Text | Yang Wanli
On the evening of April 18, the waterproof faucet Oriental Yuhong disclosed a financial report with a double increase in revenue and net profit. On April 19, Dongfang Yuhong's share price weakened, closing down 3.56%, with a share price of 13.54 yuan and a total market value of 34.1 billion yuan.
Dismantling the 2023 annual report, Dongfang Yuhong's attributable net profit data last year was lower than the expectations of some brokerage analysts. In 2023, the company will make a total provision for asset impairment of more than 1 billion yuan, of which the bad debt loss of accounts receivable will exceed 500 million yuan.
It is worth mentioning that as of the end of 2023, the value of accounts receivable of Oriental Yuhong still exceeds 9.5 billion yuan, and the listed company has warned of the risk of accounts receivable.
The data is not as good as the outside world's expectations, who is dragging down the net profit?
Oriental Yuhong takes waterproof business as the core, and also operates diversified businesses such as civil building materials, mortar powder, and architectural coatings. As of the end of 2023, waterproofing membranes, coatings, mortar powders, engineering construction and other businesses accounted for 40.56%, 29.51%, 12.79% and 9.89% of the company's revenue, respectively.
In terms of performance, in 2023, Dongfang Yuhong will achieve revenue of 32.823 billion yuan, a year-on-year increase of 5.15%, and attributable net profit of 2.273 billion yuan, a year-on-year increase of 7.16%. Dongfang Yuhong said that the reasons for the growth of revenue last year included the smooth expansion of the company's various businesses and the gradual increase in the proportion of retail business.
However, last year's attributable net profit data of Oriental Yuhong was lower than the expectations of some brokerage analysts.
According to the securities software, from the end of October 2023 to the middle of March 2024, securities analysts from Bank of China Securities, Kaiyuan Securities, Huaxin Securities, Ping An Securities, Capital Securities, Tianfeng Securities and other institutions have successively mentioned in the research report that the attributable net profit of Dongfang Yuhong in 2023 is predicted to be 3 billion yuan or more than 3 billion yuan, but the attributable net profit value disclosed in the 2023 annual report is less than 2.3 billion yuan, and the difference between the values before and after is more than 700 million yuan.
Who dragged down Dongfang Yuhong's attributable net profit?
Dongfang Yuhong mentioned in the "Announcement on the Provision for Asset Impairment in 2023" that in order to fairly reflect the company's financial situation and operating results, based on the principle of prudence, the company's total provision for asset impairment in 2023 will be about 1.039 billion yuan.
Dongfang Yuhong also said that the provision for asset impairment will correspondingly reduce the company's attributable net profit in the consolidated statement for 2023 by about 1.039 billion yuan.
Looking further, in 2023, Dongfang Yuhong will provide for bad debt losses of accounts receivable of about 572 million yuan, accounting for more than half of the total amount of asset impairment provisions last year.
Looking back on the past financial reports, from 2019 to 2022, Dongfang Yuhong's bad debt losses on accounts receivable were about 127 million yuan, 160 million yuan, 226 million yuan, and 224 million yuan respectively. After calculation, in the past five years (2019 to 2023), Dongfang Yuhong has accumulated a total of about 1.3 billion yuan in bad debt losses of accounts receivable.
It is not difficult to find that accounts receivable is an important factor affecting the net profit performance of Oriental Yuhong.
The value of accounts receivable exceeds 9.5 billion, what is the explanation?
From 2019 to 2023, Dongfang Yuhong's accounts receivable will be 5.636 billion yuan, 6.101 billion yuan, 8.764 billion yuan, 10.88 billion yuan, and 9.568 billion yuan respectively, accounting for 31.05%, 28.07%, 27.45%, 34.86%, and 29.15% of the current revenue respectively, and the accounts receivable will account for more than 27% in the past five years.
For the change of accounts receivable, Dongfang Yuhong explained that the company has implemented the national layout strategy in recent years, the market coverage has been expanding, the number of customers has continued to increase, the company's operating income has increased year by year, and the accounts receivable have risen.
In the 2023 annual report, Dongfang Yuhong reminded the risk of accounts receivable, saying that "there is a possibility that bad debts due to accounts receivable will affect the company's operating performance in the future". As early as November 1 last year, analysts at Ping An Securities also reminded in the research report that the recovery of accounts receivable is not timely and the risk of bad debt accrual.
It has been argued that rising accounts receivable and prepaid accounts usually mean that companies have adopted more aggressive sales and expansion strategies. As of the end of 2023, the prepayment was 1.078 billion yuan, close to the 2021 stage high value (1.097 billion yuan).
Dongfang Yuhong has realized this problem. In November last year, when accepting a specific target survey, Dongfang Yuhong replied to investors' questions, saying that "for the stock of accounts receivable, a series of measures will be taken to accelerate the recovery", "for customers with higher risks, they are required to provide sufficient asset collateral", "will speed up the realization of existing mortgage assets".
In the 2023 annual report, the 2024 business plan mentioned by Dongfang Yuhong includes "resolutely implementing zero-tolerance control of due accounts receivable + total receivables control + non-performing asset rate control", "comprehensively building a professional collection team that continues to fight" and so on.
Of course, Dongfang Yuhong has also improved some financial indicators, such as cash flow indicators.
As of the end of 2023, the net cash flow generated by Oriental Yuhong's operating activities was 2.103 billion yuan, a year-on-year increase of 221.58%, mainly due to the increase in cash received from the sale of goods and the provision of labor services, and the decrease in cash received from the purchase of goods and the payment of labor services.
Affected by factors such as the year-on-year increase in net cash flow from operating activities, the net increase in cash and cash equivalents of Oriental Yuhong in 2023 will be -1.264 billion yuan, an improvement of 75.31% year-on-year.
Next, we will continue to pay attention to how Dongfang Yuhong will control accounts receivable.