3Q22 performance is in line with our expectations
The company announced 1~3Q22 results: revenue 3.058 billion yuan, year-on-year-14.2%; return to the mother net profit of 209 million yuan,-9.9% year-on-year. Of this total, 3Q22's revenue was 1.052 billion yuan,-18.2% compared with the same period last year, and the net profit was 73.79 million yuan,-9.8% compared with the same period last year. The company's 3Q22 performance is in line with our expectations.
1) the cost pressure relieved and the overlay price increased compared with the same period last year, and the gross profit margin improved compared with the previous year. 3Q22's comprehensive gross profit margin of 20.5%, year-on-year / month-on-month + 3.2ppt/+0.5ppt, has been improved to a certain extent. We believe that it is mainly due to the year-on-year price increase (the company's last round of price increase was in 4Q21), and the cost has been reduced to a certain extent compared with the month-on-month ratio: according to the factory price of Liaoning Oak polyether monomer tracked by us, the bagged HPEG price of 3Q22 is 9% higher than that of the same period last year. 2) the scale of income shrinks, and the cost rate increases to a certain extent. Due to the decline in real estate demand, and after the physical workload of 1~3Q22 infrastructure fell to the ground, 1~3Q22 produced 1.56 billion tons of cement,-12.5 percent year-on-year, of which 3Q22 produced about 589 million tons,-6 percent year-on-year, although the decline narrowed somewhat, but still shrank compared with the same period last year. We estimate that the company's 3Q22 admixture sales may decline by 610% year-on-year, and revenue from other non-major projects may also shrink to some extent, making the company's 3Q22 revenue-18.2% year-on-year. Against the background of declining revenue, the company's 3Q22 single-quarter sales, management, and financial expense rates are year-on-year + 0.6ppt, + 0.4ppt, + 0.3ppt to 4.7%, 3.6%, 0.4%, and three expense rates year-on-year + 1.3ppt to 8.7%. 3) the pressure of credit impairment still needs to be cleared. 3Q22 single-quarter credit impairment loss of about 11.84 million yuan, we believe that in the downstream demand pressure, the overall tight industrial chain funds under the background, the company may still face a certain impairment pressure. 4) the cash flow performance is better. The operating net cash flow of 1~3Q22 Company is ~ 162 million yuan, which is + 32% compared with the same period last year, and the payback is stable and good.
Trend of development
Demand is expected to recover moderately and there is still room for improvement in market share in the medium term. According to the National Bureau of Statistics, the national cement output in September was about 210 million tons, + 1% year on year, and the monthly output growth rate returned to positive for the first time since May 2021. The upstream high-frequency data since September also supported a modest recovery in demand. We believe that with the acceleration of the physical workload of infrastructure, 4Q can expect a rebound in sales driven by a pick-up in downstream demand. In the medium term, we believe that under the background of falling demand, stricter environmental protection, and increased cost fluctuations, the competitiveness of small enterprises is obviously insufficient, and the clearing of the industry is expected to speed up, and the company, as one of the "double leaders" of domestic and foreign additives in the national layout, is expected to continue to increase market share.
Profit forecast and valuation
As a result of adjusting the sales volume, ton profit and expense rate assumptions, we downgrade the net profit of 2022Universe 2023E by 16.5% Universe 18.0% to 272 million / 338 million yuan, and the current stock price corresponds to 2022max 2023e 14.7x/11.9xP/E. We maintain the company's outperform industry rating, taking into account the decline in earnings and the recovery of the industry, lowering the target price by 7% to 6.98 yuan, corresponding to 2022E / 2023E 18.4x/14.8x Pabot E, implying 25% upside space.
Risk
The pressure of credit impairment is higher than expected, and the recovery of demand is not as expected.
