The company released its 2023 annual report, achieving full year operating income of 22.426 billion yuan, an increase of 11.27%; net profit attributable to shareholders of the parent company was 3,524 billion yuan, an increase of 12.07% year on year; net profit attributable to shareholders of the parent company after deducting non-current profit and loss was 3.495 billion yuan, an increase of 31.75% year on year. Earnings per share were $2.09.
Comment:
The rapid growth of the waterproof materials and “gypsum board+” business, reduced costs, and improved fee control led to an increase in revenue and profit levels. Under the strategic leadership of the company's “Gypsum Board +”, the 2023 Young Quality Building Materials revenue was 18.129 billion yuan, an increase of 8.82% over the previous year, maintaining steady growth. At the same time, as competition in the waterproof materials industry intensified and the number of enterprises above scale decreased, market expansion was increased, and the waterproof materials business achieved operating revenue of 3.03 billion yuan, an increase of 24.12% over the previous year, which led to a good increase in the company's revenue. By reducing costs, the level of profit is maintained upward. The comprehensive gross margin in 2023 was 29.88%, up 0.64 percentage points from the previous year. Among them, the gross margin of lightweight building materials increased by 0.67 percentage points and waterproof building materials increased by 2.08 percentage points. This is driven not only by the decline in raw materials, but also by the optimization of the company's product structure and optimization of various measures such as production lines, formulations, and management. At the same time, the company's fee control efficiency improved. In 2023, the management fee rate decreased by 1.49 percentage points, and the financial expense ratio decreased by 0.15 percentage points, which led to a 1.31 percentage point reduction in the sales period.
The company's return on non-net assets in 2023 was 15.96%, an increase of 2.72 percentage points over the previous year.
The “integrated” gypsum board business guarantees abundant cash flow, and the “two wings” business takes advantage of the opportunity to develop rapidly. The company is rich in monetary capital and transactional financial assets. In 2023, transactional financial assets, mainly structured deposits, were 5.532 billion yuan, up 40.44% year on year; net cash flow from operating activities was 4.734 billion yuan, up 29.20% year on year. The “gypsum board +” business, mainly distribution, has good repayments, which ensures the company's abundant cash flow. Therefore, in the current downturn in the waterproof materials industry, abundant cash flow provides a financial foundation for the rapid development of the waterproofing business. In 2023, there were more than 1,300 new development channels for the waterproof materials business, focusing on expanding and exploring advantageous customers, achieving a rapid increase in market share and stabilizing the top three positions in the industry. At the same time, the other wing of the paint business achieved rapid development through the acquisition of leading paint company Gabrielle. Beixin Building Materials is a central building materials leader. In the current situation where survival of the fittest is intensifying in the industry, the company relies on its solid resource base and comprehensive competitiveness. Instead, it can achieve faster growth through increased market share and epitaxial development.
Transform into a consumer building materials manufacturing service provider, and promote a new space for the company's development with “two wings in one” with high quality and internationalization.
Facing new changes in the real estate industry, the company is actively transforming to consumer goods. In addition to “full-coverage saturated marketing+micro-marketing in the Internet era” on channels plus the “factory+foreman” marketing model, the company is also increasing sales of functional products under the leadership of high-end to meet the multi-level needs of high-end home decoration. We are also expanding mid-tier functional products to achieve full market coverage through “channel+engineering”. Promote digitalization and high-end technological transformation in production, create new quality productivity to reduce costs and increase efficiency, achieve high-quality “integrated two-wing” development, and drive the faster and healthier growth of the new “two wings” business. It is also actively promoting internationalization, vigorously developing markets in Africa, Central Asia, the Middle East, Southeast Asia, etc., and expanding new space for global development.
Company profit forecast and investment rating: We expect the company's net profit for 2024-2026 to be $44.25, 49.20, and 5.538 billion yuan, respectively, with corresponding EPS of 2.62, 2.91 and 3.28 yuan, respectively. The current stock price corresponds to 2024-2026 PE values of 10.59, 9.53, and 8.46 times, respectively. I am optimistic that the company's “two wings in one” business structure will develop faster and better at home and abroad in the current industry environment, and maintain the company's “Highly Recommended” rating.
Risk warning: The regulatory effect of the real estate industry falls short of expectations.