北新建材(000786):稳健依旧 成长可期

Beixin Building Materials (000786): Steady growth can still be expected

長江證券 ·  05/08  · Researches

Description of the event

The company released the first quarter report of 2023: the company achieved revenue of 4.724 million yuan in Q1, an increase of 2.48% over the previous year; achieved net profit of 591 million yuan, an increase of 5.58% over the previous year; net profit after deducting non-attributable mothers was 562 million, an increase of 3.98% over the previous year.

Incident comments

Under pressure from the industry, steady growth was achieved. Against the backdrop that industry demand is still under pressure, the company achieved a 2.48% increase in revenue in the first quarter, reflecting the company's strong position and channel capabilities in the gypsum board industry. Looking at profitability, Q1 achieved a gross profit margin of 26.9%, down 1.5 pct from the previous year. We expect that gypsum board's gross margin may increase due to the year-on-year decline in costs, and the decline in gross margin may be mainly affected by other businesses such as waterproofing. The rate for the current implementation period was 13.2%, down 1.7 pct from the previous year, of which the management fee rate decreased by 1.6 pct; the investment income for the current period increased by 12.31 million yuan over the same period last year, mainly due to the year-on-year increase in the company's financial management income and profits of participating companies; in the end, Q1 achieved a 3.98% increase in deducted non-net profit, and the corresponding deduction of non-net interest rate of 11.9%, an increase of 0.2 pct over the previous year.

The quality of operations remains stable, and negative cash flow is a normal seasonal phenomenon. The company's revenue ratio for 2023Q1 was 72.45%, a slight decline from the previous year. Net cash flow from operating activities was -3.17 yuan. The net burden shift was a normal seasonal fluctuation. Mainly, the first quarter was a quarter aimed at releasing accounts from downstream dealers and customers. The first quarter of previous years (2022, 2020, 2019, 2017, 2016, etc.) also often had negative cash flow in the first quarter of previous years (2022, 2020, 2019, 2017, 2016, etc.). Furthermore, the pressure on the external macro environment is still strong in 2023Q1, which will also have an impact. Judging from the annual net cash flow performance in recent years, the company's operating conditions are still excellent.

An integrated two-wing strategy strengthens medium-term growth. The company plans to acquire the remaining 51% of Tianjin Lighthouse Paint's shares. After completion, the shareholding ratio will become 100%, making it a wholly-owned subsidiary of the company. The target company achieved revenue of 220 million yuan and net profit of 16.2 million yuan in 2022. Although its size is relatively limited, it shows that the company's “two wings in one, global layout” development strategy is still being actively implemented, and the gradual release of categories such as waterproofing and coatings is expected to drive the growth center of medium-term growth.

Continuing to set an example of high-quality growth, positive changes can be expected after governance optimization, and we are optimistic about the company's growth. Under demand pressure brought about by the pressure of the real estate boom, the company's main business maintained strong resilience even under high market share, and continued to maintain a high level of profitability. At the same time, against the backdrop of downstream repayment pressure, the company maintained a very high level of operating quality and repayment. Whether at an absolute level or a horizontal comparison, it dismissed it as a model for high-quality growth. Furthermore, after Beixin's new management took office last year and governance optimization began, the internal integration of the gypsum board business is expected to go one step further, the competitiveness of the main business is expected to further improve, and differentiated management and control will be implemented. The company's subsequent reforms and incentives are worth looking forward to.

Industry demand is expected to pick up steadily. On the one hand, in the context of the relaxation of epidemic control and full economic recovery, business formats such as hotels and shopping malls have gradually recovered, leading to an improvement in demand for gypsum board in the public decoration sector; on the other hand, improved demand for real estate construction driven by security delivery, etc., and a recovery in demand for home improvement on the retail side will also drive a recovery in demand in the residential sector. Furthermore, with improved demand, there is a possibility that the price of waste paper on the cost side of gypsum board will increase. If demand recovery is combined with cost increases, the company still has the possibility of excessive price increases, which in turn will increase profitability.

Investment advice: Continue to be optimistic about the valuation repair and long-term growth of Beixin Building Materials. It is expected to achieve performance of 3.74.3 billion in 2023 and 2024. Corresponding to the current PE valuation being only 12 or 10 times, the purchase rating.

Risk warning

1. Real estate workers' expectations continue to be low;

2. Expectations are low for the rate of category expansion.

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