Maintain an “Overweight” rating. The company's 2023 revenue of 32.823 billion yuan increased by 5.15%, net profit to mother of 2,273 billion yuan increased 7.16%, 24Q1's revenue of 7.149 billion yuan decreased by 4.61%, and net profit to mother of 348 million yuan decreased by 9.81%. Operating performance was in line with expectations, and the risk of impairment in the 23rd annual report had a certain impact. The company's revenue structure was clearly optimized, and its competitive advantage bucked the trend. Considering risk aversion and asset disposal or short-term impact in the engineering business, the 2024-2026 EPS was adjusted to 1.28 (-0.49), 1.46 (-0.69), 1.62 (initial) yuan, and the target price was lowered to 25.92 yuan (-9.48) according to the same ratio of EPS in 24, which is 20x.
Shipment volume remains strong under the base, and the structure is optimized. The core factor affecting the company's revenue growth rate of 2024Q1 is a high base, and base pressure will improve quarterly starting from Q2. Structurally, we estimate that the company's retail channel will maintain growth resilience, and the direct sales side is clearly being dragged down. In terms of categories, we estimate that mortar will maintain a high growth rate. Among them, civil construction contributed the most obvious to mortar. Structural optimization will continue for 24 years.
Structural optimization led to a year-on-year improvement in gross margin. 2024Q1's gross profit margin increased by 29.68% and 1.02pct. The main factor was structural improvements, and the share of high-margin retail products increased significantly. Looking ahead, structural improvements will continue. The pricing side has stabilized, and the cost side is likely to be more stable with winter storage H1. Quarterly gross margin or year-over-year advantage for 24 years.
The trend of high shareholder returns is expected to continue as the business model is adjusted. The company's 23 annual report plans to pay a dividend of 1.47 billion yuan. The dividend rate of 65% is the highest in recent years. Looking at the completion of the company's 50+ factory layout in the long term, capital expenditure is expected to decrease significantly. The shift from the big B business to the small B+C side has led to important improvements in cash flow, and the increase in cash flow and shareholder returns is a long-term trend.
Risk warning: Macroeconomic downturn, raw material costs rising.