The company's total revenue in 2023 was 7.944 billion yuan, up 3.70% year on year; net profit to mother was 338 million yuan, profit of 178 million yuan in the same period in '22, down 289.47% year on year; net profit after deducted from back to mother was -428 million yuan, profit was 43.1872 million yuan for the same period in '22, down 1093.05% year on year; basic EPS was -0.29 yuan/share, weighted average ROE was -6.34%, down 9.65 pct year on year. (Both were calculated using retrospectively adjusted values) The company's total revenue for the first quarter of 2024 was 1,485 billion yuan, down 20.43% year on year; net profit to mother was 52.7522 million yuan, down 9.20% year on year; net profit after deduction was 234.526 million yuan, down 42.64% year on year; basic EPS was 0.05 yuan/share, the same year on year; weighted average ROE was 1.05%, up 0.02 pct year on year.
Revenue remained steady for 23 years, and the calculation of impairment affected profits. The company's total revenue in 2023 was 7.944 billion yuan, up 3.70% year on year; net profit due to mother - 338 million yuan, profit for the same period in '22 was 178 million yuan. The main reason for 2023 was that the company's credit and asset impairment provisions totaled 823 million yuan (+214% year over year), affecting current profit and loss. In 2023, the company continued to develop distribution business, and the share of dealer revenue increased steadily, especially in the civil construction sector. Furthermore, the company continued to optimize its revenue structure, and the municipal infrastructure, industrial and commercial construction, and repair and renovation businesses grew steadily. By product, in 2023, the company's revenue from waterproof membrane/ waterproof coating/ waterproof engineering construction/ shock absorption products was -3.11%/+12.70%/+11.10%/+14.98% to 4.201 billion yuan/1,894 billion yuan/1,470 billion yuan/300 million yuan, respectively.
Expense rates have increased slightly, and profit margins are under pressure. The company's gross and net sales margins in 2023 were 21.17%/-4.31%, respectively, -0.04pct/-6.64pct year-on-year, respectively. The company's expense ratio was +0.80pct to 16.85% year-on-year in 2023, with sales/management/ R&D/finance expenses ratios +1.26pct/-0.05pct/-0.46pct/+0.05pct year-on-year, respectively. The net cash flow from the company's operating activities in 2023 was $192 million, -18.47% year-on-year, mainly due to increased cash payments for raw material purchases. As of the end of '23, the balance of the company's accounts receivable and notes receivable was $4.162 billion, -14.68% year-on-year.
Profit margins improved year-on-year in 24Q1, and share buybacks boosted market confidence. The company achieved operating income of 1,485 billion yuan in 2024Q1, -20.43% year-on-year; net profit to mother was 53 million yuan, -9.20% year-on-year. The company's 24Q1 sales gross margin/net margin was 23.81%/3.43%, respectively, +2.22pct/+0.33pct year-on-year, respectively. In order to boost investor confidence, the board of directors of the company deliberated and passed the “Proposal on Increasing the Amount of Shares to be Repurchased”, increasing the amount of shares to be “not less than RMB 10,000 million, not more than RMB 20,000 million”. 24Q1 The company regained substantial control over Fortress Co., Ltd. and was re-included in the scope of the consolidated statements.
Continuously optimize the quality of operations, be dragged down by accounts receivable in the short term, and wait for adversity to reverse. At the industry level, the China Building Waterproofing Association predicts that the total waterproofing output in 2023 will be 3,059 billion square meters, or -11.5%. Combined with the State Administration of Market Supervision including construction waterproofing membranes in the national product quality supervision and spot check plan for six consecutive years, compliance costs continue to rise, and the industry's low-quality and inefficient production capacity is being cleared at an accelerated pace. On the other hand, in the context of affordable housing construction, urban village renovation, and “ordinary dual-use” public infrastructure construction, the waterproofing industry still has broad market space. At the company level, in terms of channels, the company continues to increase dealer development to ensure steady revenue growth; in terms of products, it matches the needs of high-end, new, and green buildings, and uses innovative product technology to reduce price competition for homogenized products. The company's revenue in 2023 still achieved a slight increase in the general environment where industry prosperity is poor, and its market share is expected to increase further in the context of future intelligent manufacturing and digital transformation and upgrading. Considering that there is still a risk of impairment of accounts receivable, the difficulty of achieving the performance promises of Fengze Co., Ltd., and the competition in the waterproof industry is fierce, we lowered our profit forecast for the company. The company's 2024-2025 EPS is 0.19 yuan and 0.28 yuan respectively, and the corresponding PE is 24.1x and 16.1x respectively, maintaining a “highly recommended” investment rating.
Risk warning: sharp decline in the growth rate of real estate and infrastructure investment, risk of fluctuations in raw material prices, risk of impairment of accounts receivable