Revenue grew steadily and maintained a “buy” rating
24Q1 achieved revenue of 997 million yuan, +11.2% year on year, net profit to mother of 154 million, -11.56% year on year, deducted non-net profit of 142 million yuan, +37.61% year on year (after adjustment), of which non-recurring profit and loss was 12 million yuan, an increase of 9.03 million yuan over the previous year. The rapid growth rate of deducted non-net profit is mainly due to Dongpeng Heli's investment income being included in non-recurring profit and loss. We expect the company's net profit to be 15.8, 17.8, and 2.01 billion yuan for 24-26, corresponding PE of 18.0, 16.0, and 14.1 times. Referring to comparable companies' 24-year PE, the approval is 22 times PE for 24 years, corresponding to a target price of 21.87 yuan, maintaining a “buy” rating.
The gross margin improved significantly, and the pressure on the raw material side was relieved
The 24Q1 comprehensive gross margin was 41.5%, an increase of 4.30pct over the previous year. We judge that it is mainly related to the relief of raw material cost pressure and the increase in the share of retail. The average price of PVC/HDPE/PPR raw materials for 24Q1 pipes was 5858, 8574, and 8814 yuan/ton, respectively, compared with -7.2%/+1%/-0.2%. The reduction in raw material costs led to a slight increase in gross margin. Since April '24, the average price of raw materials is -5%, +1% compared to the same period last year. We determine that gross margin may still have room for improvement as raw material prices decline.
Expense rates rose slightly during the period, and net interest rates were under pressure
The cost rate for the 24Q1 period was 23.89%, up 1.20pct year on year. Sales, management, R&D, and finance expenses rates were 15.05%, 6.96%, 3.44%, and -1.56%, respectively. The year-on-year changes were +1.23pct, -0.18pct, -0.16pct, and +0.30pct, and sales expenses increased 21.1% year over year. Asset and credit impairment losses were $0.2 billion, an increase of $0.2 billion over the previous year; of these, credit impairment increased by $1.6951 million over the same period last year, mainly due to an increase in current accounts receivable and an increase in accrued credit impairment losses. Net interest rate fell 3.95pct yoy to 15.77% under the combined impact. The net CFO of the 24Q1 company was -176 million, with a year-on-year increase of 34 million; the current payout ratios were 118.03% and 142.77%, respectively, with year-on-year changes of -3.42pct and +0.44pct.
Two-wheel drive supports the release of performance, and is optimistic that the company's diversified business development company will adhere to the “retail and engineering two-wheel drive” development strategy and actively promote the steady development of various business segments. The retail business focuses on superior pipeline products, promotes waterproofing and water purification services, and comprehensively increases market share; the engineering business continues to accelerate transformation, improving business quality through selecting customers and projects, and growth is expected to remain steady, and the “concentric product chain” strategy further empowers the company's long-term growth potential. The successful acquisition of Zhejiang Kerui accelerated the transformation and upgrading of system integration services, acquired Guangzhou Hexin Fangyuan, opened up development space for high-end domestic residential projects and large-scale public construction markets, further strengthened and expanded the water supply and drainage business, and effectively promoted the company's strategic transformation and implementation.
Risk warning: Real estate is under strong downward pressure; repayment risk; raw material costs have risen sharply.