Incident: The company revealed its 2023 performance forecast. Net profit for the full year is expected to be RMB 11—130 million, after deducting non-net profit of RMB 6600 to 86 million yuan, all turning losses into profits year-on-year (losses of 165 million yuan and 180 million yuan, respectively). The review is as follows:
The main business is growing, and profitability continues to rise. By business, in 2023, the company's building ceramics/automotive interior finishing materials business revenue increased by about 21%/15% year-on-year, respectively, and revenue from fireproof panels also achieved a slight increase. In terms of gross margin, the gross margin of automotive interior finishing materials increased by about 2 pct year on year, and the gross margin of fireproof board products increased by about 6 pct year on year due to the increase in domestic sales of high-margin products. In 2023, the company's non-recurring profit and loss was about 46 million yuan, an increase of about 206% over the previous year. The main reasons are: 1) for real estate clients' bonded real estate in 2023, the company carried out accounting treatment in accordance with debt restructuring standards to confirm debt restructuring gains; 2) the operating performance of the company's foreign shareholding companies improved in 2023, and income from changes in fair value increased; 3) the increase in government subsidies included in current profit and loss in 2023. Under the combined influence of the above factors, the company's performance turned a year-on-year loss into a profit. Net profit attributable to mother for the whole year was 111-130 million yuan, and net profit after deducting non-net profit was 66-86 million yuan.
It is proposed to acquire 10% of the remaining minority shareholders of Ruixin Packaging to further integrate the company's resources. On January 22, 2024, the company received an acquisition request from minority shareholder Cao Chunqing. The company plans to begin the third cash purchase of 10% of Ruixin Packaging's shares (corresponding to a registered capital of 2.81 million yuan) in accordance with the agreement of the original “Equity Acquisition Agreement”. After the acquisition is completed, the company's shareholding ratio in Ruixin Packaging will increase from 90% to 100%. The company completed the acquisition of Ruixin Packaging in April 2021. The company's product segment introduced decorative materials such as high-end fireproof boards and non-combustible high-pressure resins, etc., which enriched the company's product range, expanded the application fields of products, made good use of industrial synergy, and further improved the company's business development in the field of prefabricated interiors. This time, the company plans to continue to acquire 10% of Ruixin Packaging's minority shareholders, which will help the company further integrate resources, strengthen the management and utilization of resources of Ruixin Packaging, and enhance the company's profitability.
The channel is sinking steadily, and the pan-home strategy has opened up room for long-term growth. The company continued to sink its channels and expanded its distribution stores across the country through continuous investment promotion and promotion. As of the first half of 2023, Yingpai had 1,243 dealers and 1,295 stores, with a store area of 300,000 square meters. At the same time, Yingpai also launched two types of stores, Yingpai Life and Yingpai Renovation Home, to embed products such as wall panels, cabinets, and flooring into Yingpai's terminal stores to gradually achieve integrated delivery from individual sales of architectural ceramics to integrated delivery of interior doors and wall cabinets, to provide customers with a one-stop solution for systematic product output, and launch the deepening business of old house renovation and hardcover houses, turning Yingpai from a building materials brand into a consumer brand in the pan-home furnishing sector.
In addition, the company focuses on the three main channels of home improvement retail, assembly and engineering, strengthening sales conversion of home improvement retail channels, increasing the stickiness of cooperation with assembly companies, and broadening resources for individual engineering projects, thereby expanding sales network coverage. In the field of public decoration, the company entered the medical renovation field through the acquisition of Tianhui Construction Technology to explore development opportunities in the medical renovation market. Currently, it has begun to gradually undertake the construction and transformation of medical renovation projects.
Mr. Wu Qichao, the controlling shareholder and actual controller of the company, subscribed in cash for all A-shares issued by the company to specific targets, which is conducive to optimizing the capital structure of listed companies, reducing financial risks, and improving resilience to risks. At the same time, it also shows the actual controller's confidence in the company's future development.
Investment advice: The annual results are in line with expectations, the main business is growing positively, and the rating of increasing holdings is maintained. The company's net profit from 2023 to 2025 is estimated to be 1.2, 160 million yuan, and 20 million yuan, respectively, up 173%, 35%, and 22% year-on-year, respectively, with corresponding PE price-earnings ratios of 19, 14, and 11 times, respectively. Downstream demand in the automotive decoration industry is improving; the company integrates holding subsidiaries such as Eagle Brand, Decorative Materials and Tianan Integration to create a complete platform to create business collaboration and create new growth points for performance.
Risk warning: raw material prices have risen or exceeded expectations; downstream demand for real estate may fall below expectations; prices of automotive interior finishing materials products have declined; industry competition has intensified; impairment meters mention merger and acquisition integration risks, etc.