SKSHU(603737) 国金证券·2025-01-17 00:56Investment Rating - The report gives a "Buy" rating for the company, with a target price of 56.67 RMB based on a 35x PE for 2025 [3]. Core Insights - The company is transitioning into a new growth phase after a period of high growth and risk, focusing on retail and small B+C segments, with significant revenue growth expected from both C and B segments [1][2]. - The company has established a strong brand presence in lower-tier cities and is leveraging this to capture growth opportunities in higher-tier cities, particularly through innovative service models [1][2]. - The report anticipates a recovery in gross margins and a reduction in sales expense ratios, leading to improved profitability and return on equity (ROE) in the coming years [2]. Summary by Sections Retail Breakthrough and Growth Phase - The company has shifted focus from large B to small B+C segments, completing channel structure adjustments by 2024, which will release previously accumulated high risks [1]. - C-end sales have shown resilience, with a compound annual growth rate (CAGR) of approximately 21% from 2011 to 2023, driven by a strong brand foundation in lower-tier cities [1][22]. - The company has maintained its position as the leading brand in engineering coatings, with 2023 revenues of approximately 4.68 billion RMB and a CAGR of 37% since 2012 [1][48]. Profit Margin Elasticity - Future profit margin elasticity is expected to come from gross margin recovery and reduced sales expense ratios, with gross margins projected to recover to 30.3% and 31.1% in 2025 and 2026, respectively [2]. - The sales expense ratio is anticipated to decrease to 14.5% and 14.0% in 2025 and 2026, respectively, as the company improves its channel construction and reduces hiring [2]. Profit Forecast and Valuation - The company is expected to achieve net profits of 4.3 billion RMB, 8.5 billion RMB, and 12.1 billion RMB for 2024, 2025, and 2026, respectively [3]. - The current stock price corresponds to a PE of 47.0, 23.5, and 16.6 for the years 2024, 2025, and 2026 [3]. Expansion into Industrial Coatings - The company is actively entering the industrial coatings market, focusing on automotive and marine coatings, with plans to build new production lines starting in 2024 [60][61]. - The industrial coatings market is characterized by high technical difficulty and is currently dominated by foreign brands, presenting an opportunity for the company to break the monopoly [60][61].