\u3000\u3000 Keshun Waterproof Technologies Co.Ltd(300737) (300737)
Matters:
The company announced the performance forecast for 2021. It is expected to realize a net profit attributable to the parent company of 630-800 million yuan, a year-on-year decrease of 10.2% ~ 29.2%, and a net profit of 570-740 million yuan after deduction, a year-on-year decrease of 16.5% – 35.7%, lower than the market expectation.
Ping An View:
The increase in cost and price superimposed the provision for bad debts, and the performance decreased year-on-year. The company expects net profit in 2021 to fall by 10.2%~29.2% compared to the same period last year, and its growth rate has dropped sharply compared with the first three quarters (+17.2%). The main reasons are: 1) the prices of upstream raw materials such as asphalt and emulsion have risen sharply, and sales gross margins have been under pressure. 2) Since September, downstream real estate credit events have occurred frequently, and the company has withdrawn bad debt reserves for accounts receivable.
The profit level is expected to improve, and the industry pattern may accelerate clearing. The company generally renegotiates with real estate direct sales customers at the end of the year and the beginning of the year. Under the background of the sharp rise in the price of raw materials in 2021, the subsequent company is expected to gradually increase the product price and improve the profit margin. In addition, the frequent occurrence of default events of downstream real estate enterprises has greatly put pressure on the operation of small and medium-sized waterproof enterprises, and the waterproof industry pattern may be accelerated. As a waterproof leader, the company has stronger financial operation strength and will benefit from the optimization of industry competition pattern.
Implement stock incentive and employee stock ownership plan to fully stimulate the vitality of employees. In November, the company disclosed the first phase of the employee stock ownership plan and the draft restricted stock incentive plan for 2021, in which the incentive plan proposed to grant a total of 20 million restricted shares to 391 people, including middle-level managers and core technical (business) personnel, with the first grant price of 8.5 yuan / share, and the assessment objective is based on the net profit in 2021, The net profit growth from 2022 to 2024 shall not be less than 25%, 56% and 95% respectively, and the net operating cash flow in these three years shall be greater than zero. The employee stock ownership plan was also carried out smoothly. As of January 6, the employee stock ownership plan had purchased 16.67 million shares of the company, with a total amount of 260 million yuan.
Investment suggestion: considering the increase in the price of raw materials and the increase in the pressure of bad debt provision caused by the outbreak of credit events of downstream real estate enterprises, the previous profit forecast is lowered. It is estimated that the EPS from 2021 to 2023 will be 0.61 yuan, 1.03 yuan and 1.36 yuan respectively (the original forecast is 0.88 yuan, 1.21 yuan and 1.54 yuan), and the corresponding PE of the current stock price is 24.4 times, 14.5 times and 11.0 times respectively. As a waterproof leader, the company has both brand strength, product advantages and price raising ability, and the subsequent profit margin is expected to improve. The company also actively implements the employee stock ownership and equity incentive plan to fully mobilize the enthusiasm of employees. From the perspective of industry, the downstream real estate enterprises frequently default, accelerating the liquidation of the waterproof industry situation, and the leading enterprises benefit more. In the medium and long term, the general trend of waterproof standard raising is inevitable, The company has no worries about its future growth and maintains the “recommended” rating.
Risk warning: 1) raw material price fluctuation risk: the raw materials required by the company’s production include asphalt, membrane type (including isolation membrane), polyester tire base, SBS modifier, polyether, emulsion, base oil, paraffin wax, isocyanate, etc., which belong to petrochemical products. If the purchasing price of raw materials continues to rise, the company’s profitability will be negatively affected. 2) Risk of real estate demand falling short of expectations: the real estate industry is the main source of the company’s sales revenue. If the follow-up development of the real estate industry falls short of expectations and new construction falls sharply, it will have an adverse impact on the company’s performance growth; 3) Recovery risk of accounts receivable: if there is no significant improvement in the follow-up real estate financial environment and the financial situation of real estate enterprise customers served by the company deteriorates, the company’s accounts receivable will not be recovered on schedule or will not be recovered, resulting in bad debts.
