Sobute New Materials (SH:603916) HTSC·2025-10-29 08:47Investment Rating - The report maintains a "Buy" rating for the company [6] Core Views - The company reported Q3 revenue of 904 million RMB, a year-over-year decrease of 0.92% and a quarter-over-quarter decrease of 8.82%. The net profit attributable to the parent company was 30.87 million RMB, showing a year-over-year increase of 21.94% but a quarter-over-quarter decrease of 20.67%, slightly below previous expectations due to rigid expense performance and declining revenue [1][6] - For the first three quarters of 2025, the company achieved a cumulative revenue of 2.577 billion RMB, a year-over-year increase of 4.10%, and a net profit of 94.12 million RMB, a year-over-year increase of 19.73% [1] - The demand is supported by key infrastructure projects in the western region, such as the "Yaxia" hydropower station, and the price of water-reducing agents improved quarter-over-quarter in Q3 [1][2] Summary by Sections Revenue and Profitability - In the first nine months of 2025, the company’s high-performance water-reducing agents, efficient water-reducing agents, and functional materials achieved sales revenues of 1.316 billion, 31 million, and 566 million RMB, respectively, with year-over-year changes of +0.9%, -13.7%, and +22.2% [2] - The average selling prices for these products showed year-over-year declines of -1.73%, -10.18%, and -10.35%, but the prices for high-performance and efficient water-reducing agents improved quarter-over-quarter by +3.6% and +7.8% [2] - The gross profit margin for the first three quarters of 2025 was 33.14%, an increase of 0.25 percentage points year-over-year, while Q3 gross profit margin was 30.15%, with year-over-year and quarter-over-quarter changes of +0.65% and -5.35% respectively [2] Expenses and Cash Flow - The company’s operating expenses increased by 5.3% year-over-year to 682 million RMB, with a period expense ratio of 26.47%, up 0.3 percentage points year-over-year [3] - The net cash flow from operating activities for the first three quarters of 2025 was 179 million RMB, a year-over-year decrease of 16.54% [3] Profit Forecast and Valuation - The company’s net profit forecasts for 2025-2027 are 164 million, 206 million, and 241 million RMB, respectively, with a three-year compound growth rate of 35.94% [4] - The target price is set at 13.44 RMB, based on a 28x PE valuation for 2026, reflecting the expected improvement in demand for construction materials due to the recovery in real estate sales [4]