Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report expresses optimism regarding the company's potential to increase its market share with major clients in the footwear materials sector and the ongoing demand for new products [4][5] - Despite a decline in revenue and profit in Q3 2025, the company is expected to benefit from the growth in new demands from sectors such as electric vehicles, electronics, and semiconductor materials [4][5] Financial Performance Summary - For the first three quarters of 2025, the company achieved revenue of 1.679 billion yuan, a year-on-year decrease of 6.84% - The net profit attributable to shareholders was 121 million yuan, down 19.22% year-on-year - In Q3 2025, revenue was 579 million yuan, a year-on-year decline of 14.24% but a quarter-on-quarter increase of 6.40% - The net profit for Q3 was 28 million yuan, reflecting a year-on-year decrease of 51.38% and a quarter-on-quarter decrease of 39.94% [4][5] Revenue and Profit Forecast - The company has revised its profit forecasts for 2025-2027, expecting net profits of 178 million yuan, 237 million yuan, and 288 million yuan respectively - The earnings per share (EPS) are projected to be 0.82 yuan, 1.09 yuan, and 1.33 yuan for the same period [4][6] Market Position and Growth Potential - The company is recognized as a leader in the PU leather industry and is expected to benefit from increased orders from major clients like Nike, Adidas, and New Balance - The company is also focusing on emerging sectors such as automotive interiors and healthcare, with some products in development and production stages [5][6]

Core Viewpoint - The company reported a decline in revenue and net profit for Q3 2025, attributed to external factors such as fluctuating tariffs, insufficient demand, and increased share-based payment expenses [1][2]. Financial Performance - For Q3 2025, the company achieved revenue of 1.679 billion yuan, a year-on-year decrease of 6.84%, and a net profit attributable to shareholders of 121 million yuan, down 19.22% [1]. - In Q3 2025, revenue was 579 million yuan, representing a 14.24% decline year-on-year, with a net profit of 28 million yuan, down 51.38% [1]. Factors Affecting Performance - The decline in performance is primarily due to: 1. Frequent adjustments in U.S. tariff policies leading to cautious customer behavior and delayed orders, resulting in reduced product output and sales [2]. 2. Insufficient market demand for functional footwear materials and inventory reduction by sports brands, causing a mixed order situation [2]. 3. A significant increase in share-based payment expenses amounting to 15.231 million yuan in Q3 2025, negatively impacting profits [2]. Growth Areas - Despite challenges, the company is seeing growth in automotive interior products, with increased orders and production [2][3]. - The company has established good cooperation with major brands like Nike and Adidas, with ongoing product development and expected order conversions [3]. - The company is expanding into new categories, including medical health and semiconductor materials, with some products in development and mass production stages [3]. Future Outlook - The company maintains an "overweight" investment rating, with revised revenue forecasts for 2025-2027 at 2.273 billion, 2.543 billion, and 2.917 billion yuan, and net profits at 161 million, 219 million, and 267 million yuan respectively [4]. - The current stock price corresponds to P/E ratios of 23.5, 17.4, and 14.2 for the respective years [4].

Group 1: Company Performance and Market Conditions - In April 2025, the company experienced a slight decline in production and sales volume due to tariffs, but product prices steadily increased. By May, order conditions stabilized, and overall business performance remained positive [2]. - The company's direct exports to the U.S. accounted for approximately 2.55% of total revenue in 2024, indicating limited impact from U.S. tariffs [3]. - The company aims to achieve a rebound in the sofa home business in 2025 despite external uncertainties [5]. Group 2: Product Pricing and Development Strategy - The increase in product prices is attributed to the company's focus on brand leadership, technological empowerment, and innovation, rather than capacity or industry cycles [2]. - The company maintains high R&D investment, developing high-tech, high-value-added products, which are increasingly contributing to profit margins [2]. - The company is transitioning from traditional polyurethane synthetic leather to new ecological functional composite materials, integrating advanced processes and materials [4]. Group 3: Client Relationships and Market Expansion - The company has established deep partnerships with major brands like Nike, Adidas, and Apple, which enhances product quality and drives up prices due to high customer demands [2]. - The automotive interior segment is seeing growth, with applications in mainstream brands such as BYD and Toyota, and the company is actively pursuing new projects [6]. Group 4: Valuation and Shareholder Management - The company’s stock is perceived as undervalued, with major shareholders showing confidence by not reducing their stakes. The company has implemented share buybacks totaling approximately 100 million yuan over three years [8]. - Future plans include enhancing shareholder returns through various market management tools and exploring stock repurchase policies [8]. Group 5: Production and Cost Analysis - The production capacity utilization rate in Vietnam is around 50%, with plans to achieve profitability in 2025. However, production costs are comparable to domestic levels due to logistics and material sourcing challenges [9]. - The company’s diverse product categories, including functional footwear and automotive interiors, are expected to show strong growth potential in 2025 [10].