Key takeaway

The company has deepened its presence across the recycled plastics value chain, with steady growth in operating results. Revenue and net profit attributable to the parent company posted CAGRs of 15.9% and 5.6% in 2020–2025, respectively. In 26Q1, revenue reached RMB1.02bn, up 28.7% YoY, and recurring net profit attributable to the parent company reached RMB105mn, up 122.1% YoY, marking a strong start to the year. Looking ahead, phase III of the Vietnam project is about to commence production, and decorative building materials are expected to form a second growth curve: 1) New green wall building materials are rapidly replacing traditional wall materials due to features such as zero formaldehyde, low VOC, waterproof and moisture-resistant properties, easy installation, and recyclability. Leveraging product capability and channel synergy, the company provides one-stop decoration solutions for customers and is expected to build a second growth curve. 2) The finished frame industry is growing steadily. The company’s products stand out in environmental performance and design, and its overseas bases enjoy tariff and other cost advantages. Currently, phases I and II of the Vietnam base are operating at full production and full sales, and phase III is expected to commence production in mid? 2026, which may further increase market share. The company’s equity incentive plan demonstrates confidence. The target for 2025–2029 is a 15% CAGR in revenue/profit (the trigger value is 70% of the target).

Event

The company released its 1Q26 report. In 1Q26, the company achieved revenue of RMB1.02bn/+28.7%, net profit attributable to shareholders of the parent company of RMB51.04mn/-29.4%, and net profit attributable to shareholders of the parent company excluding non-recurring items of RMB105mn/+122.1%. Amid a complex external environment, the company maintained stable and orderly operations and steadily advanced the global lexpansion of production capacity. Revenue achieved solid growth, while exchange rate fluctuations and changes in the fair value of financial assets affected reported performance. Net profit attributable to shareholders of the parent company excluding non-recurring items more than doubled, delivering astrong start.

Quick Take

Deeply cultivating the entire recycled plastics industry chain and expanding global production capacity: Steady operations in recent years. The company was established in 2002 and has focused on the renewable plastics sector for more than 20 years. Centered on plastic recycling, regeneration, and utilization, it has innovatively connected the entire industry chain of plastic circular reuse. The company has the capacity to recycle and reuse about 150,000 tons of plastic annually, helping reduce global carbon emissions by 300,000 tons per year, save 450,000 tons of crude oil resources, and reduce the felling of about 2.7 million trees. The company has six production bases worldwide, located in Zibo, Shandong; Fengxian, Shanghai; Lu'an, Anhui; Zhenjiang, Jiangsu; Malaysia; and Vietnam. From 2020 to 2025, the company's revenue increased from RMB1.699bn to RMB3.546bn, with a CAGR of 15.9%; net profit attributable to shareholders of the parent company increased from RMB0.217bn to RMB0.286bn, with a CAGR of 5.6%. In 2025, the company recorded revenue of RMB3.546bn/+21.3%; net profit attributable to shareholders of the parent company was RMB0.286bn/-7.0%, and net profit attributable to shareholders of the parent company excluding non-recurring items was RMB0.195bn/-27.6%, mainly due to share-based payment expenses (RMB13.29mn) and an increase in foreign exchange losses (from a foreign exchange gain of RMB33.60mn in 2024 to a foreign exchange loss of RMB63.27mn in 2025).

