Incident: The company released its 2024 three-quarter report. In the first three quarters, the company achieved total operating income of 5.14 billion yuan, a net profit of 0.13 billion yuan, +53.9% year on year; in the first three quarters of 2024, total operating income of 1.67 billion yuan, -12.6% year on year, achieved net profit of 0.03 billion yuan, +51.2% year on year, and the revenue decline continued to narrow.

Focus on dealer investment and consolidate channel advantages. 1) In terms of distribution system construction: Continue to develop empty markets, accelerate channel sinking, implement more accurate and effective product development, sales strategies and marketing activities for the township market, and continuously increase market share. 2) Downstream customer side: Continue to develop high-quality customers from central and state-owned enterprises, accelerate penetration in infrastructure construction, transportation engineering and industrial construction; comprehensively strengthen C-side market development, use new media platforms for in-depth content marketing; respond positively to the country's “Belt and Road” policy and accelerate international market development. 3) Market layout: Focus on incremental markets in emerging fields such as affordable housing, urban renewal, renovation of old neighborhoods, photovoltaic roofing, sponge cities, etc., and continue to expand revenue growth sources.

Increased gross margin and improved profitability. The first three quarters of 24 years: 1) Gross profit margin: The company actively developed the market, continuously optimized the product structure, and achieved remarkable results in cost reduction and efficiency; gross margin increased 1.9 percentage points to 23.0 percent year on year; sales expenses increased 1.3 percentage points to 8.3% year on year as the company increased market development for new products and new businesses; management expenses rate increased 1.3 percentage points to 8.3% year on year; management expense ratio: due to the increase in employee remuneration, the management expense ratio increased 0.9 percentage points year on year to 4.6% year on year; combined, the company's comprehensive expense ratio increased 2.4 percentage points year on year, compared with net sales interest rate Increased by 1.1 percentage points to 2.3%, improving profitability. 2) At the end of the reporting period, accounts receivable were 4.73 billion yuan, an increase of 14.4% over the beginning of the period, mainly due to mergers of holding subsidiaries and granting credit to some channel customers; net cash flow from operating activities during the reporting period was -1.5 billion yuan, a year-on-year decrease of 0.66 billion yuan, mainly due to an increase in cash payments to suppliers.

Continue to develop downstream customers and wait for the industry to rise at an inflection point. The company continues to consolidate the basic market of waterproof business, continuously optimize the customer structure, strengthen channel construction, and steadily increase its overall competitiveness. 1) The company focuses highly on the waterproof industry, continuously enriches the product matrix, continuously optimizes the product structure, continues to expand the downstream customer sector, vigorously promotes the national production capacity layout, has outstanding comprehensive competitive advantages, and steady business potential. 2) Continuously optimize the customer structure, develop more customers from central state-owned enterprises, increase market development in the field of infrastructure construction, actively expand revenue sources, and continuously improve revenue quality. 3) Currently, favorable policies such as “stopping the decline and stabilizing” and “building insurance” in the real estate market have been introduced one after another. Policies such as urban renewal and renovation of old neighborhoods continue to be implemented, large-scale infrastructure projects continue to be launched, downstream demand is expected to gradually recover, and new industry regulations promote a continuous increase in market concentration. As a leading enterprise in the waterproof industry, the company will significantly benefit from industry recovery dividends.

Profit forecast: The company's overall competitive advantage is outstanding, and its market share is steadily increasing; downstream demand is recovering, and the company's performance is expected to rise at an inflection point. We expect a compound revenue growth rate of 10.2% and net profit to mother of 50.3% for 2025-2026.

Risk warning: risk of a sharp economic downturn; market development or failure to meet expectations; policy effects fall short of expectations.