Matters:
Beixin Building Materials released its 2022 annual report: the company achieved revenue of 19.034 billion in 2022, -5.49% year on year, net profit of 3.136 billion yuan, -10.71% year on year, net operating cash flow of 3.664 million, and -167 million yuan year on year.
Commentary:
The main business, gypsum board, is resilient, and profits from diversified businesses are expected to bottom out in '23. The company achieved revenue of 19.034 billion in 2022, -5.46% year on year, and net profit of 3.136 billion yuan to the mother, or -10.71% year on year.
On a quarterly basis, Q1-Q4 revenue growth rates were +10.47%, -3.24%, -14.84%, and -10.45%, and the performance growth rates were +7.28%, -18.29%, -20.10%, and +0.61%, respectively. After deduction, the performance growth rates were +4.59%, -21.64%, -18.35%, and -51.60%, respectively. We believe that the decline in revenue and performance in '22 was mainly due to weak demand in the downstream real estate market and rising raw material prices. The decline in Q4 performance was mainly due to a year-on-year decline in gross margin and an increase in impairment losses (in '22, due to the year-on-year increase in accounts receivable and bad debt losses accrued by the company's subsidiaries, a total credit impairment loss of $107 million, an increase of $93 million over the previous year; in addition, the company's estimated loss of goodwill impairment during the reporting period was 51 million yuan). The growth rate of performance was significantly higher than the increase in non-deduction of asset disposal benefits due to government repurchases of land speed.
1. By business, the main gypsum board business is resilient. In 2022, the company's gypsum board business achieved revenue of 13.365 billion yuan, -3.01% year-on-year, sales of 2,093 billion square meters, and -11.98% of the country's total sales, accounting for 68.11% of the country's total sales, and its market share increased by 0.36 pct. We estimate that the unit price of the company's gypsum board in 2022 was about 6.39 yuan/square meter, +0.59 yuan/square meter compared to the previous year. The cost per flat was about 4.15 yuan/square meter, which was +0.52 yuan/square meter year over year, mainly due to an increase in fuel power costs.
Due to weak downstream demand (the country's completed area fell 15% year on year in 2022), combined with high fuel costs, the gross margin of the gypsum board business fell 2.31 pct to 34.95% year on year, but the gross profit per square remained around 2.2 yuan. In the face of a sharp decline in real estate demand in 2022, overall operations were steady.
2. Dragons' revenue has declined and profit levels have increased. In 2022, the company Longbone achieved revenue of 2,517 million yuan, -8.7% year on year, and gross margin was 18.94%, a slight increase of 0.51 pct over the previous year. Considering the decline in steel prices last year, we estimate that keel sales have not changed much.
3. The gross margin of the waterproof sector is under pressure and is expected to bottom out in '23. The company's waterproofing sector achieved revenue of 3.145 million yuan in 2022, -18.88% year on year, including 2,160 million for membrane materials, -15.18% year on year, 445 million for waterproof coatings, -16.00% year on year, and 453 million for waterproofing projects, 34.94% year on year. The gross profit margin of the waterproof sector was 17.04%, -6.62 pct compared to the previous year. Affected by the sharp rise in the cost of raw materials such as asphalt and weak downstream demand, the waterproof segment changed from profit to loss, with a loss of 98 million dollars during the reporting period. We believe that new waterproofing regulations are combined with a recovery in real estate demand. Demand in the waterproofing industry is expected to improve markedly in '23, raw material prices are gradually stabilizing, and the company's profits are expected to bottom out.
Interest rates remained flat under profit pressure, and repayment levels dropped slightly. The company's consolidated gross margin in 2022 was 29.24%, -2.59pct year on year, mainly due to the decline in gypsum board and waterproofing margins. On a quarterly basis, Q1-Q4 gross margins were 28.39%, 31.36%, 29.24%, and 27.44%, respectively. The net interest rate was 15.77%, -1.08pct year on year. Looking at the breakdown, lightweight building materials achieved net profit of 3.170 billion yuan, -3.44% year on year, with a net interest rate of 18.88%. The rate for the period was 13.81%, +0.72pct over the previous year, which was basically the same as the previous year. Among them, the management fee rate, R&D rate, sales rate, and financial rate were +0.3 pct, +0.17 pct, +0.1 pct, +0.14 pct, respectively. Net operating cash flow was 3.664 billion yuan, year-on-year - 167 million yuan, of which lightweight building materials were 3.4 million, year-on-year - 615 million. After deducting the impact of capital collected to the parent company, the net inflow of the waterproofing segment after deducting the impact of capital collected to the parent company was -984.18 million, compared to 561 million yuan over the previous year. The payout ratio was 103.67%, and the year-on-year ratio was -2.65 pct. The balance ratio was 25.03%, -1.49 pct over the previous year.
Integrating two wings, global layout: 1) Gypsum board+: By the end of the reporting period, the Group's gypsum board production capacity was 3.358 billion square meters. In the future, it will continue to focus on the core gypsum board business, optimize production capacity layout, and promote collaborative integration; 2) Waterproof: Building a “1+N” waterproof industry pattern. The company has now promoted the layout of 16 waterproof material production bases. In 23, the company will continue to increase investment in waterproof R&D and technological upgrading to strengthen marketing organization and channel construction; 3) Coatings: Beixin Coatings focuses on the two core regions of North China and Central Plains. The company plans to stabilize the core regions of North China and the Central Plains. Step Promote the development of the paint business and specialize in coatings.
Profit forecasting, valuation and investment ratings: The company's main gypsum board business is resilient, and diversified strategies are progressing steadily, but considering that downstream demand will still take time to recover, we adjusted the company's 2023-2025 EPS forecasts to 2.21 yuan/2.49 yuan/2.80 yuan/share (the original value for 23-24 was 2.27/2.64 yuan/share). The corresponding PE is 13x/11x/10x. According to historical valuation methods, considering the completion situation in 23 and diversified business expansion, the corresponding PE is 13x/11x/10x. 18x valuation, target price of 35.4 to 39.8 yuan/share, maintaining a “strong push” rating.
Risk warning: The completed area of real estate has declined more than expected, the prices of raw materials have fluctuated sharply, and the synergistic effect has not met expectations.