XINGYE TECH.(SZ:002674) Changjiang Securities·2024-08-07 00:01Investment Rating - The investment rating for the company is "Buy" and is maintained [3][5]. Core Views - The company is a diversified leader in leather manufacturing, focusing on high-end cowhide leather for shoes and expanding into automotive leather and second-layer leather through acquisitions [3][4]. - The company has established a strong presence in the domestic market and is expanding its export business, with key clients including major global brands [3][4]. - The company has launched an ambitious stock incentive plan, aiming for net profit growth of no less than 30% in 2023, 20% in 2024, and 20% in 2025, reflecting strong confidence in its growth prospects [3][4]. Company Overview - The company started by focusing on the domestic high-end cowhide leather market and has since expanded its export efforts, achieving the largest market share in domestic cowhide leather [3][4]. - The company has diversified its product offerings by acquiring companies in the automotive leather sector and second-layer leather processing, with current revenue contributions of 69% from shoe leather, 22% from automotive leather, and 5% from second-layer leather [3][4][13]. - The company has a stable and concentrated shareholding structure, with a strong management team that has been with the company for many years [15][18]. Industry Analysis - The traditional adult shoe market has seen a decline in growth, with a CAGR of -0.8% from 2014 to 2021, as the market share of traditional shoes decreased from 72% in 2013 to 44% in 2023 [3][21]. - The market for women's shoes is expected to maintain low to moderate growth, outperforming men's shoes, while mid-range and above products are expected to grow faster than low-end products [21][23]. - The automotive leather market is in a growth phase, with significant opportunities arising from partnerships with new energy vehicle manufacturers, leading to a projected CAGR of 118% for the acquired company, Hongxing, from 2021 to 2023 [4][5][11]. Profit Forecast and Valuation - The company is expected to achieve net profits of 230 million, 290 million, and 330 million yuan from 2024 to 2026, representing year-on-year growth rates of 25%, 23%, and 16% respectively [5]. - The company is considered a rare undervalued asset in the industry, combining growth potential with high dividends, with a projected PE ratio of 11, 9, and 8 times for the respective years [5].