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Event: On October 27, 2023, Keshun Co., Ltd. released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved operating income of 6.241 billion yuan, up 4.77% year on year; net profit of 81.8842 million yuan, down 69.44% year on year. Among them, in the third quarter of 2023, the company achieved operating income of 1,904 billion yuan, up 4.86% year on year; net profit of 21.3801 million yuan, down 9.96% year on year.
Investment highlights:
The scale of revenue increased slightly, and gross margin rebounded. (1) In terms of operating income, revenue for the first three quarters of 2023 increased 4.77% year on year, and 23Q3 revenue increased 4.86% year on year. Against the backdrop of declining real estate demand and market contraction, the company's business scale rose slightly. It is expected that the company's business scale rose slightly, mainly due to rapid growth in distribution and retail channel business, leading to increased performance; (2) In terms of gross margin, the company's comprehensive gross margin for the first three quarters of 2023 was 21.19%, down 0.42pct year on year. On a quarterly basis, the 23Q3 consolidated gross margin was 21.35%, up 2.37 pct year on year and 0.59 pct month on month. Gross margin improved month-on-month, mainly due to a decline in raw material prices from last year's high, optimization of the company's product structure, and an increase in the share of high-margin products.
The increase in sales expenses is compounded by an increase in credit impairment losses, and the company's profit side continues to be under pressure. Net profit for the first three quarters of 23 years was 81.98 million yuan, down 69.44% year on year; 23Q3 net profit was 21.38 million yuan, down 9.96% year on year. The profit side was clearly under pressure, mainly due to the increase in sales expenses and credit impairment losses: (1) In terms of the period expense ratio: (1) The company's sales/management/development/financial expenses for the first three quarters of 2023 changed year-on-year by +1.07/-0.12/-0.33/-0.12pct, respectively. The overall cost rate for the period increased by 0.5pct year on year. Although management, R&D, and financial expenses have all declined, sales expenses have clearly risen, driving the period fee rate to rise year on year. It is expected that this is related to the company's development of distribution and retail channels and increased C-side market investment; (2) Credit impairment: In the first three quarters of 2023, the company's credit impairment was 289 million yuan (100 million yuan in the same period last year), and impairment losses increased by 189 million yuan year on year, of which Q3 credit impairment was 134 million yuan (1.10 million yuan in the same period last year, 123 million yuan in the second quarter), it is still expected to be due to extended periods of work-arrival and accounts receivable.
The revenue to cash ratio increased slightly, and the fourth quarter cash flow is expected to be corrected: in the first three quarters of 2023, the net cash flow from the company's operating activities was -848 million yuan, a year-on-year decrease of 19.55%. With the return of year-end dealers' arrears, cash flow is expected to improve and rectify in the fourth quarter. In the first three quarters of 2023, the company's revenue ratio was 89.90%, up 6.62 pct year on year; payout ratio was 109.08%, up 10.71 pct year on year.
Profit forecast and investment recommendations: In the first three quarters of 2023, due to a combination of factors such as the increase in the scale of the company's credit impairment charges exceeding expectations and the falling progress of new construction and repair in the real estate industry, we lowered the company's profit forecast. The adjusted revenue for 2023-2025 is expected to be 8.17 billion yuan, 9.55 billion yuan, and 11.17 billion yuan respectively (the original forecast values were 8.84 billion yuan, 10.71 billion yuan, and 12.86 billion yuan), with year-on-year growth rates of 6.63%, 16.94%, 16.91%, and net profit of the mother They were 150 million yuan, 450 million yuan, and 5.1 billion yuan respectively (the original forecast values were 350 million yuan, 6.2 billion yuan, and 8.2 billion yuan). Currently (October 27), the corresponding PE is 58, 19, and 15 times, respectively. Maintain the “Overweight” rating.
Risk factors: raw material prices rose more than expected, downstream demand recovery fell short of expectations, customer repayment risk, credit impairment continued to exceed expectations, etc.