Beijing New Building Materials Public Limited Company released its H1 2025 interim results, reporting revenue of RMB 13.56 billion, net profit attributable to shareholders of RMB 1.93 billion, and adjusted net profit of RMB 1.89 billion for the first half, representing year-over-year changes of -0.3%, -12.9%, and -12.4% respectively. For Q2 alone, the company achieved revenue of RMB 7.31 billion, net profit attributable to shareholders of RMB 1.09 billion, and adjusted net profit of RMB 1.07 billion, declining by -4.5%, -21.9%, and -21.5% year-over-year respectively. Q2 operating cash flow reached RMB 1.18 billion, down 42.7% from the same period last year.
**Q2 Gypsum Board Business Continues Under Pressure, International Operations Excel**
Q2 revenue growth turned negative at -4.5% year-over-year, declining from Q1's positive growth. By product segment, H1 2025 gypsum board and dragon bone systems generated revenues of RMB 6.68 billion and RMB 1.14 billion respectively, falling 8.6% and 10.7% year-over-year, indicating continued pressure on the gypsum board segment. Waterproofing membranes and waterproofing engineering achieved revenues of RMB 1.72 billion and RMB 200 million, with year-over-year changes of +0.6% and -1.8% respectively, demonstrating relatively stable performance in waterproofing operations. Coatings business generated RMB 2.51 billion in revenue, surging 40.8% year-over-year, primarily attributed to the low base effect as Carpoly was not consolidated in January-February 2024. Other businesses mainly comprising "gypsum board plus" products recorded revenue of RMB 1.31 billion, down 0.9% year-over-year.
Regionally, northern, southern, and western regions achieved revenues of RMB 4.20 billion, RMB 6.69 billion, and RMB 2.35 billion respectively, with year-over-year changes of -12.4%, +9.0%, and -5.2%. International operations delivered RMB 320 million in revenue, jumping 68.8% year-over-year.
**Gross Margins Under Pressure Amid Weak Demand**
H1 2025 gross margin reached 30.4%, declining 0.6 percentage points year-over-year. Gypsum board gross margin was 38.7%, down 0.9 percentage points year-over-year, likely due to continued price declines amid sluggish demand. Total expense ratio was 13.4%, up 0.6 percentage points year-over-year. Sales, administrative, and R&D expense ratios were 5.2%, 4.2%, and 3.9% respectively, changing by +0.7, +0.2, and -0.1 percentage points year-over-year. The increase in sales expense ratio was mainly due to Carpoly's consolidation. Net profit margin for H1 2025 was 14.6%, declining 2.0 percentage points year-over-year.
H1 2025 operating cash flow was RMB 960 million, down 52.9% year-over-year, primarily due to: (1) Carpoly's consolidation in 2024, where original shareholders repurchased some receivables, boosting 2024 H1 operating cash inflows, while Carpoly's credit policy in January-February led to negative operating cash flow during a period when it wasn't consolidated in the prior year; (2) decreased cash receipts from goods sales and services in H1 2025.
Q2 gross margin was 31.6%, down 1.2 percentage points year-over-year. Total expense ratio was 13.1%, up 0.8 percentage points year-over-year. Sales, administrative, and R&D expense ratios were 4.5%, 3.9%, and 4.6% respectively, increasing by 0.4, 0.4, and 0.2 percentage points year-over-year. Q2 net profit margin was 15.3%, declining 3.3 percentage points year-over-year.
**Coatings M&A Expansion and Continued International Growth**
In coatings, the company invested in constructing a 20,000-ton annual capacity industrial coatings production base. Zhejiang Daqiao was consolidated on February 28, 2025, enhancing industrial coatings market presence in East China and further enriching the coatings product portfolio. During H1 2025, production facilities in Tanzania and Uzbekistan continued achieving double-digit revenue and profit growth year-over-year. The Thailand facility with 40 million square meters annual gypsum board capacity has entered trial production phase. The Bosnia and Herzegovina project is progressing as planned.
**Earnings Forecast, Valuation and Rating**
Considering pressure on the gypsum board business, we have revised down our 2025-2027 net profit attributable to shareholders forecasts to RMB 3.879 billion, RMB 4.446 billion, and RMB 5.071 billion respectively (down 15%/17%/18% from previous estimates). As the leading player in the gypsum board industry with strong operational resilience in waterproofing and coatings businesses, we maintain our "Buy" rating.
**Risk Factors**: Weak downstream demand, slower-than-expected integration of coatings business, unexpected surge in raw material prices.
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