Key points of investment:
The company announced a preliminary increase in performance for the first half of 2024, which slightly exceeded expectations. Net profit due to mother is expected to be 0.05-0.058 billion yuan in the first half of 2024, with a year-on-year increase of 35%-55%, of which 24Q2 will achieve 0.038-0.045 billion yuan, an increase of 31%-56%; net profit without return to mother is expected to be 0.049-0.054 billion yuan in the first half of 2024, with a year-on-year increase of 100%-123%, of which 24Q2 will achieve net profit of 0.038-0.044 billion yuan, same This is an increase of 74%-99%. Under pressure from the overall sector, the company achieved obvious contrarian growth, and promoted high profit growth, reflecting its unique alpha advantages: 1) the company firmly established a pan-home furnishing industry strategy, strengthened the collaborative development of the business sector. Yingpai Ceramics continued to promote channel decline, tap customer needs, and accelerate blank market coverage; 2) the polymer composite finishing materials business segment increased revenue growth, high gross margin product orders increased, and the scale effect unleashed profit flexibility; 3) Deepen refined management, strictly reduce costs and increase efficiency, and effectively improve operating quality.
The traditional automotive interior business is the cornerstone of steady growth, and the reuse of technology and manufacturing capacity is driving growth in other sectors. Automotive interior revenue in 2023 was 0.49 billion yuan, up 15.5% year on year. The company continues to expand NEV companies such as BYD and Chery, and is expected to continue to benefit from the increase in the penetration rate of domestic NEVs in the future.
The company's manufacturing and technical capabilities accumulated in the fierce competition of automotive interiors can be reused in other sectors: reuse manufacturing and supply chain management experience to improve Yingpai's production efficiency, reuse product technical capabilities to improve environmental friendliness, stability, and high efficiency of complete solutions.
Eagle is the core growth engine. After Tianan joined the market operation mechanism, it stimulated vitality and achieved countertrend growth with an asset-light model. The ceramics industry has high requirements for production-side cost control and supply chain efficiency. After Tianan New Materials acquired Yingpai, driven by the four dimensions of strategy, mechanism, management, and culture, it achieved a net profit of 0.09 billion yuan in 2023, which greatly reversed losses. At the same time, we actively explore declining market channels, empower dealers, activate Eagle's brand and product potential, and form channel-side traction. In 2023, we achieved revenue of 1.57 billion yuan, an increase of 20.8% over the previous year. Adopt outsourced OEM, central warehouse models, and large household strategies to grow against the trend and lay the foundation for medium- to long-term development. The outsourced foundry+central warehouse model has manageable asset risk, avoids insufficient utilization of production capacity, guarantees cash flow, reduces transportation, inventory and financial pressure, and is lightweight, while the central warehouse model is close to terminal outlets, responds quickly to consumer needs, helps improve the coverage capacity and speed of empty areas, and accelerates the expansion of the national market; the “ceramic+large household” differentiation strategy progresses steadily, shifting from a single tile to a “tile+rock panel+wall panel+floor” multi-category delivery, providing consumers with an environmentally friendly, prefabricated one-stop solution.
Prefabricated interior: Innovative application of automotive interior products and technology to output complete solutions. The market size of the complete assembly exceeds trillion dollars, the penetration rate of prefabricated interior decoration is increasing rapidly, and there is plenty of room for imagination. The company integrates resources from various sub-sectors around the pan-home furnishing industry chain to form differentiated competitiveness and enter the complete market. The front desk uses Yingpai Company and Tianhui Jianke's channel resources and brand capabilities for home decoration and public decoration to export tiles, door wall and floor cabinets, and polymer finishing materials. Tianhui Construction Technology has mature experience in prefabricated public installation, and can achieve rapid, safe, environmentally friendly and beautiful delivery of public space reassembly, and is expected to be replicated on a large scale in the field of stock housing renewal and old housing renovation. Zhongtai Tianan integrated output design scheme and supply chain supporting services. Backstage Tianan Polymer and Zhejiang Ruixin mainly produce decorative materials, including home decoration finishing materials and building fireproof veneer materials. They innovatively apply environmentally friendly automotive interior products and dry construction technology to finishing, creating competitive advantages over traditional decoration in terms of environmental protection, product quality, and delivery efficiency.
After the merger and acquisition of Yingpai Ceramics, the bottom reversed. In the short to medium term, they were optimistic that market-based reforms would drive an increase in profit margins. Outsourced OEM and central warehouse models brought about countertrend growth in the industry during the downturn. In the long term, they are optimistic that new prefabricated interior technology will enter the complete assembly market, and the increase in B-side and C-side penetration rates will open up room for growth. Maintain the company's net profit forecast for 2024-2026 at 0.152/0.213/0.285 billion yuan, respectively, +25.8%/+39.9%/+33.7% year-on-year, respectively. The corresponding PE was 13/9/7X, maintaining the purchase rating.
Risk warning: weak demand in the home furnishing market, risk of business collaboration.