DEHUA TB(SZ:002043) Ping An Securities·2025-03-12 08:46Investment Rating - The report assigns a "Buy" rating for the company, Tubaobao, for the first time [1]. Core Views - Tubaobao is a leading player in the domestic artificial board industry, with a strong focus on channel transformation and growth in the custom home segment. The company has maintained generous dividends and has a solid cash flow [5][7]. - The domestic artificial board market is valued at over 700 billion, with significant applications in furniture manufacturing and building decoration. The market is expected to see an increase in concentration due to rising environmental awareness and changes in consumer demand [5][7]. - Tubaobao has established strong brand barriers and is deepening its relationships with suppliers and distributors, ensuring stable profit margins and cash flow. The company is actively expanding its distribution channels, particularly in rural areas, and is focusing on the custom home market [5][7]. Summary by Sections Company Overview - Tubaobao, founded in 1992, has become one of the largest producers of high-end eco-friendly furniture boards in China. The company operates primarily in decorative materials and custom home segments, utilizing a dealer model for sales [13][15]. - The company has a production model that includes both self-manufacturing and OEM outsourcing, with a focus on high-end customized furniture boards and related products [15][17]. Financial Performance - The company has shown resilience in its financial performance, with revenue growth even amidst industry challenges. For the first three quarters of 2024, Tubaobao achieved revenue of 6.46 billion, a year-on-year increase of 12.8% [19][20]. - The average net profit margin and ROE over the past decade have been 7% and 19%, respectively, indicating stable profitability [22][24]. Industry Landscape - The artificial board market in China has seen steady growth, with production increasing from 27.37 million cubic meters in 2014 to 33.6 million cubic meters in 2023, reflecting a CAGR of approximately 2.3% [36][37]. - The market is characterized by a high degree of fragmentation, with over 10,100 production enterprises, but is expected to consolidate as consumer preferences shift towards environmentally friendly products [45][46]. Growth Strategy - Tubaobao is capitalizing on the channel transformation trend, increasing its focus on furniture factory channels and rural markets. The company has expanded its decorative materials stores significantly, with 4,322 stores by mid-2024 [5][7]. - The company is also enhancing its custom home offerings, leveraging its core materials advantages to drive business growth [5][7].