The market share of PPR tube is continuously improved, and the verification quantity is changed to qualitative change.

- Feb 08, 2018-

Net profit rose 34% in 2013 from a year earlier, and achieved EPS0.95 yuan. The company realized sales revenue, operating profit and net profit of 2.16 billion, 370 million and 320 million yuan respectively in 2013, up 16.2%, 29.2% and 33.8% respectively. Earnings per share of 95 yuan. In the fourth quarter, the company's revenue increased by 26.9%, net profit rose 60.8%, and EPS was 0.32 yuan per quarter. Last year, the net operating cash flow of the company amounted to 420 million yuan, up 41% year on year, the best year in history. The company intends to add 3 shares to each 10 shares and send 8 yuan (including tax). The dividend amount is 85% of the net profit, and the dividend yield is 5.0% at current share price.

Source of growth: retail sales force, market share increase. Last year, the company's PPR revenue grew by 34%, and its growth rate was 8.2% and 2.1%, respectively. At the same time, its gross margin increased by 3.5 percentage points to 51.7 percent, driving the overall gross profit rate up 1.7 percentage points to 39.1 percent. The high growth of PPR pipe is derived from the initial results of brand and channel construction, and the market share keeps improving. In the future, the company will continue to expand the number of sales terminals to about 30,000, and increase the sales of single stores through after-sales experience such as "star steward" service. Last year, the company's PE pipe revenue growth rate was 6.6%, and the gross profit margin fell by 1.3 percentage points. HDPE pipe revenue increased 11%, and gross margin increased by 1.9 percentage points to 29.9%.

The expense ratio of sales began to decline, and the management fee rate stopped rising, and the future or turning point. Last year, the company's sales expense ratio was 14.0%, a year-on-year decline of 0.2 percentage points. The management fee rate was 7.3%, unchanged from the previous year. The fastest growth in sales was the marketing campaign, which grew at a 39% annual rate, down from 81% in the first half of the year. The decline in the expense ratio and the management fee rate depends on the scale effect, and as the company's revenue scale grows, we expect these two rates to come to an inflection point in the next two years.

Increase the profit forecast, continue to maintain "strong recommendation -A" investment grade. This year, the revenue target of the company is 2.53 billion yuan, and the cost and expenses are to be controlled at about 2.05 billion yuan. We modestly raised our profit forecast to 1.23 yuan (1.17 yuan) this year, and the company is expected to have EPS of 1.23, 1.52 and 1.89 yuan in 2014-2015. We prefer company PPR pipe market share continue to improve, this will smooth the impact of real estate regulation and control, and that in the executive equity incentive has two phases of exercise than expected factors are likely to increase, under the condition of continue to strongly recommend.

Risk tip: the real estate slump, the raw material price to go up sharply.