The company achieved net profit without return to mother of 791 million yuan in the first quarter, an increase of 40.68% year on year. In 24Q1, the company achieved revenue/net profit of 59.44/822 million yuan, +24.62%/+38.11% year-on-year, and realized net profit without return to mother of 791 million yuan, +40.68% year over year. Non-recurring profit and loss were mainly profits and losses from fair value changes and government subsidies included in current profit and loss.

Revenue achieved relatively rapid year-on-year growth, and profitability further improved

The company's revenue for the first quarter of '24 increased 24.6% year on year, mainly driven by sales growth. The completed area of commercial housing fell 20.7% year on year in January-March. Second-hand housing sales are popular. The release of stock demand is expected to provide good support, and the price side is expected to be basically stable from month to month. The 24Q1 company's overall gross profit margin was 28.65%, +1.74/+1.67pct YoY, respectively. We expect to benefit mainly from lower raw fuel costs. The cost ratio for the 24Q1 period was 13.43%, +0.24pct. Among them, the sales/management/R&D/finance expenses ratio was +0.57/-0.64/+0.47/ -0.16pct, respectively. The increase in sales expenses was mainly due to the increase in labor costs of the company's new mergers and acquisitions subsidiaries and affiliated subsidiaries. R&D expenses were mainly due to the company's new mergers and acquisitions subsidiaries and increased R&D investment. 24Q1 achieved a net profit margin of 13.95%, +1.44/-0.60pct yoy. The balance ratio at the end of 24Q1 was 27.90%, +3.46pct year over year. Net operating cash flow of -0.26 million yuan, a year-on-year decrease of outflow of 291 million yuan, mainly due to an increase in net cash flow from mergers and acquisitions of Gabrielle.

Invest in the construction of a new waterproof line, and the production capacity layout will be further optimized

On April 27, '24, the company issued a foreign investment announcement, agreeing that Beixin Waterproof will invest in the construction of a thermoplastic polyolefin (TPO) waterproof membrane production line with an annual output of 4 million square meters and a waterproof mortar production line project with an annual output of 50,000 tons in Quanjiao County, Chuzhou City, Anhui Province, which is conducive to further improving the production capacity layout of the company's waterproofing business and further improving the competitiveness and economic benefits of the company's waterproof business in the target regional market. At the same time, the company agreed to adjust part of the Hainan Dongfang Investment and Construction Project to comprehensively utilize industrial by-product gypsum production line with an annual output of 30 million square meters, which is conducive to speeding up the company's gypsum board production capacity layout across the country. The completion and commissioning of the project will reduce gypsum board manufacturing costs and the logistics radius of raw materials and finished products, thereby effectively improving the company's economic efficiency and comprehensive competitive strength in the target regional market. We continue to be optimistic about the company's future “two wings in one” development.

We are optimistic about the company's “one, two wings” development, and maintain the “buy” rating company's “two wings in one” action plan to focus on the main business and accelerate the implementation of the “one, two wings, global layout” development strategy. We continue to be optimistic about the company's medium- to long-term growth. At the same time, equity incentive goals also fully demonstrate the company's confidence in future development. Considering the pressure on demand on the completion side of downstream real estate, the 24-26 net profit forecast was lowered to 39.7/44.9/5.0 billion yuan (previous value of 42.5/48.5/5.41 billion yuan). Referring to comparable companies, the company was given 16 times PE in 24 years, corresponding to a target price of 37.64 yuan, maintaining the “buy” rating.

Risk warning: Demand for commercial and real estate decoration has declined sharply, price competition in the waterproof industry has intensified, and the company's production capacity progress has fallen short of expectations, etc.