The company's core business covers the entire industrial chain of plastic recycling, regeneration, and utilization. Among them, terminal products such as finished frames and decorative building materials accounted for 77.8% of revenue, while overseas revenue accounted for 88.5%. 1) By product, ① finished frames: 2025 revenue RMB1.478bn/+12.6%, accounting for 41.7% of revenue, gross margin 28.35%/ -0.83pct; ② decorative building materials: 2025 revenue RMB1.281bn/+39.8%, accounting for 36.1% of revenue, gross margin 29.78%/-0.69pct; ③ recycled plastics: 2025 revenue RMB0.739bn/+13.7%, accounting for 20.8% of revenue, gross margin 6.90%/+1.62pct; ④ environmental protection equipment: 2025 revenue RMB0.030bn/-7.8%, accounting for 0.9% of revenue, gross margin 59.24%/-4.39pct. 2) By region, ① overseas: 2025 revenue RMB3.137bn/+28.9%, accounting for 88.5% of revenue, gross margin 26.90%/-0.69pct; ② domestic: 2025 revenue RMB0.407bn/-16.2%, accounting for 11.5% of revenue, gross margin 6.74%/-3.76pct. Company growth logic: 1) decorative building materials: New green wall decoration materials are replacing traditional building materials and are expected to create a second growth curve. According to QYResearch, the global wall decoration materials market reached USD137.8bn in 2024. Among them, new green wall building materials are rapidly replacing traditional wall materials due to features such as zero formaldehyde, low VOC, waterproof and moisture resistance, easy installation, and recyclability. The company's new environmentally friendly building materials feature light industrial craftsmanship, convenient installation, environmental performance, and modern aesthetics. They offer significant cost advantages throughout the full life cycle. The company's decorative building materials series can provide a "one-stop decoration solution", covering healthy homes to commercial buildings, and from indoor decoration to outdoor scenarios. Looking ahead, in line with the structural shift in wall decoration materials in Europe and the United States, the company is expected to build a second growth curve by leveraging its product capabilities and channel synergies. 2) Finished frames: The industry is developing steadily, and the company ’s competitive advantages are significant, with market share expected to continue rising. According to company disclosures, the combined import value of finished frames (mirror frames, photo frames, and picture frames) in Europe and the United States was about USD6.1bn in 2025. The market size has remained broadly stable in recent years. China’s share of European and US imports declined from 49.25% in 2018 to 37.15% in 2025, while Vietnam’s share increased from 1.14% to 3.78%, indicating a gradual emergence of the Southeast Asia substitution effect. The company ’s finished frame products focus on mirror frames, photo frames, and picture frames, featuring environmental friendliness and strong design capabilities. Against the backdrop of steady industry growth, the company has competitive advantages such as global customer channels, a diversified product matrix, and coordinated global flexible production capacity. Benefiting from the restructuring trend of the global supply chain, the company’s market share is expected to further increase. In terms of overseas production capacity, the company was among the first to establish two major Southeast Asian bases in Malaysia and Vietnam. Currently, Phase I and Phase II of the Vietnam base are operating at full capacity with full sales, and Phase III is expected to commence production in mid? 2026. Overseas production capacity has tariff cost advantages. In 2025, the Vietnam base generated revenue of RMB500mn, and its output value is expected to reach RMB1bn in 2026.

Equity incentives demonstrate confidence: The 2025–2029 target implies a 15% CAGR for revenue/net profit. In May 2025, the company announced a proposed restricted stock incentive plan, granting a total of 7.5mn restricted shares to 618 incentive recipients (including company directors, senior management, core technical personnel, and key business staff), accounting for 4.01% of the total share capital on the announcement date. The grant price of the restricted shares is RMB12.07 per share. Based on the company-level performance assessment targets for lifting sales restrictions, the CAGR of operating revenue or net profit from 2025 to 2029 must reach 15%. (Note: The trigger value is 70% of the target value. If the target value is not achieved but the trigger value is reached, unlocking will occur in proportion to the level achieved). According to the draft plan, expenses amortized from 2025 to 2030 are estimated at

RMB22.32mn/31.43mn/18.27mn/10.88mn/5.68mn/1.65mn, totaling RMB90.225mn.

Earnings forecast:We expect the company’s revenue in 2026–2028 to reach RMB4.261bn, RMB5.038bn, and RMB5.943bn, representing YoY growth of +20.1%, +18.2%, and +18.0%, respectively. Net profit attributable to shareholders of the parent company is projected to be RMB402mn, RMB484mn, and RMB576mn, representing YoY growth of +40.5%, +20.5%, and +19.1%, respectively. The corresponding current PE ratios are 18.0x, 15.0x, and 12.6x. We initiate coverage with a “buy” rating.

Risks: 1) Risk of gross margin decline due to intensified competition / raw material price volatility. If industry competition intensifies, or raw material prices rise while the company cannot pass through the cost pressure, the company’s gross margin may decline. Based on 2026 as the base case, if gross margin decreases by 1%, 2%, or 5%, net profit attributable to shareholders of the parent company in 2026 will decrease by 10.1%, 20.1%, and 50.3%, respectively. 2) Exchange rate fluctuation risk:The company needs to hold USD funds for the long term to support daily operations and strategic investment needs. In 2025, exchange losses created a clear drag on net profit for the period. In the future, management needs to continue closely monitoring international exchange rate trends and flexibly adjust operating strategies and risk control plans in line with market changes. 3) Trade policy and tariff uncertainty:In 2025, overseas revenue accounted for 88.5% of the company’s total