Incident: The company issued an announcement on the “Double Improvement of Quality and Return” action plan, proposing the following five major measures: 1) focus on the main business and accelerate the implementation of the “two wings in one, global layout” development strategy; 2) scientific and technological innovation to ignite a strong engine for high-quality development; 3) consolidate governance and improve the level of standardized operation; 4) improve trust and adhere to investors' needs; 5) operate steadily and establish the concept of return to investors.
The leading position in the gypsum board industry is stable, and the growth of paint wing+waterproof wing is accelerating. The company firmly implements the “one, two wings” development strategy. In terms of its main business, it insists on strengthening, improving and expanding the gypsum board and gypsum board+ business, forming the world's largest gypsum board industry group and light steel keel industry group. The company's gypsum board production capacity has reached 3.388 billion square meters by the end of 2023H1. It has three major brands, “Taishan,” “Dragon Brand,” and “Dream Brand,” fully covering the high-end, middle, and low-end downstream markets.
On the two sides, the company accelerated the strengthening and expansion of the waterproof and coating business. Among them, the waterproof business already ranks among the top three in the domestic industry, and has famous brands such as Yuwang, Shuyang, Golden Thumb, Yuehuang, Sete, Australia and Pacific. In recent years, the company has increased the layout of the paint business, established Beixin Paint in July 2021, acquired 49% of the shares in Tianjin Lighthouse Coatings in September of the same year, and transferred the remaining 51% of Lighthouse Coatings in April 2023., gradually improving the layout.
In terms of channels, the company continues to promote the transformation of industrial products to consumer goods, focusing on the system capabilities and terminal brand capabilities of prefabricated interiors, refining the “factory+foreman” three-dimensional full-coverage saturated marketing business model; promoting the four transformations of “tooling to home improvement, city to county and village, base materials to surface materials, and product to service” to accelerate the transformation into a consumer building materials manufacturing service provider.
Global layout to expand emerging international markets such as Africa, Central Asia, the Middle East, and Southeast Asia. “Global layout” is another of the company's core development strategies. The company is strengthening its development around emerging international markets such as Africa, Central Asia, the Middle East, and Southeast Asia. By the end of 2023H1, the Tanzanian production base had achieved double growth in revenue and total profit over the same period last year; a 40 million square meter gypsum board production line in Uzbekistan has entered production; the Thai company has been established, and project construction is progressing in an orderly manner. At the same time, the company is strengthening field research, deepening the territorial market, and actively exploring various business development models such as powder mortar and protective paper. In the future, it is expected to enrich the overseas product matrix and industrial chain layout, and further enhance its core competitiveness in the international market.
The cash flow performance is excellent, and the dividend policy is steady. Since 2013-2022, with the exception of poor cash flow performance due to payment of US drywall lawsuits in 2020, the company's net present ratio has all been above 1. The abundant cash flow has laid the foundation for the company's long-term steady dividend policy. The company has implemented cash dividends for 14 consecutive years since 1999. From 2020 to 2022, the company accumulated cash dividends of 3.142 billion yuan, accounting for 33.04% of the cumulative net profit due to mother during the period. In 2022, the company further increased its dividend ratio to 35.28%, an increase of 3.78 pcts over the same period last year.
Investment suggestions: We continue to be optimistic about Beixin Construction ① the steady progress of the “one, two wings” strategy; ② the accelerated transformation of gypsum board to “consumer goods”; ③ the waterproofing business benefits from capital cost advantages and is gradually contributing; ④ flourishing overseas. We predict that in 2023-2025, the company's net profit to mother will be 36.0 billion, 43.8, and 6.20 billion yuan, respectively. The current price corresponds to PE of 13, 11, and 7 times, maintaining the “recommended” rating.
Risk warning: New business development falls short of expectations; changes in real estate policies fall short of expectations; risk of fluctuations in raw material prices.