Retail efforts, the growth rate of emerging sand powder business is strong, and the highlights of Oriental Yuhong's annual report are analyzed

Recently, the performance of listed companies in the decoration and building materials industry has been released, and a series of signs are showing that the industry is gradually getting rid of the impact of weak demand in the real estate market and ushering in a rebound in profits. Among them, Dongfang Yuhong's performance is eye-catching.

According to the company's financial report data, Dongfang Yuhong will achieve revenue of 32.823 billion yuan in 2023, a year-on-year increase of 5.15%, a net profit attributable to shareholders of listed companies of 2.273 billion yuan, a year-on-year increase of 7.16%, and basic earnings per share of 0.91 yuan/share, a year-on-year increase of 7.06%. The company achieved double growth in revenue and profit, and the growth and stability of the industry leader continued to be demonstrated.

1. Performance growth: steady pace and improvement of operating quality

In-depth analysis of this financial report, it is not difficult to find that Oriental Yuhong has not only achieved significant growth in performance, but also effectively improved the overall business quality, showing a high-quality development side. This can be developed from the following three key dimensions presented in the financial report:

a. Rapid growth of the business

First of all, from the business level, in the past year, Oriental Yuhong's major business segments have grown well, showing the company's competitiveness and market adaptability in many fields, and the company's diversification strategy and innovation capabilities have provided continuous growth momentum for its performance growth.

Specifically, as one of the core businesses of Oriental Yuhong, waterproofing membrane will achieve a revenue of 13.314 billion yuan in 2023, with a year-on-year growth rate of 6.71%, indicating that the company's market position in traditional advantageous fields is still solid.

The revenue of the paint business reached 9.685 billion yuan, a year-on-year growth rate of 13.85%, which shows the good competitiveness and growth potential of Dongfang Yuhong in the paint market.

At the same time, the mortar powder business achieved revenue of 4.196 billion yuan in the past year, with a year-on-year growth rate of 40.00%, which is the fastest growth rate among all business segments. This significant growth demonstrates the strong expansion and market capture ability of Oriental Yuhong in this market segment. As part of the company's diversification strategy, the rapid growth of mortar powder has contributed significantly to the company's overall performance growth.

In addition, the scale of the waterproof construction business has gradually shrunk under the strategic adjustment, and the revenue of this business segment will be 3.245 billion yuan in 2023.

b. Gross and net profit margins

Secondly, Dongfang Yuhong's gross profit margin and net profit margin have improved year-on-year, which is due to the company's efforts in cost control and operational efficiency improvement. According to the financial report, the company's gross profit margin in 2023 will be 27.69%, a year-on-year increase of 1.92 percentage points, the net profit margin will be 6.97%, a year-on-year increase of 2.69 percentage points, and the weighted average return on equity will be 8.24%, a year-on-year increase of 0.27 percentage points. Under the dual pressure of raw material price fluctuations and intensified market competition, Oriental Yuhong has successfully achieved the enhancement of profitability by improving production efficiency, optimizing product structure and enhancing product added value.

It is worth mentioning that the company's retail gross profit margin is generally above 40%, and with the increase in the proportion of retail, it will also play an important role in supporting the improvement of cash flow and gross profit margin.

c. Sound financial structure

Finally, the overall debt level of Oriental Yuhong has been effectively controlled, and the company has demonstrated a sound financial structure. As of the end of 2023, the company's asset-liability ratio was 43.90%, down 2.32 percentage points from the same period last year. In addition, the company's net operating cash flow improved significantly, to 2.103 billion yuan at the end of the 23-year period, an increase of 221.58% over the same period last year, including 6.863 billion yuan in the fourth quarter of 23.

It can be seen that the company's solid financial position provides a solid foundation for its future investment and expansion. Through reasonable capital operation and risk management, Oriental Yuhong ensures that the company can maintain financial stability and sustainability while pursuing growth. This financial soundness allows the company to remain agile and responsive in the face of market uncertainty to be in a competitive position.

It is worth mentioning that the company's accounts receivable have effectively decreased, and by the end of 2023, the amount of accounts receivable will be 9.568 billion, a decrease of 2.80% from the beginning of 23, and the proportion of total assets will decrease from 21.5% at the beginning of 23 to 18.70%.

To sum up, Oriental Yuhong's annual report not only shows the company's steady pace of performance growth, but also reflects its continuous improvement in operation quality. These achievements are also the result of the joint action of the company's strategy implementation, market positioning and internal management.

2. Competitive barriers and growth potential build a "flywheel" for value multiplication

Behind the steady performance growth, in-depth analysis can find that Oriental Yuhong has built a "flywheel" to promote the continuous growth of the company's value through its unique competitive advantage and strategic layout. The operation of this "flywheel" is not achieved overnight, but from the strong support brought by the competitive barriers formed by Oriental Yuhong in the long-term industry and the growth potential it has cultivated.

Competitive barriers: the dual guarantee of first-mover advantage and scale effect

First of all, Oriental Yuhong's deep cultivation in the industry has accumulated significant competitive advantages for it. The company has not only established a good reputation in product quality and technological innovation, but also formed a strong market barrier through forward-looking market layout and capacity expansion. These barriers include not only brand influence and customer loyalty, but also the layout of production capacity in key areas and the scale advantage in supply chain management.

