Every reporter: Chen Ronghao Every editor: Wei Wenyi
In 2023, the "waterproof faucet" Dongfang Yuhong (SZ002271, share price 13.37 yuan, market value 33.672 billion yuan) handed over a "double profit" financial report: revenue increased by 5.15% year-on-year to 32.82 billion yuan, and net profit attributable to the parent company increased by 7.16% year-on-year to 2.273 billion yuan.
But the capital markets don't seem to be buying it. The day after the annual report was released (April 19), Dongfang Yuhong's share price fell by 4.42%, and the stock price continued to fall by 1.26% on April 22.
From the perspective of Oriental Yuhong's revenue structure, Oriental Yuhong's business mainly includes waterproof membranes, coatings, mortar powder and other businesses, of which the waterproof and coating business accounts for more than 70% of the revenue, the waterproof membrane business contributes 13.314 billion yuan, accounting for 40.56% of the revenue, and the coating business contributes 9.685 billion yuan, accounting for 29.51%.
Although last year achieved a "double increase in profits", Dongfang Yuhong's net profit attributable to the parent was far lower than the expectations of some brokerage analysts. For example, the expected annual net profit attributable to the parent of Oriental Yuhong given by Capital Securities in the previous research report is 3.941 billion yuan, and the annual net profit attributable to the parent company given by Ping An Securities is 3.623 billion yuan.
The reporter of "Daily Economic News" noticed that the important reason for the drag on the net profit attributable to the parent company in the past year was the impairment of the accrued assets. As of the end of 2023, the total asset impairment provision of Oriental Yuhong exceeded 1 billion yuan, of which the bad debt loss of accounts receivable exceeded 500 million yuan. The total accounts receivable as of the end of 2023 was 9.568 billion yuan, a year-on-year decrease of 12.05%.
The provision for asset impairment dragged down the growth rate of performance
Judging from the performance changes of Dongfang Yuhong in the past five years, the time for the rapid growth of revenue and net profit is during the period of 2020~2021, of which the net profit attributable to the parent company hit a high peak of 4.205 billion yuan in 2021, with a year-on-year increase of 24.07%.
Specifically, in 2019~2023, Dongfang Yuhong will achieve revenue of 18.15 billion yuan, 21.73 billion yuan, 31.93 billion yuan, 31.21 billion yuan and 32.82 billion yuan respectively, and the net profit attributable to the parent company will be 2.066 billion yuan, 3.389 billion yuan, 4.205 billion yuan, 2.121 billion yuan and 2.273 billion yuan respectively, and the corresponding growth rate of net profit attributable to the parent company will be 36.98%, 64.03%, 24.07%, -49.55% and 7.16% respectively.
An important reason for the growth rate of Dongfang Yuhong's net profit attributable to the parent company is lower than expected is the impairment of the assets. In 2023, the total asset impairment provision of Oriental Yuhong will be about 1.039 billion yuan, of which the asset and credit impairment in the fourth quarter will be about 433 million yuan, mainly due to the impairment of accounts receivable according to the age, as well as the impairment of contract assets and inventory decline losses, which will affect the current performance.
The reporter noticed that from the changes in Dongfang Yuhong's income last year, the fastest growth rate was in the first quarter, and the revenue in the fourth quarter showed negative growth. Dongfang Yuhong's revenue growth rate from the first quarter to the fourth quarter of 2023 will be 18.8%, 4%, 5.41%, and -4.76% respectively.
Dongfang Yuhong said that in recent years, the company has implemented a national layout strategy, the market coverage has been expanding, the number of customers has continued to increase, the scale of operating income has increased year by year, and accounts receivable have risen.
A data for reference is that the cash flow generated by Oriental Yuhong's operating activities increased significantly last year, which to a certain extent reflects the rapid increase in its business scale. According to the annual report, 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.
Regarding the future disposal of accounts receivable, Dongfang Yuhou said in the annual report: "The 2024 business plan includes resolutely implementing zero tolerance control of accounts receivable due + total receivables control + non-performing asset rate control, and comprehensively building a professional collection team that continues to fight." ”
On the retail business side, as of the end of 2023, Oriental Yuhong's retail business achieved 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, and its subsidiary China Democratic Construction Group achieved revenue of 8.18 billion yuan in 2023, a year-on-year increase of 34.58%.
