Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of about 22.4 billion yuan, a year-on-year increase of 11.27%, achieved net profit due to mother of about 3.52 billion yuan, a year-on-year increase of 12.07%, net profit after deducting non-return to mother of about 3.50 billion yuan, a year-on-year increase of 31.75%, and a net cash flow from operating activities of 4.73 billion yuan, an increase of 28.76% year on year. Profit distribution plan: A cash dividend of 8.35 yuan (tax included) will be distributed to all shareholders for every 10 shares.
Comment:
The leading position of gypsum board is stable and profitability remains strong. In 2023, against the backdrop of weak real estate sales, the company achieved gypsum board sales of 2.172 billion square meters, a year-on-year increase of 3.78%, and a capacity utilization rate of only 62.23%, reflecting the general characteristics of industry demand; although demand was weak, the company relied on strong competitive advantages to stabilize prices and expand volume and dig deeper into the potential of “one dime”. The gross margin of gypsum board increased by 3.54 pct to 38.49% year on year, and profitability remained strong.
Both wings have made remarkable progress, and internationalization needs to be accelerated.
Both the company's waterproof and paint wings performed well in 2023: waterproof achieved revenue of 3.9 billion yuan, an increase of 24.12% over the previous year. We believe that 2023, when new construction and real estate sales were weak, was not easy, and the waterproof business turned a loss into a profit in 2023, achieving a net profit of 150 million yuan; the paint business achieved revenue of 370 million yuan and net profit of 37.19 million yuan. We believe that a net interest rate of about 10% performed well. At the end of 2023, the company announced the acquisition of 78.34% of Gabrielle's shares for 4.1 billion yuan (revenue volume is about 4 billion yuan). It is believed that the company's paint business has made breakthrough progress.
In terms of internationalization, Tanzania operated well in 2023, with a double increase in revenue and profit. A gypsum board production line with an annual output of 40 million square meters was put into operation in Uzbekistan. At the same time, the Thai company has established a “two-wing” market in the three countries mentioned above. We believe that the company has strong gypsum board production line construction and operation capabilities and strong financial strength, and the speed and scale of the company's internationalization still has potential for further improvement.
The cash flow is abundant, and the dividend ratio has increased. In 2023, the company's net operating cash flow also increased by 28.76%, higher than net profit to mother, and the cash flow was abundant. At the end of 2023, the company's balance ratio had dropped to 22.6%. At the same time, the company plans to increase the dividend ratio to about 40% and increase its efforts to give back to shareholders.
Maintain an “better than the market” rating. The company's main business is steady, and the “two wings” help growth. We expect net profit to be 40.52, 42.23, and 4.559 billion yuan respectively from 2024 to 2026, giving the company 14-17 times PE in 2024, corresponding to a reasonable value range of 33.60 to 40.80 yuan, maintaining the “superior to the market” rating.
Risk warning. Demand fell beyond expectations, new gypsum board production capacity exceeded expectations, and mergers and acquisitions were progressing slowly.