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PPR pipe market share continued to improve, the amount of change to qualitative change

- Dec 23, 2017 -

In 2013, net profit increased 34% YoY to RMB0.95. The Company achieved sales revenue, operating profit and net profit of 2.16 billion, 3.7 billion and 320 million respectively in 2013, up by 16.2%, 29.2% and 33.8% respectively over the same period of last year. 0.95 yuan earnings per share. In Q4, the revenue of single-quarter companies increased by 26.9% and net profit increased by 60.8%. The single-quarter EPS was 0.32 yuan. Last year, the company's net operating cash flow reached 420 million yuan, an increase of 41%, is the best year in history. The company intends to convert 3 shares for every 10 shares and send 8 yuan (tax included). The amount of the dividend accounts for 85% of the net profit and the dividend yield is 5.0% based on the current share price.

Source of growth: Retail business, market share increase. Last year, the company PPR pipe revenue growth of 34%, Wing High, care over the same period growth of 8.2% and 2.1%. At the same time, its gross profit margin increased by 3.5 percentage points to 51.7%, driving overall gross profit margin up 1.7% to 39.1%. PPR pipe revenue growth from the brand, channel construction achieved initial success, the market share rising. In the future, the company will continue to expand the number of sales terminals to about 30,000, and at the same time, enhance single-store sales through after-sales experiences such as "Star Steward" service. Last year, the company's PE pipe revenue growth rate of 6.6%, gross profit margin fell slightly 1.3 percentage points. HDPE pipe revenue increased 11%, gross margin increased 1.9 percentage points to 29.9%.

Sales expense rate began to decline, management fee rate ceased to rise, or in the future usher in turning point. Last year, the Company's sales expense ratio was 14.0%, a decrease of 0.2 percentage point from the same period of previous year. Its management expense ratio was 7.3%, unchanged from the same period of last year. The fastest growing sales expense was the marketing promotion fee, which increased by 39% for the whole year, down from 81% in the first half of the year. The decline in sales and overhead rates is dependent on economies of scale. As the company's revenue continues to grow, we expect the two rates to hit an inflection point in the next two years.

Increase earnings forecasts, continue to maintain "highly recommended -A" investment rating. This year's revenue target of 2.53 billion yuan, cost and cost control in 2.05 billion yuan. We slightly raised our profit forecast for the year to RMB1.23 (originally RMB1.17). We expect the Company's EPS to be RMB1.23, RMB1.52 and RMB1.89 for 2014-2015. We are optimistic about the company PPR pipe market share continued to improve, which will smooth the impact of real estate control, and that in the case of executive incentive stock options have been over-expected two factors may increase, continue to strongly recommend.

Risk Warning: real estate fell sharply, raw material prices sharply higher.

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