In terms of products, Dongfang Yuhong mainly includes waterproof membranes, coatings, mortar powder three major businesses, last year's gross profit margin was 27.01%, 37.03% and 27.56%, and the comprehensive gross profit margin was 27.69%.
The reporter combed and found that the companies engaged in the waterproof business in the listed companies mainly include Keshun Co., Ltd. and Beijing New Building Materials, etc., the main companies engaged in the paint business include 3Trees, Asia Cuaneng and so on, and the main companies engaged in the mortar powder business include Lei Zhi Group and Subote.
Oriental Yuhong's gross profit margin of each product line in 2023 Source: Oriental Yuhong's annual report
As of the third quarter of 2023, the gross profit margin of Keshun Co., Ltd. was 21.19%, the gross profit margin of Asia Cuaneng was 32.44%, and as of the end of 2023, the gross profit margin of Beijing New Building Materials was 29.88%, the gross profit margin of Subote was 35.04%, the gross profit margin of 3Trees was 28.38%, and the gross profit margin of Lei Zhi Group was 24.84%.
In contrast, the gross profit margin of Dongfang Yuhong's major branches is at the middle and upper level of the industry.
The actual controller continues to add additional stock pledges
Another important dynamic situation of Oriental Yuhong this year is the generous dividend.
On March 13 this year, Dongfang Yuhong announced that the actual controller proposed to distribute cash dividends to all shareholders with a total amount of not less than 50% of the audited net profit attributable to shareholders of the company in 2023.
On the one hand, he paid large dividends, but on the other hand, Li Weiguo, the actual controller of the company, continued to add stock pledges.
On April 18, Dongfang Yuhong disclosed the equity pledge of Li Weiguo, the controlling shareholder and actual controller of the company. According to the announcement, Li Weiguo and his concerted actors pledged nearly 27 million shares to several securities firms to increase the guarantee for their pledge financing.
Basic information on the cumulative pledge of shares of Oriental Yuhong shareholders Source: enterprise announcement
As of April 18, Li Weiguo and his concerted actors had held a total of 541.7 million shares of Oriental Yuhong, accounting for 21.51% of the company's total share capital. After the completion of this partial share pledge, Li Weiguo and his concerted actors have pledged a total of 348.7 million shares of the company, accounting for 64.37% of the company's shares held by him.
Among the pledged shares, the cumulative number of pledged shares that will expire in the next year is 258.8 million shares, accounting for 47.78% of its shares, and the remaining financing balance is 1.827 billion yuan. In other words, Li Weiguo and his concerted actors face a pledge financing scale of more than 1.8 billion yuan that will expire within one year.
Based on the closing price of 13.37 yuan on April 22, the market value of the pledged 258.8 million shares is 3.460 billion yuan. Based on this calculation, its stock pledge ratio is about 52%. According to the Guidelines for Risk Management of Securities Companies Participating in Stock Pledged Repurchase Transactions, the collateral ratio of equity pledge cannot exceed 60%. It is not difficult to find that if Dongfang Yuhong's share price continues to decline, Li Weiguo's pledge financing risk will also increase.
Dongfang Yuhong mentioned in the previous announcement that after the above-mentioned pledges expire one after another, they will be repaid through pledge extension, pledge replacement, and own funds. Mr. Li Weiguo has a good credit standing, has the corresponding performance ability and capital repayment ability, and his repayment funds come from pledge replacement and pledge extension, his own funds, etc.
Oriental Yuhong's stock price performance in the past year Source: Baidu Stock Market
As of the close of trading on April 22, Dongfang Yuhong's share price was 13.37 yuan, which has shrunk by nearly 80% compared with the peak in mid-2021. At the beginning of this year, Li Weiguo launched a stock cash-out plan, planning to reduce his holdings of no more than 50.37 million shares through block trading within 3 months after 15 trading days from the date of disclosure of the announcement on January 13, 2024. The cash-out funds will be used to cover the losses of the 2021 employee stock ownership plan.
At the same time, Oriental Yuhong adopted a share buyback strategy to try to boost the stock price. Since the end of last year, Oriental Yuhong has spent more than 600 million yuan in the secondary market to buy back shares.
It is worth mentioning that as early as October last year, the secretary of the board of directors of Oriental Yuhong once "complained" about the decline in Dongfang Yuhong's stock price in the circle of friends. Now Dongfang Yuhong's share price has fallen by 50% from October last year.
National Business Daily