On

January 16, 2025, Ningbo Chibo, a shareholder of more than 5% of the company's shares, signed the "Share Transfer Agreement" with Zhejiang State-owned Capital Operation Co., Ltd., under which Ningbo Chibo intends to transfer 9,098,730 shares of the company held before its initial public offering to the state-owned operating company by way of agreement transfer, accounting for 5.07% of the company's total share capital, and the underlying share transfer consideration is 63.30 yuan per share, totaling 576 million yuan.

Comment

The introduction of state-owned operating companies is expected to strengthen the development of digital printing in the company. The transferee of this agreement is Zhejiang State-owned Capital Operation Co., Ltd., according to the official website, the state-owned operating company is the controlling shareholder of Wusan Zhongda and Zhejiang Construction Group, and has cultivated a number of projects including Lanyu Digital. According to the company's announcement, the share transfer, the state-owned operating company intends to support the company's comprehensive development in the field of digital printing industry, we believe that after the completion of the transfer, the company introduced important strategic investors, is expected to enhance the company's core competitiveness and comprehensive competitiveness, enhance resource synergy.

Honghua Baijin Qianyin, a joint-stock company, is expected to build a first-class digital printing + home textile production base. Honghua Baijin Qianyin was established in October 2021, mainly engaged in the production of high-end home textile sets, according to textile machinery, the total land area of the project is 170 acres, with a total investment of 2.76 billion yuan, the first phase of the project is expected to be officially put into operation in 1Q25, and the annual output value is expected to reach 800 million yuan, and the second phase of the project will start construction in April 2024 and is scheduled to be completed in 2026; After the project is completed and put into production, it will have an annual production capacity of 80 million sets of high-end home textile sets, with an estimated annual sales revenue of 8.7 billion yuan and profits and taxes of about 1.2 billion yuan.

Equipment + ink two-wheel drive, optimistic about the growth space. 1) Equipment side: In October 2024, the company signed a strategic cooperation agreement with Interstate Digital and Dongshen Industry to build the third generation of SinglepPass ultra-high-speed intelligent digital inkjet printing machine, which is expected to reach a maximum operating speed of 6,000 meters per hour; At the same time, under the trend of small orders and multi-frequency industries, the company will strengthen its digital intelligence capabilities, and in December 2024, the company will release a new automated printing system, which is combined with the software and hardware of digital printing machines to achieve automatic centralized RIP and improve production efficiency. 2) Ink end: According to the announcement, the company believes that the Tianjin ink production base company is expected to be put into operation in 2025, and the production capacity is expected to be expanded to 4-50,000 tons.

Earnings Forecast & Valuation

We maintain our 2024/2025 earnings forecast unchanged at $4.37/$590 million, introducing a 2026 earnings forecast of $770 million, and the current share price corresponds to 21.0/16.1x P/E in 2025/2026. Maintain the outperform rating, switch the valuation to 2025, consider the cross-year valuation switch and the sector valuation center to improve, and raise the target price by 12% to 82.13 yuan, corresponding to 25/19x P/E in 2025/2026, and the current upside is 19%.

Risks

Industry demand is less than expected, new business development is less than expected, and competition intensifies risks.