Key points of investment
Incident: The company released its 2022 annual report. In 2022, the company achieved total operating income of 19.034 billion yuan, or -5.49% year on year; achieved net profit of 3.136 billion yuan, -10.71% year on year; net profit after deducting non-return to the mother was 2,615 million yuan, -23.39% year on year.
The integrated two-wing layout continues to deepen, the gypsum board business remains steady, and the waterproofing business is under pressure. 1) Gypsum board business: Gypsum board business revenue was 13.365 billion yuan, down 3.02% year on year, gypsum board gross profit margin was 34.95%, year-on-year change -2.31pct; average price of gypsum board was 6.39 yuan/square meter, up 10.2% year on year; single flat gross profit was 2.23 yuan/square meter, up 3.4% year on year. Despite a decline in sales, the company's gross margin of gypsum board remained stable and the market share remained high. 2) Keel business: Keel's business revenue came under slight pressure, reaching 2,517 billion yuan, a year-on-year decline of 8.65%, gross profit margin of 18.94%, and a year-on-year change of +0.51 pct. 3) Waterproof building materials: Revenue from waterproof building materials was 3.145 billion yuan, a year-on-year decrease of 18.88%, gross profit margin of 17.04%, and a year-on-year change of -6.62pct, mainly due to factors such as falling demand and rising costs.
Expense rates were generally stable during the period, and net profit was affected by asset disposal income and impairment charges. In 2022, the company's gross profit margin was 29.24%, down 2.59pct from the previous year; the net profit margin on sales was 15.77%, down 1.08pct from the previous year. There was a slight increase in the company's expense rate in various periods in 2022, mainly due to a decline in revenue and a decrease in cost dilution. The company's asset impairment loss in 2022 was 55.45 million yuan, mainly due to the company's goodwill impairment losses in the current period, resulting in goodwill impairment losses; in 2022, the company's credit impairment loss was 107 million yuan, mainly due to the year-on-year increase in bad debt losses accrued by the company's subsidiaries; the company's asset disposal revenue in 2022 was 478 million yuan, an increase of 154.12% over the same period last year, mainly due to the current government repurchase of land, generating income from disposal of intangible assets and fixed assets.
Operating cash flow remained stable. The net cash flow from the company's operating activities during the period was 3.664 billion yuan, a year-on-year decrease of 4.35%. Looking at these segments, the net cash flow from the operating activities of the Waterproof Building Materials Division is deducted from the impact of capital collected to the parent company. It was -98.42 million yuan in 2022 and 463 million yuan in 2021. The company's payout ratio in 2022 was 103.93%, the year-on-year change was -2.39pct; the payout ratio was 102.14%, the year-on-year change was -8.06 pct.
Profit forecasting and investment ratings: With the further deepening of state-owned enterprise reform, under the company's “integrated two wings, global layout” strategy, the main gypsum board industry will continue to increase its global market share, and the keel support, waterproofing and coating business will also contribute to continued rapid growth. We expect the company's net profit to the mother for 2023-2025 to be 3,739/4256/4,832 billion yuan respectively (the previous forecast value for 2023-2024 was 37.44/4,305 billion yuan), and the corresponding PE was 13X/11X/10X respectively. Considering the company's steady and sustainable performance, it will maintain the “buy” rating.
Risk warning: risk of fluctuations in the real estate industry, risk of macroeconomic fluctuations, risk of rising raw materials and energy prices, risk of new business development falling short of expectations.