The company publishes three quarterly reports for 2023. The 2023 1-3Q company realized revenue of 2.08 billion yuan, an increase of 35.70%, and a net profit of 75 million yuan, an increase of 235.39%, EPS 0.20 yuan and 233.33%. The company focuses on the polymer core strategy and continues to promote channel reform. Maintain the company's overweight rating.

Support the main points of rating

The company's income increased steadily: 2023Q3's revenue was 773 million yuan, up 26.39%; the return net profit was 20 million yuan, a sharp increase of 2190.92% over the same period last year; and the non-return net profit was 12 million yuan, an increase of 146.26%, mainly due to the fact that the company received 8.5611 million yuan in government subsidies in the third quarter. The net operating cash flow of 2023 1-3Q company was-274 million yuan, and the net outflow decreased by 32.58% compared with the same period last year. Among them, the net cash flow of the company's operating activities in the third quarter was-196 million yuan, and the net outflow increased by 152.87% compared with the same period last year.

Profitability continued to pick up, and the expense rate was relatively stable during the period compared with the same period last year. From the first to the third quarter of 2023, the company's comprehensive gross profit margin was 24.10%, an increase of 2.97 pct, and a net profit rate of 3.61%, with an increase of 2.15pct. Among them, the company's comprehensive gross profit margin was 24.12% in the third quarter, with an increase in 6.61pct and a slight decrease in 0.86pct compared with the previous quarter, mainly because the leach price rose with the price of crude oil in the third quarter, resulting in an increase in cost pressure. The net interest rate of homing in the third quarter was 2.57%, with an increase in 2.43pct and a slight decrease in 0.03pct compared with the previous quarter. The company's profitability continued to pick up compared with the same period last year. In terms of period expenses, the total expense rate of the company from the first to the third quarter of 2023 is 18.12%, which is the same as minus 1.07pct, in which the sales / management / R & D / financial expense rate changes 1.02/-3.36/-0.02/1.28pct respectively compared with the same period last year. In the third quarter, the company's period expense rate was 16.35%, which was the same as minus 0.46pct, in which the sales / management / R & D / financial expense rate changed 0.44/-0.78/-0.40/0.27pct respectively compared with the same period last year. The increase in the salary of the company's sales staff and marketing planning expenses in the first to third quarters of this year led to an increase in the company's sales expense rate compared with the same period last year; at the same time, there was no equity incentive share payment this year, and the scale of management expenses declined.

Focus on polymer core strategy and continue to promote channel reform. The production base that the company has put into production and under construction can radiate most of the market areas in East China, North China, Central China, Southwest China, South China and Northwest China; the first phase of the polymer industrial park with a production capacity of 100 million square meters has entered the production stage. it is expected to further enhance the company's leading position in the field of polymer waterproofing. In addition, the company continues to vigorously develop the dealer model, sink through channels, increase regional sales resources, and vigorously expand the broad market of industrial buildings, municipal buildings and civil buildings.

Valuation

Considering the recovery of demand in the waterproofing industry in the fourth quarter still needs to be observed, we adjust the profit forecast accordingly. It is estimated that the income of the company from 2023 to 2025 is 28.6,36.6 and 4.59 billion yuan, the net profit of returning to the mother is 1.4,2.0 and 280 million yuan respectively, and the EPS is 0.36,0.51,0.74 yuan respectively. Maintain the company's overweight rating.

Main risks faced by rating

The price of raw materials has risen sharply, the demand expansion is less than expected, and the turnover of accounts receivable is difficult.