Jiangshan Oupai (603208): ROE of wooden door hardcover faucet project continues to improve

Jiangshan Oupai 西安耍耍网 (603208): ROE of wooden door hardcover faucet project continues to improve

Leader in the wooden door industry, leading in production capacity and manufacturing strength.

The company was founded in 2006, started foreign trade, and later expanded the engineering market. At present, it has developed into a preferred brand for real estate developers.

The company focuses on large-scale production, has multiple large-scale production bases, and has a designed production capacity of nearly 2.8 million tons, leading the manufacturing strength in the industry.

Increasing the proportion of hardcover houses will bring heavy market volume for wooden door projects, with a compound growth rate of 20% in the future.

Wooden door sales channels are divided into retail, engineering and export.

As the proportion of refined decoration increases, the engineering market expands rapidly. We estimate that the engineering market will reach 26.8 billion yuan by 2021, with a compound growth rate of 20%.

Due to the non-standardized and scattered retail orders, and the production lines are mostly small-scale entities, which cannot meet the requirements of engineering-scale manufacturing, we expect that the domestic engineering capacity gap will be 1.7 million in 2018, and enterprises with large-scale manufacturing capabilities will fully benefit.

Focusing on manufacturing advantages, the “engineering strategy” set sail.

In 2019, the company implemented a strategic and strategic focus, vigorously expanded the engineering market, and its revenue increased significantly. It increased by 55% in the first three quarters of 19th. At the same time, the wooden door engineering product SKU was more streamlined, and the scale of the production side was significantly affected. Therefore, the company’s profitability has steadily improved.Net profit growth rate in the first three quarters was 66%.

At present, the company’s engineering market share will still decrease. We estimate that the company’s share of manufacturing advantages will continue to increase, with considerable space, and its performance is expected to maintain rapid growth.

There is plenty of room for improvement in net interest rate + asset turnover, and ROE is expected to continue to improve in the future.

Benefiting from the “engineering strategy”, the company’s revenue scale will rapidly expand, and its gross profit margin will increase, and its expense ratio will decrease, which will increase the net interest rate. At the same time, the increase in production capacity will also increase the fixed asset turnover rate.

In 2018, the company’s ROE was only 14%. We believe that benefiting from the “engineering strategy”, the company’s ROE will continue to improve in the future.

Investment recommendations We estimate the company’s attributable net profit for 2019-2021.

300 million, 3.

0 billion, 3.

7 trillion, corresponding to 16 on November 1st PE.

7 times, 12.

9 times, 10.

2 times, given a “prudent overweight” rating.

Risk reminder: downstream demand grows significantly, scale effect is less than expected