Event: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 1.388 billion yuan, +1.72% YoY; net profit to mother was 53.32 million yuan, +43.46% YoY. Among them, Q2 achieved revenue of 0.863 billion yuan, +4.12% year over year; net profit to mother of 41.06 million yuan, +41.36% year over year.
Revenue from the building ceramics business declined slightly, and net interest rates improved year-on-year. The company actively promotes channel decline, broadens marketing channels, and at the same time grasps the development trend of overall decoration, and adheres to the “ceramic+big household” dual-track parallel strategy to drive sales of architectural ceramic products. The revenue of the four 2024H1 Eagle companies was 0.653 billion yuan, down 4.20% year on year. The revenue side was slightly under pressure but still better than the industry. The company fully exploited the potential of the supply chain, improved cost control capabilities, and accelerated the construction of central warehouses, which helped reduce dealer inventory pressure, improve distribution efficiency, and reduce logistics costs. The net interest rate of the four 2024H1 Eagle companies was 5.50%, an increase of 0.45 percentage points over the previous year.
The 24H1 automotive interior business grew rapidly, and the volume and price of major polymer finishing materials increased and fell.
2024Q2 automotive interior/home decoration materials/film/building fireproof materials revenue was +20.31%/-2.82%/+46.18%/-5.22%, respectively. Automotive interior materials have maintained steady and rapid growth. The main reason is that the company continues to expand product research and development of NEV interior finishing materials and accelerate project cooperation with NEV manufacturers. In terms of volume and price breakdown, 24H1's main products, home decoration materials/automotive interior finishing materials/film sales were +12.71%/+16.56%/35.62%, respectively. The company actively developed customers and orders, and sales of the main products of polymer finishing materials grew steadily; the average unit price of 24H1 home decoration materials/automotive interior finishing materials/films was -2.34%/-2.21%, respectively. Competitive prices in the main industries increased and declined.
The overall gross margin was under slight pressure, and the cost ratio for the period was optimized. In terms of gross margin, the gross sales margins of the 2024Q1-Q2 company were 21.25%/22.43%, respectively, with year-on-year changes of -0.25pct/-0.87pct.
The cost ratio for the period, the sales/management/R&D/finance ratio of 2024H1 company changed by -0.26/-0.01/-1.08/-0.85pct year-on-year, respectively, and the cost ratio for each period was optimized. The net cash flow from 2024H1's operating activities was $0.109 billion, or -45.68% year-on-year, mainly due to an increase in 24H1 payment of supplier notes due and payment of employee remuneration.
With the acquisition of Southern Design Institute, the strategic layout of Pan-Home Furnishing was further improved. In July 2024, the company acquired 51% of the shares of Southern Design Institute to reinforce the company's architectural design and interior decoration business scope, help enrich the company's entry points in the terminal market, help the company develop in the direction of prefabricated interior EPC and healthy living brands, and achieve cost-effective one-stop environmental protection and art space solutions.
Profit forecast and investment rating: The company is based on the two major businesses of architectural ceramics and polymer composite finishing materials, and focuses on driving product sales around the pan-home furnishing industry chain layout. Its subsidiary Yingpai Tiles has formed an asset-light operating model with high turnover, and the channel and business scale continue to expand; automotive interiors in polymer materials are growing rapidly, and the two major infrastructure industries are developing steadily. We maintain an estimated net profit of 0.159/0.188/0.228 billion yuan for 2024-2026, and the corresponding PE is 11X/10X/8X, respectively, maintaining the “incremental” rating.
Risk warning: the risk of fluctuations in raw materials and energy prices, the risk of increased market competition, and the risk of repayment of accounts receivable.