\u3000\u3 China Vanke Co.Ltd(000002) 372 Zhejiang Weixing New Building Materials Co.Ltd(002372) )
In 2021, Zhejiang Weixing New Building Materials Co.Ltd(002372) achieved an operating revenue of 6.388 billion yuan, with a year-on-year increase of 25.13%; The net profit attributable to the owners of the parent company was 1.185 billion yuan, with a year-on-year increase of 2.58% and EPS of 0.77 yuan.
Comments:
With the increase of volume and price, the operating revenue increased, and the gross profit margin decreased, resulting in a low growth rate of net profit. In 2021, the total sales volume of the company’s products was 298100 tons, with a year-on-year increase of 20.33%, and the comprehensive price of the products was 20900 yuan, with a year-on-year increase of 10.85%. In the case of rising raw material prices, the company realized the simultaneous rise of volume and price by raising prices to ensure the growth of operating revenue. However, as the price increase of the company’s PE pipes (accounting for 26.89% of revenue) and PVC pipes (accounting for 15.94% of revenue) failed to better transmit the pressure of raw materials, the gross profit margin decreased significantly. Among them, the gross profit margin of PE and PVC pipes decreased by 4.48 and 11.2 percentage points year-on-year, but the price increase of the company’s core product PPR pipes (accounting for 48.32% of revenue) fell well, and the gross profit margin decreased by only 1.15 percentage points. The company’s overall gross profit margin decreased by 3.71 percentage points, resulting in the growth rate of net profit lower than that of operating revenue.
Brand, channel and service create excellent market competitiveness of PPR pipe. As the leader of decorative pipe, the product quality has been recognized by the market and the brand awareness is high. At the same time, the company has established perfect marketing channels nationwide, set up 30 sales branches and more than 30000 marketing outlets, with a year-on-year increase of more than 2000, covering a wide and deep range. In addition, the company’s star housekeeper service solves the concerns of consumers and further improves the company’s brand strength. Bring the excellent market competitiveness of the company’s products and ensure the bargaining power of products. In the second half of 2021, the price of raw materials was affected by factors such as shipping congestion and dual control of China’s energy. However, relying on the strong market bargaining power of the company’s PPR pipe, the price transmission cost pressure was increased. The overall effect of price increase was good, basically covering the rise of costs. The gross profit margin of PPR pipe in the second half of 2021 was only 0.56 percentage points lower than that in the first half of 2021, reflecting the good bargaining power of products. Increase the market share of core products and develop concentric circles based on brands and channels. Under the market advantage of PPR tube, the company continues to expand dealers and improve the market share. The revenue growth of PPR tube in 2021 was 27.64%, the highest level in five years. At the same time, taking advantage of its own brand and channel advantages and taking PPR pipe as the core, we will develop waterproof materials and water purification products. The sales revenue of relevant products will increase by more than 80% in 2021, so as to cultivate a concentric development path of new business. By building an intelligent chemical plant, building cost advantages, acquiring jieliu company, promoting the development of overseas business and bringing new development space.
Profit forecast and investment rating: we expect the company’s net profit attributable to the parent company from 2022 to 2024 to be 1.393 billion yuan, 1.675 billion yuan and 2.161 billion yuan respectively, corresponding to EPS of 0.88, 1.05 and 1.36 yuan respectively. The PE value corresponding to the current stock price is 22, 19 and 14 times respectively. Be optimistic about the excellent market competitiveness brought by the company’s PPR pipe brand and channel, ensure that the company takes this as the core to develop concentric business, bring certainty of development and growth, and maintain the investment rating of “strongly recommended” by the company.
Risk tip: the marginal improvement of real estate policy is less than expected.
