Core views
The company achieved revenue of 22.43 billion yuan in 2023, up 11.3% year on year; realized net profit of 3.52 billion yuan, up 12.1% year on year; achieved revenue of 5.38 billion yuan in the fourth quarter, up 15.0% year on year, and realized net profit of 770 million yuan, down 3.4% year on year. In 2023, the company adhered to the two-wing development strategy. The company's gypsum board business achieved a gross profit increase of 0.21 yuan/square meter to 2.44 yuan/square meter through continuous cost reduction, which led to a 3.5 percentage point increase in gross margin of the gypsum board business to 38.5%. At the same time, the company achieved major breakthroughs in its two-wing business. Among them, the waterproof business turned a loss into a profit on the basis of a sharp increase in revenue; the paint business improved its layout in the field of construction and industrial coatings by acquiring remaining shares in Gabrielle and Lighthouse Coatings.
occurrences
The company released its 2023 annual report. In 2023, the company achieved revenue of 22.43 billion yuan, an increase of 11.3% over the previous year; achieved net profit of 3.52 billion yuan, an increase of 12.1% over the previous year; and achieved net cash flow from operating activities of 4.73 billion yuan, an increase of 28.8% over the previous year.
Brief review
Performance grew steadily, and Garbaoli successfully combined. The company achieved revenue of 22.43 billion yuan in 2023, up 11.3% year on year; realized net profit of 3.52 billion yuan, up 12.1% year on year; achieved revenue of 5.38 billion yuan in the fourth quarter, up 15.0% year on year, and realized net profit of 770 million yuan, down 3.4% year on year. The growth rate of the company's net profit to mother was slightly higher than the revenue growth rate, mainly due to: 1. Gross margin increased 0.7 percentage points to 29.9%; 2. The marketing management fee rate fell 1.1 percentage points to 7.9%. The company announced the acquisition of Garbo Reinforcement Coatings business at the end of 2023, and was officially included in the company's consolidated statement at the end of February 2024.
The gypsum board business has been rising steadily, and gross margin has reached a new high in five years. In 2023, the company's gypsum board business achieved revenue of 13.77 billion yuan, up 3.0% year on year, of which sales volume was 2.17 billion square meters, up 3.7% year on year; the corresponding unit price was 6.34 yuan/square meter, which was basically flat, down 0.6%.
Through continuous cost reduction, the company reduced the cost of a single flat to 3.9 yuan/square meter, and increased the gross profit margin to 2.44 yuan/square meter, an increase of 0.21 yuan/square meter over 2022. As a result, the gross margin of the gypsum board business increased 3.5 percentage points to 38.5%. The steady development of the gypsum board business is the ballast stone for the steady growth of the company's performance. By the end of 2023, the company had a total production capacity of 456,300 tons of light steel keels, with a capacity utilization rate of 76.6%. According to the company's report data, the current company's self-sufficient keel support rate is only about 10%, and the gypsum board+ business has great potential in the future.
The two wings made a major breakthrough, and the waterproofing business turned a loss into a profit. In 2023, the company's waterproof sector achieved revenue of 3.90 billion yuan, an increase of 24.1% over the previous year; in 2023, the net profit margin of the company's waterproof business increased from -3.0% in 2022 to 18.9%, which also shows a breakthrough after the integration of the company's waterproof sector was completed. The paint business achieved revenue of 390 million yuan, an increase of 12.1% over the previous year. During the year, the company completed the transfer of 51% of Lighthouse Coatings shares and built a 50,000-ton industrial paint production base in Nangang, Tianjin; at the same time, it acquired Garbaoli to enhance its architectural coating capabilities.
The purchase rating is maintained, and the target price is 37.2 yuan/share. Considering that the current market pattern of the company's main business, gypsum board business, is relatively stable, and the performance contribution will remain stable in the future on the basis of a slight increase in volume and price stability; the rapid development of the two wings and international subsidiaries will be the main driving factor for the company's future performance growth. We predict that the company's net profit for 2024-2026 will be 46.0/52.4/5.87 billion yuan per share, corresponding EPS of 2.72/3.10/3.48 yuan/share; the company will be given 12 times PE in 2025, with a corresponding stock price of 37.2 yuan/share to maintain the purchase rating.
Risk analysis
1. Prices of raw materials have risen sharply. The price of the company's main business, gypsum board business, is relatively stable, and the company has basically maintained a relatively stable level of profit over the years. However, if raw material prices rise sharply in the short term, the company's gross profit margin will also be impacted.
2. The consolidation of the paint business fell short of expectations. The company acquired Garbo in December 2023 to supplement the architectural coatings segment. The future development of this business will largely depend on the company's integration with Gabrielle. The paint industry is currently fiercely competitive. The architectural coatings circuit has been affected by the decline in real estate in recent years and the industry has been seriously reshuffled. If Gabrielle's development falls short of expectations, it will also seriously affect the completion of the company's paint sector's performance.
3. The development of the international business fell short of expectations. The company has been accelerating its global layout in recent years, strengthening development around new types of international markets such as Africa, Central Asia, the Middle East, and Southeast Asia. However, due to certain differences in the real estate situation and cultural background of these countries and China, the company may be prevented from exploring local operating models, which in turn affects the release of overseas production capacity as scheduled.