Yearly revenue/net profit ratio -3.6%/-44.3% YoY, maintaining the “Buy” rating
Subbott released its annual report. In 2023, it achieved revenue of 3.582 billion yuan (yoy -3.58%, previous value repeated), net profit of 0.16 billion yuan (yoy -44.32%), deducting non-net profit of 0.146 billion yuan (yoy -43.87%).
Among them, Q4 achieved revenue of 1.006 billion yuan (yoy +0.57%, qoq +9.89%) and net profit of 18.98 million yuan (yoy -64%, qoq -57%). Considering that new real estate construction is weak and capital is tight in some regions, we adjusted the company's 2024-2026 EPS to 0.48/0.53/0.61 yuan (previous value of 0.70/0.86 yuan in 24-25). EPS 0.34/0.14 yuan for the 24-year additive/testing business is 0.34/0.14 yuan, which is comparable to the company's average 12/17xPE. Considering that the company has higher pricing power as a leading admixture company, the testing business has better growth potential under a low base. The 24-year additive/testing business was given 20/20 xPE, with a target price of 9.55 yuan (previous value of 12.44 yuan), maintaining the “buy” rating.
Sales of high-efficiency water-reducing agents rebounded throughout the year, with a year-on-year increase in the company's sales volume of high-performance water-reducing agents/high-efficiency water-reducing agents/0.2692 million tons year-on-year, -7.75%/+9.74%/-5.74%; Q4 +2.44%/+41.05%/-15.81% YoY, +20.9%/+4.69%/+19.75%, Q4 high-performance water-reducing agents and high-efficiency water-reducing agents increased year-on-year. The year-on-year sales price of the three tons was -4.75%/-4.61%/+9.94%, of which Q4 was -7.28%/-40.58%/+32.71%, and -8.75%/-12.15%/-2.33% year-on-year. The gross profit margin in '23 was 35.12%, +0.82pct year on year. Technical services grew steadily. Revenue in '23 was 0.756 billion, +12.25% year-on-year, and gross margin increased 1.02pct to 51.35%.
Expense rates increased year-on-year over the 23-year period, and cash flow improved
The cost rate for the 23-year period was 26.5%, +2.7 pct year on year, of which the sales/management/R&D/finance expense ratio was 10.5%/8.5%/6.0%/1.4%, +0.5/+0.04pct, the net profit margin of the company in '23 was 4.48%, -3.27pct; Q4 was 1.9%, or -3.4/-3.0pct. The 23-year balance ratio/interest-bearing debt ratio was 40.8%/26.2%, +0.1/+4.2pct year-on-year. In addition, the company's net operating cash flow for 23 years was 0.37 billion yuan, +68.8% year over year, mainly due to a decrease in cash for purchasing materials. 23Q4 net operating cash flow was 0.21 billion yuan, or -24.6% year over year. The pay-to-cash ratio in '23 was 109.5%/99.1%, +4.0/-3.8pct.
The price of high-efficiency water-reducing agents and functional materials per ton has increased significantly
24Q1 achieved revenue/net profit attributable to mother/net profit of 0.579/0.021/0.02 billion yuan, compared to -13.07%/-47.83%/-47.90%, or mainly due to the slow pace of resumption of work on engineering projects at the beginning of the year, compounded by tight funding in some regions, which led to lackluster demand performance and declining product sales. 24Q1 gross profit margin was 35.04%, -1.53pct year over year. Sales volume of high-performance water reducing agents/ high-efficiency water reducing agents/ functional materials was -15.77%/-60.20%/-0.44%, tonne price -10.4%/+19.51%/+13.68%, month-on-month/-10.4%/+39.06%/+30.72%. The average sales price of high-efficiency water reducing agents and functional materials increased significantly.
Risk warning: Production capacity investment falls short of expectations; market share growth falls short of expectations; raw material prices rise.