Q1 performance declined year on year. Waiting for demand recovery to drive performance repair, maintaining the “buy” rating, the company achieved operating income of 3,582 billion yuan in 2023, -3.58% year over year, and achieved net profit of 160 million yuan, or -44.32% year on year. Corresponding to the Q4 quarter, the company achieved net profit of 0.19 yuan, or -57.31% month-on-month. In 2024Q1, the company achieved operating income of 579 million yuan, -13.07% year on year; realized net profit of 21 million yuan, or -47.83% year over year, +11.09% month on month. Due to demand pressure from the downstream real estate industry, the company's performance is low. We lowered the company's profit forecast for 2024-2025 and added 2026. The estimated net profit to mother is 1.98 (-3.22), 2.55 (-3.57), 317 million yuan, and EPS is 0.46 (-0.78), 0.59 (-0.87), and 0.73 yuan, respectively. The current stock price corresponds to PE 16.9, 13.1, and 10.6 times, respectively. We are optimistic that the company is a leading concrete admixture. In the future, as downstream demand picks up, the performance is expected to take the lead in restoration and maintain a “buy” rating.
Q1 Sales of high-performance water reducing agents declined year-on-year, and the revenue of functional materials increased year-on-year in 2024Q1. The company's sales volume in the high-performance water reducing agent, high-efficiency water reducing agent, and functional materials sector was 15.86, 0.39, and 45,600 tons, respectively, -15.77%, -60.20%, and -0.44%; revenue was 2.83, 0.10, 110 million yuan, respectively, -24.51%, -52.44%, +13.07%; the calculated average price was 1,787, 2,506, 2,409 yuan/ton, respectively. 10.37%, +19.51%, +13.56% Furthermore, as of 2024Q1, the size of the company's notes and accounts receivable decreased from $3.164 billion in 2022 to $2,422 million, and net operating cash flow increased from $219 million in 2022 to $370 million in 2023. The company's financial structure is expected to continue to improve.
Overseas business is developing rapidly, and the testing business and functional materials business are expected to continue to grow. According to the company's annual report, the oversized underwater shield tunnel technology developed by the company has been used in the world's longest underwater shield tunnel, the Haitai River Crossing Channel, and UHPC high-performance concrete products have been used in many large-scale tunnel projects; the company's “Belt and Road” layouts in overseas regions have gradually paid off, and there is strong potential for future growth. In 2023, the company's testing business achieved high-quality growth. The sales revenue of the technical service sector was +12.25% year-on-year, and gross margin was +1.02pcts year-on-year. At the same time, the second phase of the company's Zhenjiang Functional Materials Base project was completed in 2023, and it is expected to continue to contribute to performance growth in the future. We are optimistic about the collaborative development of multiple sectors of the company, which is expected to usher in business recovery along with economic recovery.
Risk warning: Production capacity investment falls short of expectations, a sharp decline in downstream demand, and a decline in the macroeconomy.