1H22 results first take
- 1H22 net profit down 28.6% y-o-y to Rmb1.3bn (below), no interim dividend was declared (negative surprise)
- Total revenue up only 1.1% y-o-y, led by 1.5% growth in plastic pipe sales (below)
- Gross profit down 9.9% y-o-y as gross margin compressed 3.2ppts (below)
- Currently we rate China Lesso BUY with HK$20.7 TP (under review).
China Lesso reported 1H22 net profit to shareholders fell 28.6% y-o-y to Rmb1.3bn. This represents c.29% of our full year FY22 earnings estimate. The results were below our expectation, mostly on slow revenue growth and margin contraction. No interim DPS was declared (1H21: HK$0.12), a disappointment.
Total revenue rose c.1.1% y-o-y to Rmb14.89bn. Weak demand from the China property sector weighed on all of China Lesso’s segments. Revenue from the main plastic pipe segment rose 1.5% y-o-y to Rmb12.76bn. This was behind the c.8% y-o-y growth we had forecasted for full year FY22. Plastic pipe revenue was driven by c.6.8% increase in ASP to Rmb11,408/ton (PVC +5%, non-PVC +11%). However, a 5% decline in plastic pipe sales volume (PVC -3%, non-PVC -9%) partially offset the ASP increase. Lesso’s building material segment saw a 3.1% y-o-y decline in revenue.
Total gross profit fell c.9.9% to Rmb3.94bn. Gross margin compressed 3.2ppts y-o-y to 26.5%, below our full year FY22 forecast of 28.8%. The main culprit was high-price raw materials purchased in 4Q21 which drove an increase in plastic pipe segment COGS. Net profit margin largely followed gross margin, compressing 3.6ppts to 8.7%.
We will have more updates after the results briefing Tuesday morning.
Currently we rate China Lesso BUY with HK$20.7 TP (under review).