Zhongtai Securities: Overweight Mona Lisa

2021-11-09Sun Ying, Zhu Jinxiao, Liu Yinan of Zhongtai Securities Co., Ltd. conducted a study on Mona Lisa and released a research report "The first repurchase highlights management confidence, investment value is highlighted", this report gives an overweight rating to Mona Lisa, and the current stock price is 19.88 yuan.

Mona Lisa (002918)

Event: On November 8, Mona Lisa announced that it intends to use its own funds to repurchase part of the company's public shares in a centralized auction transaction, and the repurchased shares will be used entirely for the equity incentive plan or the employee stock ownership plan (if the purpose is not implemented within 36 months from the date of completion of the share repurchase, the unused repurchased shares will be cancelled). The total amount of the repurchase range is 110 million yuan - 220 million yuan (inclusive), the repurchase price does not exceed 31.93 yuan / share (the repurchased share price does not exceed 150% of the average trading price of the company's shares in the 30 trading days before the company's board of directors deliberates and approves the resolution to repurchase shares), and the expected repurchase range is 3.445 million shares to 6.890 million shares, accounting for 0.83% to 1.66% of the company's current total share capital.

Comments: This announcement is the first repurchase plan since the company's listing, and its main purpose is equity incentive plan or employee stock ownership plan, which highlights the management's full confidence in the company's business development prospects, operating conditions, financial situation, future profitability, and high recognition of the company's value.

We believe that the current ceramic industry is facing unprecedented operating pressure in the short term, which is conducive to the expansion of head enterprises against the trend. The company's operating conditions are phased lows, and through the introduction of new product price increases and internal lean management, cost pressures such as billets, coal, natural gas and electricity will be released marginally. The company's 21Q1/21Q2/21Q3 revenue growth rate was 105.6%/59.9%/19.2% respectively, and the revenue growth rate in the third quarter slowed down slightly, on the one hand, due to the higher base of the same period last year, on the other hand, it was affected by industry factors such as downstream real estate and power rationing. 21Q3 Gross profit/net profit margin both declined year-on-year, mainly due to the rise in raw material and energy prices, the follow-up company will reduce costs through product structure adjustment, increase the proportion of products such as large slate slabs, and improve management efficiency, stable production quality, and staggered peak electricity consumption.

Financial situation: At the end of the third quarter, the company's monetary fund balance was 2.36 billion yuan, a record high, which can cover the repurchase funds and the funding needs of the construction in progress, and the funding position is good. The repurchase is the company's own funds, assuming that the upper limit of 220 million yuan of the repurchase funds is fully used, the repurchase funds account for 1.79% and 5.11% of the company's total assets and net assets attributable to the mother at the end of the third quarter, respectively, accounting for a relatively small proportion. According to the latest progress of the construction project disclosed in this year's mid-year report, the company still needs to invest about 600 million yuan in budget funds, and its own funds can cover the construction of the project.

Core logic: We believe that compared with other leading enterprises in the tile industry, the company has outstanding advantages in terms of product strength. The company adopts the two-wheel drive mode of "distribution channel + real estate strategy" to achieve balanced development of B and C and steady expansion of production capacity, continuously improve brand awareness, and maintain rapid growth in performance for many years.

1) Product strength: Through scientific and technological innovation, the company aims at the world's first-class ceramic product production technology, and continues to increase the research and development and promotion of large-scale ceramic slabs, rock slabs, multi-functional slabs and ceramic sheets, and the scale of production and marketing of ceramic slabs and rock slabs ranks in the forefront of the industry, and is expected to further become the dominant products in the market.

2) Channel: To B Business: The company implements the "real estate strategy" marketing strategy and cooperates deeply with high-quality large customers such as Country Garden, Vanke and Poly, which are the head real estate developers. In addition, the company continues to expand its waist real estate customers, and it is expected that the engineering field will benefit from the continuous expansion of customers and the further improvement of the concentration of downstream real estate developers for a long time. To C business: The "channel sinking" strategy of the distribution channel has been implemented effectively, and there is still room for sinking. In the next step, the company will continue to increase the layout of the county-level and town-level markets. It is expected that the retail side will benefit from the marginal slowdown of the fine decoration trend and the accelerated expansion of the small B channel.

3) Brand: Mona Lisa is a first-line brand in the industry, with rich brand culture and connotation. In the field of tooling, the company has won the honor of Vanke A supplier for many consecutive years, and has also become the exclusive supplier of architectural ceramics for the 22nd Hangzhou Asian Games. In the field of retail, the company achieves brand value improvement through the overall image of high-standard and standardized terminal stores.

4) Capacity advantage: In the first half of the year, the company's Guangxi Tengxian production base phase I phase ii 3 intelligent production lines, Guangdong Xiqiao production base 3 special high-performance ceramic plate production lines, the acquisition of Jiangxi Gao'an production base 9 production lines have been put into operation, production capacity release to support sales growth.

Profit forecast: The company is a leading enterprise of high-end ceramics, with significant brand advantages, capacity expansion, product upgrades and deepening cooperation with real estate developers, helping the company to develop rapidly in the field of engineering business, and profitability is expected to achieve rapid growth. The buyback demonstrates management confidence, and we believe that the phased pressure of the industry will not change the company's medium- and long-term development prospects, and the investment value is prominent. We expect 21, 22 years attributable net profit of 630 million, 820 million, corresponding to PE of 12 and 9 times, maintaining an "overweight" rating.

Risk Warning: The intensification of industry competition has led to a sharp decline in the average profit margin of the industry; the operating risks caused by the downturn in the downstream real estate market; the progress of the company's new production capacity has not met expectations; and the industry competition such as the existence of operational risks for large local customers.

A total of 21 institutions have given ratings in the last 90 days, 18 buy ratings and 3 overweight ratings; the average target price of institutions in the past 90 days has been 37.56; the Securities Star Valuation Analysis Tool shows that mona Lisa (002918) good company rating is 3.5 stars, good price rating is 4 stars, and valuation composite rating is 3.5 stars.