In the first three quarters of 2023, revenue reached 6.241 billion yuan, up 4.77% from the same period last year; net profit from home was 81.9842 million yuan, down 69.44% from the same period last year; net profit from non-return was 7.6162 million yuan, down 95.73% from the same period last year; basic EPS was 0.0704 yuan per share, down 69.60% from the same period last year; and the weighted average ROE was 1.47%, down 3.50pct from the same period last year.

Income remains robust, and impairment affects performance under pressure. In the first three quarters of 2023, the company realized income / return net profit of 6.241 billion yuan / 81.9842 million yuan, which was + 4.77% and 69.44% respectively compared with the same period last year. On a quarterly basis, 23Q1/Q2/Q3 revenue is 1.866 billion yuan / 2.47 billion yuan / 1.904 billion yuan, respectively, compared with the same period last year, which is + 7.59%, 2.67%, 4.86%, and the net profit of returning home is 58.0755 million yuan / 2.5286 million yuan / 2138.01 yuan, respectively, compared with the same period last year. The decline in performance was mainly due to an increase in sales expenses, credit impairment losses and asset impairment losses. 2023Q3 set aside assets and credit impairment reserves totaling 141 million yuan, and total assets and credit impairment provisions totaled 302 million yuan in the first three quarters.

Q3 gross profit margin improved compared with the same period last year, and the sales expense rate increased. The company's gross profit margin / net profit margin in the first three quarters of 2023 was 21.19% 0.42pct/-3.22pct 1.28%, respectively compared with the same period last year-2.37pct/-0.27pct, of which 23Q3 gross profit margin / net profit rate was 21.35% / net profit rate 1.03%, respectively compared with the same period last year. The decline in net interest rate is mainly due to the impact of impairment. On the cost side, according to wind data, the average price of 23Q3 asphalt is-13% compared with the same period last year, and the month-on-month ratio is 23Q2%. On the expense side, in the first three quarters of 2023, the company's main business expense rate was 15.57%, which was + 0.50pct compared with the same period last year; among them, the sales / management / R & D / financial expense rate was + 1.07pct/-0.12pct/-0.33pct/-0.12pct respectively compared with the same period last year. Due to the sluggish market demand and intensified competition in the industry, the company increased its market development efforts, C-end market investment and support to core dealers.

Continue to make efforts to control the risk of distribution, channel sinking to open up the market. In the first three quarters of 2023, the cash flow generated by the company's operating activities was-848 million yuan, the net outflow increased by 19.55% compared with the same period last year, and the cash-to-cash ratio / cash-to-cash ratio was 1.09, respectively. At the end of the third quarter, the balance of accounts receivable and bills receivable was 5.37 billion yuan,-5.47% compared with the same period last year. The company optimizes the channel strategy, continuously increases the development and cultivation of dealer customers, and improves the national prefecture-level city coverage of dealers, as well as special dealers in specific areas or products, such as shock isolation, building repair, Rain Water management, photovoltaic energy, plastering gypsum, etc., and effectively increase the proportion of distribution. Aiming at the "Keshun" brand itself, the "Keshun Family Waterproof" brand in the home decoration market, and the "Keshun repair" brand in the leakage repair market, the company distinguishes three distribution models, namely, industrial construction distribution, civil distribution and repair distribution. At present, the company has established long-term and stable cooperative relations with more than 2500 dealers in 30 provinces and cities across the country.

Convertible bonds help expand production and replenish flow, waiting for the leader's dilemma to reverse. At the industry level, infrastructure investment continues to make efforts to ensure the demand for waterproofing at the infrastructure end, and the introduction of optimization policies is expected to promote the repair of the real estate market to a steady state; the new waterproofing regulations catalyze the market expansion by 40%, and the superimposed waist waterproofing enterprises have been seriously cleared before. the waterproofing market pattern is expected to improve and the strong is Hengqiang. At the company level, Keshun convertible bonds help expand capacity and replenish flow, the company already has a network of production and R & D bases throughout the country, and is building small satellite factories to further improve distribution efficiency and reduce transportation costs. In the future, with the increase of the company's distribution share and production efficiency, the profit margin is expected to hit bottom and repair. Taking into account the impact of the impairment of the company in the fierce competition in the waterproofing market this year, we revise our profit forecast for the company. It is estimated that the company's EPS in 2023-2024 will be 0.12 yuan and 0.35 yuan respectively, corresponding to 57.3x and 19.8x respectively, maintaining a "highly recommended" rating.

Risk tips: decline in the growth rate of real estate and infrastructure investment, sharp rise in raw material prices, and the risk of bad debts in accounts receivable.