\u3000\u30003 Eternal Asia Supply Chain Management Ltd(002183) 00218)
PU synthetic leather industry leader, deeply cultivated in the industry for more than 20 years. Founded in 1994, the company is mainly engaged in the R & D, production, sales and service of ecological functional polyurethane synthetic leather and its composites, with a wide range of downstream applications. The company is an innovative R & D driven enterprise. After more than 20 years of integration and optimization, it has become one of the enterprises with the largest production and sales of ecological functional polyurethane synthetic leather in the world. The company complies with the development trend of global industry and arranges overseas markets. Benefiting from the company’s continuous promotion of product technology innovation and active layout of overseas markets, the company’s performance has increased rapidly in recent years. In 2021, the company achieved a revenue of 2.046 billion yuan, an increase of 32.28% and a net profit attributable to the parent company of 132 million yuan, an increase of 161.42%.
The rapid expansion of downstream application fields has driven the rapid increase of synthetic leather market demand. The company is the leader of PU synthetic leather industry, and ecological functional PU synthetic leather will become the mainstream of industry development: 1) ecological functional PU synthetic leather and composite materials have distinctive characteristics and obvious environmental protection advantages, and are encouraged and supported by national industrial policies to accelerate the replacement of natural leather, PVC artificial leather, textiles, plastics and other traditional materials. 2) With the upgrading trend of consumption and the enhancement of consumers’ awareness of environmental protection, downstream Chinese and foreign brands are gradually reducing or eliminating some materials and solvent-based products containing DMF, and expanding the application of water-based, solvent-free and other environmental protection and ecological products. The demand for medium and high-end ecological functional polyurethane synthetic leather products of the company has increased significantly. 3) The downstream application fields of synthetic leather continue to expand, and have gradually expanded from traditional fields such as shoes, bags, handbags, clothing, sofa, home, ball games, ticket clips, belts and certificate stationery to emerging fields such as electronic products, packaging, automobile interior decoration, outdoor sports and engineering decoration.
The ratio of R & D investment has been stable for many years, and industrial technical barriers have gradually formed. As an R & D driven enterprise, the company pays attention to product R & D. over the years, the R & D investment has been leading the industry and has achieved remarkable results. It has an early layout of cutting-edge equipment and process technologies such as ecological functional polyurethane synthetic leather, solvent-free polyurethane synthetic leather, waterborne polyurethane synthetic leather and bio based materials, has a strong first mover advantage and occupies the commanding height of global industry competition. In addition, under the pressure of environmental protection policies, the company actively develops international advanced process technology and comprehensively iterates and upgrades the backward production capacity.
High quality customer resources and continuous upgrading of product structure lay the foundation for growth. The company has been deeply engaged in its main business for more than 20 years. With advanced technology and strong R & D and innovation ability, the company has successively reached strategic cooperation with well-known brand customers at home and abroad, such as apple, Nike, Toyota, IKEA, Great Wall Motor Company Limited(601633) , Weifu group, Colombia, Tommy, CK, Byd Company Limited(002594) , Google, europay and so on. In addition, the company continues to improve the product structure and expand to the product field with high added value. At present, the production capacity of water-based solvent-free accounts for about 25%. It is expected that with the transformation of the company and the production of new water-based solventless polyurethane, the proportion of its revenue will increase to 40% by the end of 2025. The improvement of product structure will promote the steady improvement of the company’s customer orders and profitability.
Profit forecast and investment rating. We are optimistic that the company will benefit from the continuous high-profile of the downstream industry. The company is expected to continue to optimize the product structure and drive the improvement of the overall gross profit margin with its strong R & D and innovation ability and process technology level. The expansion of emerging application fields, new customers and the continuous release of production capacity are expected to bring new performance growth points to the company. We expect that from 2022 to 24, the company’s revenue will increase by 21.1% / 17.2% / 16.2% year-on-year, and the net profit attributable to the parent company will increase by 159.2% / – 21.4% / 21.4% year-on-year. The current share price of the company corresponds to 7.56 times in 2022, and the average PE valuation of comparable companies in 2022 is 17.56 times, which is at a low level. Based on the absolute valuation and relative valuation methods, we give the company a target price of 25.08 yuan, which is optimistic about the company’s future long-term performance growth, and give a “buy” rating for the first time.
Risk factors: price fluctuation risk of raw materials, repeated epidemics in overseas and China, and significant appreciation of RMB exchange rate.
