PPR pipe market share continues to increase, verification volume changes to qualitative change

- Jul 14, 2018-

In 2013, net profit increased by 34% year-on-year, achieving EPS of 0.95 yuan. The company achieved sales revenue, operating profit and net profit of 2.16 billion, 370 million and 320 million yuan respectively, up 16.2%, 29.2% and 33.8% respectively. Earnings per share of 0.95 yuan. In the fourth quarter, the company's revenue increased by 26.9% in the single quarter, net profit increased by 60.8%, and single-quarter EPS was 0.32 yuan. Last year, the company's net operating cash flow reached 420 million yuan, a year-on-year increase of 41%, which is a year of history. The company plans to increase 3 shares for every 10 shares and send 8 yuan (including tax). The dividend amount accounts for 85% of the net profit. The dividend yield is 5.0% based on the current share price.

Source of growth: retail business strength, market share increased. Last year, the company's PPR pipe revenue growth rate reached 34%, Yonggao, Gudi's growth rate was 8.2% and 2.1%. At the same time, its gross profit margin increased by 3.5 percentage points to 51.7%, driving the overall gross profit margin to increase by 1.7 percentage points to 39.1%. The high growth of PPR pipe revenue was due to the initial results of brand and channel construction, and the market share continued to increase. In the future, the company will continue to expand the number of sales terminals to around 30,000, and at the same time increase the sales of single stores through after-sales experience such as “Star Butler” service. The company's PE pipe revenue growth rate was 6.6% last year, and gross profit margin dropped slightly by 1.3 percentage points. HDPE pipe revenue increased by 11% and gross profit margin increased by 1.9 percentage points to 29.9%.

The sales expense ratio began to decline, the management expense ratio stopped rising, and the future may usher in an inflection point. Last year, the company's sales expense ratio was 14.0%, down 0.2 percentage points year-on-year; the management expense ratio was 7.3%, which was flat year-on-year. The fastest-growing sales expense was marketing promotion fees, with a growth rate of 39% for the whole year, down from 81% in the first half of the year. The decline in sales expense ratio and management expense rate depends on the scale effect. As the company's revenue scale continues to grow, we expect these two expense rates to usher in a turning point in the next two years.

Revise up earnings forecasts and continue to maintain the “strongly recommended-A” investment rating. This year, the company's revenue target is 2.53 billion yuan, and the cost and cost will be controlled at about 2.05 billion yuan. We slightly raised our earnings forecast for this year to 1.23 yuan (originally 1.17 yuan), and the company's EPS for 2014-2015 is expected to be 1.23, 1.52 and 1.89 yuan. We are optimistic about the continuous increase of the company's PPR pipe market share, which will smooth the impact of real estate regulation and control, and believe that the over-expected factors may increase in the case of executive equity incentives that have been exercised in two phases, and continue to strongly recommend.

Risk warning: Real estate fell sharply and raw material prices rose sharply.