Revenue increased slightly year over year in '23, and depreciation impacted performance. In 2023, the company achieved revenue of 7.94 billion yuan, +3.7% year-on-year, net profit of $340 million, net profit after deduction of 180 million yuan in the same period of the previous year, and EPS of -0.29 yuan/share. Performance pressure was mainly due to accounts receivable from high-risk real estate customers, as well as accrued credit impairment losses of 760 million yuan and asset impairment losses of 60 million yuan, a total of 820 million yuan, +214% year over year. 2024Q1 revenue was 1.49 billion yuan, -20.4% year over year, net profit attributable to mother of 53 million yuan, -9.2% year on year. The year-on-year decline in Q1 revenue was due to the fact that the subsidiary Toyosawa was no longer included in the scope of the merger since September 2023, the impact of late start of construction, and weak market demand. It has now regained substantial control.
Profit margins improved month-on-month, and expense margins increased slightly. By product, waterproof membrane/ waterproof coating/ waterproof engineering construction achieved revenue of 42.0/18.9/1.47 billion yuan, -3.1%/+12.7%/+11.1% year-on-year, gross profit margin 18.2%/31.6%/14.2%, year-on-year, -0.6/+5.6/-7.6pp; in addition, seismic insulation contributed 300 million yuan, +15.0% year-on-year. The comprehensive gross profit margin in 2023 was 21.2%, which was basically the same year on year. The cost ratio for the period was 16.9%, and +0.8pp. Among them, sales/management/finance/R&D expenses ratios were +1.2/-0.1/+0.1/-0.5pp, respectively. The increase in the sales expense ratio was mainly due to the company's increased investment in the C-side market.
2024Q1 gross profit margin was 23.8%, net profit margin 3.4%, +2.2pp/+0.3pp year on year, +2.7pp/+28.2pp, period expense ratio 18.5%, +2.2pp/month-on-month. Profitability improved month-on-month. Profitability improved month-on-month, and the cost ratio increase was mainly due to a decline in revenue that was not effectively diluted.
Cash flow still needs to be repaired, stock reduction strengthened, and scale of accounts receivable reduced. In 2023, the company achieved a net cash flow of 190 million yuan from operating activities, -18.5% year-on-year, and 0.99/1.01 in the same period of the previous year. 2024Q1 had a net cash flow outflow of 980 million yuan, an increase of 320 million yuan over the previous year, with a payment/payout ratio of 0.85/1.73, and 0.82/1.23 for the same period last year. The cash flow still needs to be repaired mainly due to the increase in the pay-to-cash ratio. The positive revenue situation reflects the effects of the company's active risk control and revenue structure optimization. As of the end of 2023, notes and accounts receivable, other receivables and contract assets totaled $4.99 billion, or $580 million year over year, with a balance ratio of 62.9%, +7.3pp year over year. Mainly due to the issuance of convertible bonds, the 2024Q balance ratio was 61.6%, a decrease of 1.3 pp over the previous month, and the overall debt ratio was still manageable.
Risk warning: Real estate recovery falls short of expectations; raw material prices have risen sharply; accounts receivable venture capital advice: depreciation releases risk, profitability is expected to be restored, maintain “buy” rating companies to continuously optimize revenue structures, and take more measures to reduce cost control. As deductions are relatively sufficient, risk release is expected to be taken lightly. Focus on the increase in leading market share due to accelerated clearance in the waterproof sector. Considering slow demand recovery and impairment calculation disturbances, the profit forecast is lowered. EPS is expected to be 0.26/0.34/0.41 yuan/share, corresponding PE is 17.7/13.7/11.3x. As growth gradually returns to the right track, combined with cost reduction and fee control efforts, profits are expected to recover and maintain the “buy” rating.