The company is a leading domestic enterprise in R&D, production and export of new PVC composite decking materials. The company's main products include wood-plastic composite decking (WPC flooring), stone-plastic composite decking (SPC flooring), glass-magnesium flooring (MGO flooring), plastic crystal flooring (LVT flooring), etc. In recent years, PVC flooring represented by LVT, SPC, and WPC has been widely used in public places such as factories, schools, hospitals, shopping malls, entertainment venues, etc., due to its lightweight, wear-resistant, and flame retardant characteristics. Production and sales have grown rapidly. In the future, domestic demand and exports will become a strong engine for domestic PVC flooring development.
The company has a stable supply of main raw materials and maintains long-term stable business dealings with suppliers and customers. In terms of raw materials, the market supply of the company's main raw materials, polyvinyl chloride (PVC resin powder), wear-resistant layers, and printed fabrics, is sufficient, and prices are transparent. At the same time, the company used a method of locking prices with suppliers so that the purchase price of the company's PVC resin powder was lower than the median market price during the same period. The company's main suppliers are well-known material suppliers in the industry or locally. The business scale is large and the operating conditions are good. On the customer side, the company's customer composition is relatively stable, and the top five customers account for a relatively high total sales. The company's main customers are world-renowned floor manufacturers and sellers. They are leading downstream enterprises with large business scale and strong comprehensive strength.
The company has technical and R&D advantages. As the first company to launch WPC flooring products in China, the company launched new SPC flooring products, and became one of the first enterprises in China to have mature MGO flooring production processes. The company has 20 authorized patents, including 12 invention patents. At the same time, the company has been actively participating in the formulation of industry standards and is one of the main drafters of many industry standards.
The company's profit level increased significantly in 2022. According to the performance report, the company achieved net profit attributable to shareholders of listed companies of 410 million yuan in 2022, an increase of 46.83% over 2021. The company's main business revenue mainly comes from two types of new PVC composite floors, WPC flooring and SPC flooring. These two types of flooring are high-end products in the PVC flooring industry. Currently, they are selling well in the European and American markets, and the market prospects are good. The company's increased profitability in 2022 was due to the decline in the price of PVC resin powder, the main raw material, the price of sea freight, and the rise in the exchange rate of the US dollar against the RMB.
The company is actively expanding production at home and abroad. In recent years, the industry has developed well, demand for the company's products is strong, the production and sales rate of the company's main products has remained at a high level, and production capacity bottlenecks have limited the company's performance growth to a certain extent. The company has now invested in the construction of intelligent production line projects for new inorganic composite decking with an annual output of 30 million square meters and 25 million square meters in China and Vietnam. The total project investment is 662 million yuan and 411 million yuan respectively. It is expected to be completed and put into operation on November 30, 2023 and June 30, 2023, respectively.
Profit forecasts and investment ratings. We expect the company's net profit to be 288 million yuan, 330 million yuan, and 379 million yuan respectively from 2023 to 2025, and EPS to be 2.40 yuan, 2.75 yuan, and 3.16 yuan respectively. Referring to the valuation level of comparable companies, they were given a “better than market” investment rating of 20 times that of 2023, corresponding to a target price of 48.00 yuan, corresponding to PB 1.55 in 2023.
Risk warning: product price fluctuations, project construction, rising raw material prices.