Q4 Growth was under pressure in a single quarter, and depreciation measures dragged down performance. In 2023, the company achieved revenue of 32.82 billion yuan, +5.2% year on year, net profit of 2.27 billion yuan, +7.2% year on year, net profit without return to mother of 1.84 billion yuan, +2.1% year on year, EPS was 0.91 yuan/share, and plans to pay 10 to 6 yuan (tax included), with a dividend rate of 66.4%, the highest level in history. Q4 achieved revenue of 7.46 billion yuan in a single quarter, -4.8% year on year, net profit to mother - 80 million yuan, -117.2% year on year, net profit without return to mother - 330 million yuan, -217.5% year over year, of which asset impairment losses and credit impairment losses were -3.0 million yuan and -130 million yuan, respectively. In the same period last year, they were -0.7 billion yuan and 320 million yuan respectively, dragging down performance by 680 million yuan year-on-year.
The share of channel and retail business increased, and the sand powder business grew rapidly. By channel, 2023 retail channel/engineering channel/ direct sales achieved revenue of 92.9/125.1/10.37 billion yuan, compared with +28.1%/+22.6%/-19.6%, accounting for 28.3%/38.1%/31.6%; by product, waterproof coil/coating/mortar powder/engineering construction/other main business revenue of 133.1/96.9/42.0/32.4/1.72 billion yuan, year-on-year, +6.7%/+13.9%/+40.0%/-26.3%/-12.5%, engineering channels and The retail business, represented by the Civil Construction Group, maintained relatively rapid growth, and its share gradually increased. At the same time, the non-waterproof business represented by mortar powder continued to expand rapidly.
The structure affected the Q4 gross profit margin in a single quarter, and the cost ratio was optimized year-on-year. The comprehensive gross profit margin in 2023 was 27.7%, +1.9pp year on year. Q4 gross profit margin was 23.0%, year over year -2.5pp, month-on-month. Due to the year-on-year decline in the price of some raw materials combined with an increase in the share of retail business, gross margin increased year-on-year. The Q4 single quarter declined month-on-month due to a slowdown in retail growth and changes in revenue structure. The expense ratio was slightly optimized year-on-year, with an expense ratio of 16.0% year-on-year, and -0.83pp, of which sales/management/finance/R&D expenses were +0.56/-1.1/-0.4/+0.1pp, respectively. Management expenses were mainly due to reduced equity incentive expenses, and financial expenses were mainly due to reduced interest expenses and exchange gains and losses. The Q4 single-quarter expense ratio was 16.6%, -4.0pp, and +1.9pp month-on-month, with significant year-on-year improvement, mainly due to a decrease in revenue scale.
Cash flow improved markedly year over year, Q4 payments remained strong, and impairment charges released risks. Net operating cash flow in 2023 was $2.10 billion, +221.6% year on year, and the payout ratio was 1.02/0.97, compared to 1.05/1.09 for the same period of the previous year. Among them, Q4 had a net inflow of 6.86 billion yuan in a single quarter, -20.3% year over year, with a pay-to-cash ratio of 1.24/0.7, and 1.59/1.2 for the same period last year. As of the end of 2023, accounts receivable and notes receivable totaled $10.19 billion, a year-on-year decrease of $1.20 billion, accounting for credit impairment losses and asset impairment losses of 753 million yuan/286 million yuan, an increase of 438 million yuan/210 million yuan over the previous year.
Risk warning: Real estate investment declined sharply; asphalt prices rose sharply; accounts receivable growth exceeded expectations. Investment suggestions: channel business transformation continues, improving operating quality and growth resilience, maintaining the “buying” company as a leader in the waterproof industry, continuing channel business transformation, while actively developing the increase in overseas market contributions, optimistic about improving business quality and growth resilience under channel transformation and category expansion, taking into account the relatively slow recovery of demand and the risk of depreciation, the profit forecast is lowered. EPS is expected to be 1.16/1.43/1.69 yuan/share in 24-26 PE is 11.2/9.1/7.7x, maintaining a “buy” rating.