Incident: 2024Q1's revenue of 5.944 billion yuan increased 24.62%; net profit to mother of 822 million yuan increased 38.11%; net profit after deducting non-return to mother of 791 million yuan increased by 40.68%.
Business expansion and consolidation increased Q1 revenue, stabilized prices and increased profitability: On the revenue side, 2024Q1 revenue achieved a 24.62% growth rate, or the main gypsum board and waterproofing business continued to expand and acquire Gabrielle. The company's gross profit margin of 28.65% increased by 1.74 pct, mainly due to 1) a slight increase in price of Taishan gypsum board; 2) cost reduction, and the average domestic waste price of Q1 protective paper raw materials also decreased by 7.5%; 3) Gabriel contributed part of the profit.
On the cost side, the cost rate during the Q1 period increased by 13.43% to 0.37 pct, and the sales/management/R&D expenses ratio was 4.94%/4.67%/3.57%, respectively, with year-on-year changes of +0.61pct/-0.59pct/+0.50pct. Q1 Asset and credit impairment losses were 0.1 million yuan, and the asset and credit impairment loss rate was 0.02%, down 0.03 pcts. The main business expanded, cost reduction continued, and acquisitions were merged, and the company achieved a net profit margin of 13.83% and an increase of 1.35 pcts. The net cash outflow from 2024Q1 operating activities of RMB 26 million decreased year-on-year by RMB 291 million, mainly due to steady business expansion. At the same time, Gabriel also led to an increase in operating cash flow. The Q1 payout ratio decreased by 3.6pct from 68%; the payout ratio decreased by 8.9pcts from 81% to cash. As of the end of Q1, accounts receivable and notes, accounts payable and notes were $51.24/2,996 billion, +134.65%/+46.24% over the same period, mainly due to 1) the company's annual credit sales policy implemented during the credit addition period; 2) Gabrielle's merger led to an increase in accounts receivable.
It is proposed to build a waterproof production line in Anhui to continue to implement “two wings in one”: The company announced on April 26 that it plans to invest 143 million yuan to build a TPO waterproof membrane production line with an annual output of 4 million square meters and a waterproof mortar production line with an annual output of 50,000 tons in Quanjiao County, Chuzhou, Anhui. The construction period is expected to be 12 months. The company continues to implement “two wings in one”, further improve the waterproof business capacity layout, and enhance the waterproofing competitiveness and economic efficiency of the East China market. With the steady increase in the price of the main business, refined cost reduction, and the refinement and continuous expansion of the two-wing business, it is expected to establish a foundation for the continued growth of a larger racetrack.
Investment advice: We predict that the company's net profit for 2024-2026 will be 43.71/49.24/5.613 billion yuan, a year-on-year growth rate of 24.02%/12.65%/14.01%, corresponding EPS of 2.59/2.91/3.32 yuan/share, respectively. The latest closing price corresponds to 2024-2026 PE 11.63x/10.32x/9.05x, respectively. Maintain an “Overweight” rating.
Risk warning: Real estate recovery falls short of expectations; raw material prices have risen sharply; industry competition has intensified.