Key points of investment
Event: The company released its 2023 annual report. In 2023, the company achieved revenue of 22.426 billion yuan, +11.27% year over year; net profit to mother of 3.524 billion yuan, +12.07% year over year; net profit without deduction of 3.495 billion yuan, +31.75% year over year.
The main gypsum board business is developing steadily, and the waterproof coating and “gypsum board+” business are being developed at an accelerated pace. 1) Gypsum board business: The company's gypsum board revenue in 2023 was 13.766 billion yuan, up 3.00% year on year, with an average gypsum board price of 6.34 yuan/square meter, -0.75% year over year; 2) Keel business: The company had a light steel keel production capacity of 456,300 tons at the end of 2023. In the future, the company will further promote an increase in the keel support rate; 3) Waterproof building materials: The company's waterproof building materials revenue in 2023 was 3.03 billion yuan, up 24.12% year on year. There are more than 1,300 development channels, and the coil production capacity reached 430 million square meters; 4) Paint and building materials: the company completed the transfer of 51% of Lighthouse Paint's shares and the joint restructuring of Gabrielle in 2023, further strengthening the paint business; 5) “Gypsum board+” business: The company's other businesses achieved revenue of 2.170 billion yuan in 2023, an increase of 149.56% over the previous year, and the “gypsum board+” business accelerated development.
The cost decreased, and the gross margin of gypsum board increased, and the cost ratio decreased during the period. In 2023, the company's gross sales margin was 29.88%, a year-on-year change of +0.64pct; the net sales margin was 15.85%, with a year-on-year change of +0.08pct, and profitability increased steadily. Among them, the gross profit margin of gypsum board was 38.49%, up 3.54 percentage points year on year, and the gross profit margin of waterproof building materials was 19.12%, up 2.08 percentage points year on year. In terms of the period expense ratio, the total cost rate for the period of 2023 was 12.49%, compared with -1.31pct, mainly due to a decrease in the management expense ratio.
Operating cash flow performance was excellent, and the dividend ratio increased. The company's net cash flow from operating activities during the 2023 period was $4.734 billion, +28.76% year-on-year. Among them, the net cash flow from the waterproof building materials division's operating activities deducted to the parent company had an impact of 352 million yuan; the paint and building materials division was 7.1643 million yuan. The company strengthened the control of accounts receivable. At the end of 2023, the balance of the company's accounts receivable and notes receivable was $2.184 billion, -3.30% over the same period last year. The company operates steadily, shares development results with investors, and the dividend ratio increased to 40.03% in 2023.
Profit forecasting and investment ratings: With the further deepening of state-owned enterprise reforms, under the strategic guidance of the company's “two wings in one, global layout”, the main gypsum board industry will continue to increase in market share, and the keel support, waterproofing, and coating businesses will also continue to contribute to rapid growth. Taking into account the combined factors of Garboree, we adjusted the company's net profit for 2024-2026 to be 43.80/51.38/5.764 billion yuan (the value before 2024-2025 was 42.84/4.844 billion yuan), respectively, and the corresponding PE was 11X/9X/8X, respectively, maintaining the “buy” rating.
Risk warning: risk of fluctuations in the real estate industry, risk of macroeconomic fluctuations, risk of rising raw materials and energy prices, risk of new business development falling short of expectations