Items:
The company reported in 2023 that its revenue in the first half of the year was 4.34 billion yuan, an increase of 4.7% over the same period last year, and its net profit was 60 million yuan, down 75.2% from the same period last year.
Peace viewpoint:
A number of factors put pressure on the first-half results. The company's return net profit fell sharply in the first half of the year, mainly due to:
1) the demand of the industry has not recovered obviously, and the competition in the industry is becoming more and more fierce. In the first half of the year, the company's revenue only increased by 4.7%. 2) due to the fierce price competition, the overlay cost remained high, and the gross profit margin decreased to 21.1% from the same period last year. 3) during the period, the company stepped up its market development efforts, including C-end input and core distributors' empowerment, resulting in an increase of sales expenses by 16.8% and 1.0pct to 15% during the period. 4) the receivables increased slightly compared with the same period last year, and the age of some receivables became longer, resulting in an increase of 60 million to 160 million yuan in the provision for bad debts; 5) the amount of government subsidies received during the period decreased. The company newspaper proposed to change ideas, adjust strategies, set up a special team to reduce the cost, resolutely enhance profitability, strictly control expenses, improve per capita efficiency, reduce all kinds of ineffective expenditure, profitability in the second half of the year is expected to usher in repair.
The gross profit margin of coil income decreased, and the performance of paint was better. In terms of product types, the revenue of waterproof roll materials in the first half of the year was 2.27 billion yuan, down 4.8% from the same period last year, the gross profit margin was 19.9%, down 1.9 pct from the same period last year; the revenue from waterproof coatings was 1.08 billion yuan, up 20.5% from the same period last year, and the gross profit margin was 24.9%, with an increase of 0.4pct over the same period last year, mainly benefiting from the improvement of the cost end; waterproofing projects were 740 million yuan, up 3.9% from the same period last year, and the gross profit margin was 16.3%, down 8.1pct from the same period last year.
The improvement of cash-to-income ratio and the increase of cash-to-cash ratio affect operating cash flow. In the first half of the year, the company's net operating cash flow was-750 million yuan, down from-680 million yuan in the same period last year, mainly because the cash-to-cash ratio increased by 4pct to 103%, but the cash-to-cash ratio increased by 2pct to 83%, indicating that the company's sales rebate quality continued to improve. In the first half of the year, accounts / notes and other receivables increased by 940 million yuan to 6.1 billion yuan compared with the same period last year, which was significantly lower than that of 1.68 billion yuan in the same period last year. In the first half of the year, the company successfully issued convertible bonds, raising 2.198 billion yuan, providing financial guarantee for future capital increase and production expansion.
Investment suggestion: considering that the industry repair is less than expected and the competition is becoming more and more fierce, the company's profit forecast is lowered. It is estimated that the net profit from 2023 to 2025 will be 310 million yuan, 570 million yuan and 730 million yuan respectively, while the original forecast will be 650 million yuan, 830 million yuan and 930 million yuan. The current market capitalization corresponding to PE is 31 times, 17 times and 13 times respectively. Although the performance forecast has been lowered, it is considered that the company has adjusted a lot, and with the gradual improvement of the fundamentals of the industry, the company has both brand, channel and product advantages, and still has good growth in the future, maintaining the "recommended" rating.
Risk Tip: 1) Raw material price fluctuation risk: the raw materials needed by the company mainly include asphalt, membrane (including isolation membrane), polyester tire base, SBS modifier, polyether, emulsion, base oil, paraffin, isocyanate, etc., which belong to petrochemical products. If the purchase price of the above raw materials continues to rise, it will have a negative impact on the company's profitability. 2) the risk that the real estate demand falls short of expectations: the real estate industry is the main source of the company's sales income. if the subsequent repair of the real estate industry falls short of expectations and new construction falls sharply, it will adversely affect the company's performance growth. 3) Receivable risk: if there is no obvious improvement in the follow-up real estate capital environment, the financial situation of the real estate customers served by the company will deteriorate, which will lead to the company's accounts receivable can not be recovered on time or can not recover bad debts.