Core views
After nearly 50 years of development, the company's gypsum board business has become the world's leading gypsum board production capacity, and its domestic market share is as high as 70%. The company's gypsum board business showed good resilience to fluctuations: in 2018-2023, the company's gypsum board sales increased from 1.87 billion square meters in 2018 to 2.17 billion square meters, with a CAGR of 3.0%, higher than the industry's overall CAGR of -0.4%; moreover, the gross profit per flat rate grew steadily between 2018 and 2023, with a compound growth rate of 4.8%. In 2023, after more than 3 years of cultivation, the company's two-wing business gradually began to release performance. The company entered the waterproof industry through large-scale mergers and acquisitions in 2019, and turned a loss into a profit in 2023; the company established a paint company in 2021, acquired Gabaoli in 2023, and the paint production capacity jumped to third place in the industry. We believe that the company's gypsum board business will provide a good foundation of performance and sufficient cash flow. The company's two wings have also bucked the trend over the past few years and begun to enter the harvest period.
summary
1. The pattern of the gypsum board industry is stable, and the leading players are strong
The company has been in the gypsum board industry for nearly 50 years. Since acquiring Taishan Gypsum shares in 2005, the company has gradually grown into the leading gypsum board with the largest production capacity in the world, and currently accounts for nearly 70% of the domestic market. As an industry leader, the company has maintained steady growth over the past ten years. The company's gypsum board business has grown steadily. In 2018-2023, sales revenue increased from 10.93 billion yuan to 13.77 billion yuan, and sales increased from 1.87 billion square meters in 2018 to 2.17 billion square meters. The CAGR is 3.0%, which is higher than the overall CAGR of the industry. Among them, the completed real estate area fell 15.0% in 2022, and the company's gypsum board revenue fell only 3.0% in the same year, showing strong risk resistance to fluctuations. Moreover, the company's gross profit in the gypsum board business continued to increase in 2018-2023: from 1.93 yuan/square meter in 2018 to 2.44 yuan/square meter in 2023, the compound growth rate reached 4.8%. The steady growth of the company's drywall business is a firm cornerstone of the company's performance.
2. Adhere to the integrated two-wing development strategy and revitalize the old leaders
In 2019, the company released the “one, two wings, global layout” strategy, with the gypsum board business as the core to rapidly expand the waterproof materials and coatings business. In the same year, the company entered the waterproofing industry through large-scale acquisitions, with a total merger and acquisition amount of 3.25 billion yuan in 2019-2022. Through significant expansion through mergers and acquisitions, the company's waterproof business revenue share increased from 1.5% in 2019 to 18.7% in 2023, and the revenue scale jumped to third place in the industry. In 2023, after three years of consolidation, the company's waterproofing business began to release performance, with net interest rates reversing to 18.9%; in the same year, the company accelerated its layout in the coatings sector. After establishing Beixin Material Coatings Co., Ltd. in July 2021, the company tested the waters on a small scale in the paint business and announced the acquisition of Garboree at the end of 2023. After the merger and acquisition, the company's paint production capacity jumped from about 103,000 tons to 1.5 million tons, making it one of the leaders in the industry.
Investment advice: We believe that the gypsum board business will continue to provide solid support for the company's performance. The next two years will be a stage of rapid development of the company's two wings of business. The company is expected to achieve revenue of 281.3, 316.4, and 34.7 billion yuan respectively in 2024-2026, and net profit of 4.5.8 billion yuan, 51.9, and 5.79 billion yuan, respectively, compared with +29.9%, +13.4%, and +11.6% year-on-year. We selected shares as the leading company in each consumer building materials sub-category. The average PE in 2024 reached 17.7 times. Considering that Beijin Construction Materials's main gypsum board market share reached 60%, which is a relatively stable building materials category, we conservatively gave the company a 15 times valuation in 2024, corresponding to a target stock price of 40.7 yuan/share, and gave it a “buy” rating.