Beijian Building Material (000786) Acquisition Review-Formally Entered the Waterproofing Field

Industry fundamentals bottomed out in 2018Q4, and the company’s second-quarter net profit increased in the second quarter.

Looking forward, through the further increase of the market share of gypsum board business, the company has stronger pricing power in the industry and the increase in the company’s high-end product share. It is expected that the net profit of Shanping will increase in the future.

Matters: The company announced that it plans to acquire Sichuan Shuyang Waterproof Material Co., Ltd.

The cost of 47 million was transferred to a 70% stake in Shuyang Waterproof.

Sichuan Shu sheep’s income in 20186.

110 thousand yuan, net profit is 0.

6.9 billion, net assets 2.

7.2 billion, ROE 25%.

An important step towards diversified development.

The company has formulated a diversified development strategy to expand its business in the field of building materials.

The acquisition of Shuyang Waterproof marks that the company will officially enter the field of waterproofing.

As the waterproof material industry has a market capacity of over 南宁桑拿 150 billion yuan, far exceeding the gypsum board industry, the development of the waterproof business is expected to open the company’s growth ceiling.

The target of the merger and acquisition has a certain reputation in the waterproof industry, and the management quality is high.

Shuyang Waterproof’s revenue in 2018 was 6.

1.1 billion, ranking more than 10 in the waterproof industry, the company’s business is mainly distributed in the southwestern region, there must be a certain reputation in the industry.

In terms of financial indicators, the net profit margin in 2018 was 11% and the ROE was 25%.

Accounts receivables and notes turnover time was 110 days, and the asset-liability ratio was 51%.

Although it is not comparable to the cash flow of the gypsum board business, due to the complete maturity of the 杭州夜网 waterproof industry market, leading enterprises are still in the growth stage, and the operating quality of Shuyang is relatively excellent in the waterproof field.

Cost 1.

8 times PB, a “cheap acquisition”.

Shuyang Waterproof Assets Valuation Value 6.

50,000 yuan, the corresponding cost of 70% equity4.

23 trillion, the company actually paid the cost3.

470,000 yuan, “a cost-effective acquisition.”

The company has $ 27 million in cash in hand as of the first half of 2019, and it is estimated that the annual net operating cash flow inflow will exceed $ 2.5 billion. Taking into account the compensation in the U.S. class action case, the company’s cash flow situation is still abundant and plans for future capital expenditures are formed.Strong support.

Risk factors.

There are certain uncertainties in asset acquisition and integration, the risks of changes in US lawsuits, the risks of changes in real estate investment fluctuations, the risks of raw material price fluctuations, and the risks of macroeconomic fluctuations.

Investment Advice.

The recommendation logic of Beijing New Building Materials is twofold: 1) The industry fundamentals bottomed out in 2018Q4, and the company’s single-ping net profit increased in the second quarter.

With the further increase of the market share of gypsum board business, the increase of the company’s internal pricing power in the industry, and the increase in the company’s proportion of high-end products, it is expected that the net profit of Shanping will improve in the future.

2) Long-term growth space lies in multi-category business and layout.

In terms of multi-category business, because the keel business needs to be used with gypsum board, the company is expected to use its own gypsum board channel and brand advantages to achieve an increase in the keel business supporting rate and gain the potential of rebuilding Beixin.

Acquired Shuyang Waterproof Facility Company to get involved in the waterproof business, the size of the industry market space.

The company’s gypsum board business is globally competitive and is expected to replicate its advantages overseas.

Taking into account the impact of the US lawsuit, we lowered our 2019 profit forecast to 8.

2 ppm (original value 21).

100 million), considering the industry’s future prospects bottomed out and raised its profit forecast for 2020-2021 to 29.

2/33.1 trillion, 2019-2021 EPS is expected to be 0.

49/1.

73/1.

96 yuan (the original value is 1.

25/1.

31/1.

37 yuan), given a target price of 24.

24 yuan.

The company’s unit net profit has continued since Q2 of 2018. This year’s Q2 has increased from the previous month. The bottom signal is obvious, and the current corresponding deduction is 12 times, which is in the lower position of the center.

Based on this, the rating is raised to “buy”.