Positioned as “artist textile”, the equity structure is clear. Established in 1994, Fuana is a comprehensive home textile enterprise positioned as “artist textile”. The company owns 5 home textile brands with various styles, including Fuana and Visa. It has five major production and logistics bases in the country, and was successfully listed in 2009. Currently, Lin Guofang, the company's actual controller, and Chen Guohong, the second-largest shareholder, hold 39.8% and 14.6% of the shares respectively. The shareholding structure is clear, and the company continues to be favored by external institutions such as Land Stock Connect and Social Security Fund. The offline channel consists of direct sales and franchise stores, and channel expansion has been steady in recent years.

Revenue growth and profit margins have remained steady, typically with high dividends and low volatility. The company's revenue CAGR was +4.4% in 2014-2023, and growth was steady. The gross margin has been rising steadily, and the net interest rate due to the increase in the cost ratio has remained stable at 18.9% in 2023. The company has increased its dividend payout ratio year by year since 2018. The dividend ratio reached 95.1% in 2023, and the dividend ratio has remained around 7.0% in recent years. The company's valuation level is relatively stable, with a median PE (FY1) of 12.6X for 2024-2023.

The home textile industry is a mature market, and the concentration of leaders is expected to increase. The market size of China's home textile industry is 256.7 billion yuan in 2023, and the 2023-2029 CAGR is expected to be +2.1%, which is a mature industry. Compared with developed countries, there is still room for improvement in China's home textile market concentration. With their scale advantages and good brand image, leading home textile companies are expected to continuously increase their market share and maintain a faster growth rate than the industry through 1) survival of the fittest, and 2) seeking change on their own initiative.

Investment advice. Compared with the revenue growth rate in the past ten years, Fuana's fluctuation was significantly less than that of its peers, reflecting the company's strategy of focusing on the quality of growth and steady management. The company's gross profit margin and net profit margin are significantly higher than those of its peers. Operating cash flow is abundant, and it maintains high dividends to return shareholders all year round. Compared with typical high-dividend and low-wave varieties, the company has the leading dividend ratio, with a dividend rate of around 7.0% in the past 5 years, ranking high and more stable in crowdbidding.

Profit forecasting and valuation. As a leader in high-end home textiles in China, Fuana's products are positioned as “artist textiles” and have a large voice in the high-end home textile market with advanced technology and excellent design. The company's revenue growth is steady, emphasizing qualitative growth, and the profit margin is among the highest in the industry all year round. The company has always attached importance to shareholder returns. In recent years, the dividend ratio has remained above 95%, and high dividends are attractive. We expect the company's net profit to be 0.517, 0.561, and 0.606 billion yuan respectively in 2024, 2025, and 2026. According to 2024E PE13-15X, the corresponding reasonable value range is 8.03-9.26 yuan/share. For the first time, it was covered, giving it a “superior to the market” rating.

Risk warning. The macroeconomy is weak, consumer preferences are changing, profit margin control falls short of expectations, and dividend policies have changed drastically.