Dongfang Yuhong (002271) in-depth report: Leaders in the waterproofing industry continue to add growth momentum

The content of this issue: Under the “big industry, small business” layout, some companies are stronger: the restructuring, the size of the waterproof material market is expanding, but the market concentration is still decreasing.

In a highly open competitive environment, large and medium-sized enterprises, especially listed companies, have accelerated their expansion, showing a trend of “the stronger the stronger”.

Facing the downward pressure on the economy, we believe that the actual investment is significantly smaller and the transportation infrastructure will also be vigorously promoted, so the demand for waterproof materials is supported.

With the increase in the concentration of the downstream real estate industry, leading waterproof companies will fully benefit.

Leading company in the industry, profit continues to increase: As the chief leader of the company, Oriental Yuhong has continued to increase its production capacity since its listing, and its industrial layout is becoming more and more perfect.

In October 2018, the company began to adjust its strategic structure, aiming to improve the operating efficiency of the company, and it is difficult for crude oil prices to continue to grow.

With the release of various types of functional building materials in the future, the company’s development will inject new momentum.

Therefore, we believe that the company’s performance improvement space is broad.

Earnings forecast and investment grade: We estimate that Oriental Yuhong’s diluted EPS for the 18-20 years will be 1.

01 yuan, 1.

31 yuan and 1.

66 yuan.

A listed company whose main business is waterproof coatings and architectural coatings is selected for comparison. The company’s PE (TTM) variable is 43 times, and Oriental Yuhong’s PE (TTM) is 19 times, which is far below the industry average.
We predict that the company’s PE in 2019 will be 15 times, which is still lower than the comparable company Keshun shares and three trees.

Considering the continuous release of the capacity of waterproof materials in the future, the company’s market share will continue to increase, supporting high growth in performance.

Covered for the first time and given a “Buy” rating.

Anticipated catalysts: The demand in the real estate sector exceeded expectations; the price of raw materials fell unexpectedly; the company’s strategic structural adjustment progressed significantly; the functional building materials business 深圳桑拿网 achieved progress beyond expectations.

Risk factors: Less than expected demand in the real estate sector; market competition risks; risk of receivables recovery; rising raw material prices.