Key points of investment

A leader in the field of container and wind power coatings, adhering to the positioning of high-end industrial coatings, the company has two core businesses: container paint and wind power paint. It is one of the top four container paint suppliers in China in the container coating field, and has won individual championships in wind power protective coatings and wind power blade coatings in China.

In 2021-2023, the company achieved operating income of 1.99, 1.387, and 1.141 billion yuan, respectively, up 111.52%, -30.31%, and -17.75% year-on-year; net profit to mother was 0.326, 0.26, and 0.167 billion yuan, up 85.38%, -20.15%, and -35.79%, respectively. 2024H1, the company's revenue was 0.758 billion yuan, up 39.59% year on year; net profit to mother was 0.074 billion yuan, down 34.69% year on year.

Wind power paint: Wind power blade coating leader, expanding new business for marine wind towers and offshore coatings. Domestic offshore wind power has entered a high growth cycle. Larger fans and the development of offshore wind power have increased the quality requirements for blade coatings. We expect the global wind power coating market to reach 6.7 billion yuan by 2026, with a CAGR of 7.5% in 2023-2026. The company won the single title for wind power protective coatings and wind power blade coatings in the 2022 China Coatings Industry Single Champion Enterprise List, accounting for nearly 1/3 of the market share in the wind power blade coatings field. At the same time, the company takes advantage of customer collaboration to enter the field of wind power towers and expand businesses such as offshore towers and offshore coatings. At present, it has successfully entered the tower paint supplier list of leading terminal wind power plant and obtained tower paint orders from many customers.

Container Coatings: Benefiting from the improvement in container prosperity, the environmental protection trend strengthening its leading position, future recovery in global trade, and the prolonged Red Sea crisis to benefit the container coating industry, we expect the global container paint market to rise to 4.6 billion yuan by 2025. The company has strong technical strength, and the water-based container coating has been successfully recognized by the market, and its competitive advantage has been further strengthened. The company is one of the four largest container paint suppliers in China, successfully developing downstream container manufacturers and terminal container owners. In 2022, the company already occupied one-fifth of the container coating industry market.

Multi-field layout, promising prospects in the field of marine coatings

The company is developing into wind power tower coatings, marine coatings, port equipment coatings, energy storage equipment coatings, photovoltaic composite frame coatings and other related industrial coatings. The domestic shipping industry is in a booming development cycle, and 2023-2026 is expected to usher in a new wave of new ship orders. Due to the high degree of overlap between end customers and container end customers, the company has certain innate advantages in entering the field of marine coatings. Currently, the company is speeding up certification and customer approval work. It has entered the certification stage of three classification societies in China, Norway, and the United States, striving to achieve business breakthroughs in the marine paint repair market and fully deploy the new ship paint business in 2025.

Profit forecasting and valuation

First coverage, giving a “buy” rating. Against the backdrop of a boom in the downstream wind power and container sector, the company's leading position in wind power and container coatings is stable. We expect the company's 2024-2026 net profit to be 0.238, 0.297, and 0.377 billion yuan, respectively, and the corresponding EPS is 2.21, 2.75, and 3.49 yuan, respectively, and the corresponding PE is 13, 11, and 8 times, respectively. The average PE of comparable companies in 2024 was 20 times higher. Taking into account the company's performance growth and a certain margin of safety, we gave the company an average PE of 20 times the industry in 2024, corresponding to a target market value of 4.7 billion yuan. The current market value has room to rise by 48%, giving it a “buy” rating.

Risk warning: Downstream demand falls short of expectations, fluctuating raw material prices, project commissioning progress and new product development fall short of expectations.