Event
On January 30, Fenglin Group released its 2020 results, KuaiBao. The company expects to achieve operating income of 1.833 billion yuan in 2020, down 5.65% from the same period last year. The net profit returned to the mother is 181 million yuan, up 6.31% from the same period last year. The net profit from non-return to the mother is 175 million yuan, up 7.39% from the same period last year.
On a quarterly basis, 2020Q1/Q2/Q3 achieved operating income of 1.44,4.57,6.29 and 603 million yuan respectively, with year-on-year changes of-57.61%,-16.45%, 16.15% and 17.15%, respectively, and net profit of-0.12,0.40,0.79 and 73 million yuan, with year-on-year changes of-138.25%,-32.69%, 85.39% and 95.99%, respectively. The non-return net profit was-0.12,0.36,0.78 and 72 million yuan, with year-on-year changes of-139.24%,-38.59%, 92.37% and 115.06%, respectively.
Our analysis and judgment
The proportion of non-formaldehyde plate superimposed direct operation increased, and 20Q4 profits exceeded expectations under the adverse influence of the epidemic in the first quarter, logistics was blocked, downstream furniture and home decoration markets were delayed to resume work, and the company's factories actively carried out equipment transformation and technology upgrading, achieving a year-on-year reduction in annual production and sales and a slight decrease in business income. However, COVID-19 's epidemic situation catalyzes the rapid growth of consumer demand for high-end environmental protection products such as aldehyde-free panels, and the company firmly puts safety, environmental protection, quality and reputation in the first place to meet the market demand in a timely manner. increase the supply of differentiated, high value-added and environmentally friendly boards, and further enhance the core competitiveness of products and the scarcity of services. Sales of formaldehyde-free plates increased by 85% compared with the same period last year. At the same time, the company has increased its direct sales efforts to large-scale customized household enterprises such as Europe, Sofia and Shangpin Homestead, the proportion of direct sales has further increased, the balance of production and marketing has been achieved throughout the year, the gross profit margin of wood-based panel sales has increased by 2.49pct over the same period last year, and the overall benefit of the company continues to extend to breadth and depth, achieving net profit growth for five consecutive years.
Benefit from the continuous rebound of downstream furniture retail and the customized bibcock actively promote "aldehyde-free"
Product upgrade, the company's 20Q4 performance exceeded market expectations. According to the data of the National Bureau of Statistics, the real estate data continue to be repaired, and the sales area and completed area of residential commercial housing nationwide rose 11.5% and 2.28% respectively in December 2020 compared with the same period last year. Furniture retail sales in December 2020 increased by 0.4% compared with the same month last year, an increase of 2.6pct compared with November. From the perspective of downstream customers, Europe, Sofia and other custom home leader 20Q4 performance rebounded faster than expected. Among them, European Home expects the revenue of 20Q4 to increase by 12%, 46%, and the net profit of returning home to increase by 24%, 64%. Sofia expects that the revenue of 20Q4 will increase by 25%, 58%, and the net profit of returning home will increase by 21%, 52%. Oupai Home released the formaldehyde-free Health Home Strategy in August 2020, leading the industry to upgrade from super-E0 to formaldehyde-free panels, driving the high performance of upstream formaldehyde-free wood-based panel enterprises. 20Q4 Fenglin Group's revenue and return net profit increased by 17.15% and 95.99% respectively compared with the same period last year, which increased 1.00pct and 10.60pct compared with 20Q3 growth. It is expected that the company will mainly benefit from the optimization of the company's product structure, the increase in the proportion of major customers' direct channels, and the significant improvement in gross profit margin.
The production capacity of particleboard is the leading in China, and high-quality environmental protection products promote the upgrading of customized leader "aldehyde-free". At present, the company's three fibreboard factories have a total production capacity of 680000 cubic meters; two particleboard factories have a total production capacity of 620000 cubic meters; at the same time, "New Zealand Gisborne annual output of 400000 cubic meters can be decorated oriented particleboard project", "annual output of 500000 cubic meters super particleboard project" is being implemented.
In addition, the company actively promotes afforestation and continues to build a "forest board integration" industry chain. At present, it has about 200000 mu of fast-growing and high-yielding woodland in Guangxi.
We expect that after the completion of the project with an annual output of 500000 cubic meters of super particleboard and the project of 400000 cubic meters of decorated oriented particleboard in Gisborne, New Zealand, the company's production capacity will be greatly increased. While further increasing the market share of aldehyde-free board products with strong market demand, it will also bring new profit growth points through the docking of SSPB (super particleboard) with the market as soon as possible. In addition, the company continues to promote the coastal port strategy and increase the development of overseas high-end timber resources, which will help to further seize the high-end plate market and lay the foundation for sustainable development in the future.
In addition, the company focuses on the high-end market of safety and environmental protection, and the leading industry of high-quality environmental protection products represented by aldehyde-free plates. The company is committed to the production of safe and environmentally friendly low free formaldehyde emissions of wood-based panels and non-formaldehyde added wood-based panels, the company's factories have passed the F ☆☆☆☆ certification in Japan, the company fibreboard includes formaldehyde-free board, router-milling board, moisture-proof board, E0-grade low-flavor board, etc. Particleboard mainly produces formaldehyde-free board, F-☆☆☆☆ board, moisture-proof board, super particleboard, E0-grade low-smell board and other high-end products. The "Fenglin" brand formaldehyde-free added fibreboard and particleboard produced by the company have passed the NAF formaldehyde-free exemption certification issued by the California Air Resources Council (CARB). When the board or furniture products that have obtained the NAF aldehyde-free exemption certification enter the US market, there is no need for formaldehyde testing. After the outbreak of COVID-19, people pay more and more attention to the home environment and quality of life, and the series of formaldehyde-free board products of downstream head customized furniture enterprises continue to grow rapidly. Fenglin Group's formaldehyde-free plate sales have increased significantly since the second quarter of 20 years, which has become the first driving force for the company to fully and rapidly resume production and improve its performance quarter by quarter. At present, the proportion of the company's formaldehyde-free plate sales has increased to about 15%. We expect that with the gradual release of end-consumer demand for environmentally friendly products such as formaldehyde-free plates, the company's sales scale and profitability will continue to improve, and the growth of environmentally friendly products such as formaldehyde-free plates is still worth looking forward to.
Investment advice:
The company's product structure has been continuously optimized and its production capacity has been continuously upgraded and expanded. We expect the company's operating income to be 22.02 yuan and 2.759 billion yuan from 2021 to 2022, an increase of 20.12% and 25.31% respectively over the same period last year, and the net profit of returning home is 2.24 yuan and 284 million yuan, an increase of 23.83% and 26.92% respectively over the same period last year, corresponding to the latest PE of 14.3x and 11.3x respectively, maintaining the "buy" rating.
Risk Tips:
The impact of the epidemic exceeded expectations; raw materials fluctuated; downstream demand was depressed, and so on.