materials and Yingpai Ceramics in 2021, increasing its main business to the fireproof board and architectural ceramics business on the basis of polymer composite finishing materials. In 2023, the company achieved revenue of 3.14 billion yuan +16% year over year, with net profit of 0.12 billion yuan, showing the results of the merger and acquisition strategy; among them, architectural ceramics/automotive interior finishing materials/home decoration materials/building fireproof veneer materials/assembly business/film, artificial leather and others contributed 50%/16%/8%/2%/17% of revenue, respectively, contributing 53%/19%/9%/11%/2%/6% of gross profit, respectively.

Yingpai Ceramics: An asset-light player who grasps the industry's supply optimization opportunities and grows against the trend. China's total production of ceramic tiles continues to decline. Currently, it is less than 70% high. The market size is shrinking, and the industry is being cleared; prices of pottery products continue to drop, and the profitability of pottery companies is generally under pressure. Yingpai was founded in 1974 and is headquartered in Foshan, Guangdong. It operates on an asset-light model, and its production capacity is significantly lower than that of its peers; in 2021, the company completed the acquisition of 66% of Yingpai Group's four subsidiaries; in 2023, with the support of the company's management, the advantages of high cost performance and low inventory were more prominent, and sales bucked the trend, achieving revenue of 1.57 billion yuan +21% over the same period.

Surface materials business: Continuously expand the market through production and research advantages/capital operations. The surface materials business is the company's traditional business, with many categories and application scenarios. After acquiring Ruixin Packaging in 2021, the fireproof sheet business was expanded. The gross profit contribution of the home surface business rebounded in 2023; the automotive interior surface business had outstanding growth, and volume and price rose sharply in 2023; fireproof sheets had excellent profitability, and Ruixin materials achieved a net interest rate of 14% in 2023.

Assembly business: Extend environmental protection and product line advantages. It is estimated that China's current assembly market is about trillion yuan; the company's Tianhui Jianke Positioning Public Furnishing Prefabricated Decoration, Eagle Life Positioning is a one-stop service brand for modern healthy homes, and the 2023 assembly business revenue is 0.05 billion yuan +144% over the same period last year.

Maintain an “Overweight” rating. The company's revenue from 2024 to 2026 is expected to be 3.5/3.9/4.4 billion yuan, up 11%/12%/11% year on year, and net profit to mother is 0.16/0.18/0.21 billion yuan (maintaining the previous 2024/2025 forecast and increasing the 2026 forecast), increasing 28%/17%/17% year over year, corresponding PE is 12/10/9 times.

Risk warning: increased industry competition, repayment risk, company performance falling short of expectations, etc.