Matters:
The company released its 2024 quarterly report, achieving revenue of 7.15 billion yuan, a year-on-year decrease of 4.6%, and net profit to mother of 350 million yuan, a year-on-year decrease of 9.8%.
Ping An's point of view:
A high base dragged down performance, and gross margin rebounded month-on-month. The company's performance declined year-on-year in the first quarter due to the fact that the industry, which had a high base last year and was still under pressure, was still under pressure. The gross margin increased by 1.0 pct to 29.7% year on year during the period, and increased significantly compared to 23% in 2023Q4 (mainly due to centralized settlement of low gross profit construction businesses), easing market concerns about the company's profitability to a certain extent. The rate during the period was affected by the decline in revenue and increased by 1.1 pct to 20.4% year over year.
The cash to cash ratio remained above 100%, and operating cash flow improved year over year. Revenue for the period was 102.9%, down 6.8 pcts year on year; current payment ratio was 135.4%, down 8.6 pct year on year, and net operating cash flow increased by 1.92 billion yuan to -1.89 billion yuan year on year. Monetary cash at the end of the period increased by 140 million yuan to 5.19 billion yuan, while accounts receivable, notes and other accounts receivable totaled 15.8 billion yuan, a year-on-year decrease of 140 million yuan.
Investment advice: Maintaining the previous profit forecast, net profit due to mother is estimated to be 2.8 billion yuan, 3.4 billion yuan, and 4.1 billion yuan respectively in 2024-2026. The current market value corresponds to PE of 12.5 times, 10.1 times, and 8.5 times, respectively. At the industry level, the issuance of special treasury bonds supports the growth of infrastructure demand; new waterproof regulations drive industry tenders and expansion, and new real estate construction continues to bottom out; at the company level, actively change channels to accelerate the development of engineering channels and retail sectors with brand, capital and channel advantages, and future business quality will gradually improve; new categories of business development have also shown results, opening up new growth space for the company's future development and maintaining a “recommended” rating.
Risk warning: (1) Real estate sales have resumed, and infrastructure demand has fallen below expectations: current real estate fundamentals are weak. If subsequent sales and construction continue to decline sharply, it will affect demand in the waterproof industry; similar to infrastructure, if subsequent physical demand falls below expectations, it will also increase the pressure on waterproof demand.
(2) The implementation of the new waterproof regulations falls short of expectations: The Ministry of Housing and Construction's new waterproof regulations policy covers a wide range of areas, financial pressure on housing enterprises is tight, and supervision is difficult. There is a risk that the implementation of the new regulations will be slow and the demand for waterproofing will fall short of expectations. (3) The price of raw materials continues to rise, limiting the profit margin of the industry: if oil prices continue to rise, it will drive the prices of raw materials such as asphalt, emulsion, and polyether to continue to rise, increasing the pressure on the company's profit. (4) Untimely collection of accounts receivable and risk of bad debt accrual: If the subsequent real estate capital environment and housing enterprise default situation do not improve or worsen, it will lead to the risk of untimely collection of accounts receivable and increased pressure to accrue bad debts, which will slow down the company's performance.