On the one hand, as a pioneer in the waterproof material industry, Dongfang Yuhong's first-mover advantage is not only reflected in its brand influence and market recognition, but also in its nationwide production capacity layout. The market radius of waterproofing materials allows the first mover to establish a strong competitive barrier in the market. Through the advance layout in key areas, Dongfang Yuhong not only successfully occupied the market share, but also laid a solid foundation for subsequent market expansion.

On the other hand, as a leading enterprise in the industry, Oriental Yuhong has significant economies of scale and obvious advantages on the cost side. Economies of scale enable the company to have greater bargaining power and cost advantages in raw material procurement, production efficiency and marketing. This cost advantage provides strong support for Oriental Yuhong in the market competition, enabling it to maintain a leading position in the fierce competition such as price wars.

In addition, the proportion of the company's retail channel is increasing, bringing greater expectations for future growth. According to the financial report, in 2023, the company's retail business will achieve operating income of 9.287 billion yuan, a year-on-year increase of 28.11%, accounting for 28.29% of the company's operating income. Generally speaking, the Matthew effect of retail channels is often more significant, and the first mover is often more able to establish high barriers to customer mind occupation and market penetration. Oriental Yuhong's deep cultivation in the retail market not only improves market coverage, but also enhances user loyalty. This competitive advantage based on brand and channel provides strong support for the company's future development.

Judging from the financial report, with the increase in the proportion of retail business, the company's gross profit margin has been significantly improved. The company's retail channels are managed by the subordinate civil construction group, architectural coatings retail business segment and building repair group Yuhong home service sector, through the establishment of home improvement companies, building materials supermarkets, building materials markets, operation centers, community service station dealers and e-commerce multi-integrated marketing network to serve the general consumer home decoration and refurbishment repair market.

In the past year, the group has developed rapidly, and by the end of the year, the group had nearly 5,000 dealers and more than 220,000 distribution outlets. In addition, the retail business of architectural coatings further sorted out and improved brand positioning, market expansion and channel management. The repair group is committed to opening up the "last mile" of Yuhong home service, and has laid out more than 1,200 operation centers and community service stations across the country, distributed in 153 cities in 29 provinces (municipalities directly under the central government) across the country, realizing the "100 cities and 1000 stores" plan, and at the same time in Ho Chi Minh City, Vietnam, Kuala Lumpur, Malaysia, Manila, Philippines and other countries have opened Yuhong home service operation centers.

Growth potential: Driven by industry evolution and strategic layout

Secondly, the growth potential of Oriental Yuhong should not be ignored. Through continuous product innovation and market expansion, the company has successfully opened up new growth space.

From the perspective of the transformation of the industry pattern and the improvement of concentration, according to the data of Tujie, the global CR10 is about 50%, of which the United States, Japan, South Korea and Germany are 93%, 95%, 95% and 90% respectively, while China is only 30%, and the potential for concentration improvement is huge. This data shows that China's coating industry is in the early stage of increasing concentration, providing huge growth space for industry leading enterprises. As a leading enterprise in the industry, Oriental Yuhong is expected to reap the greatest dividends in this process.

On the other hand, Oriental Yuhong's stable position in the large customer market and the growth space in the retail market provide strong support for the company's sustainable growth. The company continues to consolidate its market position in the engineering channel, and at the same time successfully opens up new growth space by expanding retail channels and sinking markets, injecting new vitality into its long-term development.

In addition, the company is also actively deploying overseas, promoting the work of "going to sea" and developing overseas markets. Oriental Yuhong has launched a series of international strategic layouts around international scientific research, overseas warehousing, overseas investment and mergers and acquisitions, overseas factory construction, overseas talent training, overseas channel expansion, etc., and has realized diversified business model operations such as overseas engineering, trade, and retail. According to the financial report, the company's revenue from other countries or regions in 2023 will reach 703 million yuan, a year-on-year increase of 54.04%.

The company actively promotes the landing of overseas factories, and at the same time establishes overseas strategic groups, and has set up overseas companies or offices in Vietnam, Malaysia, Singapore, Indonesia, Canada, the United States and other countries, laying a good foundation for consolidating overseas business development and expanding overseas market space. It is worth mentioning that last year, the company also signed a strategic cooperation agreement with Arkaz Company, a subsidiary of Alturki Holdings in Saudi Arabia, and Arkaz Company officially became the exclusive distributor of Oriental Yuhong thermoplastic polyolefin (TPO) roofing system in Saudi Arabia. There is reason to believe that the overseas market is expected to become another growth pole for the company to create in the future.

3. Conclusion

In the context of the current industry as a whole has not yet fully recovered, Oriental Yuhong has shown a good recovery and growth momentum. The company has laid a solid foundation for future performance growth by continuously optimizing sales channels and expanding product categories.

At the same time, the company's high dividend strategy has also reassured the market. Previously, the company announced that the actual controller of the company proposed that the cash dividend ratio in 2023 should not be less than 50% of the net profit in 2023. With the release of the annual report, the company announced that the company will distribute cash of 0.6 yuan per share in 23 years, corresponding to a dividend yield of 66%, and the corresponding dividend yield of the current stock price is 4.2%, which is higher than the yield of 10-year treasury bonds. This move also demonstrates the company's positive attitude to giving back to shareholders.

Returning to the capital market level, Oriental Yuhong's steady operation, healthy cash flow and good dividend return make it more attractive in a highly uncertain market environment, and will also win more market recognition for it, and is expected to bring opportunities for value revaluation.