Summary of Oriental Yuhong's NDR Call and 3Q25 Results Company Overview - **Company**: Oriental Yuhong (002271.SZ) - **Industry**: Construction Chemicals, specifically waterproofing materials Key Points from the Call 1. 3Q25 Performance Highlights - **Topline Growth**: - 3Q25 saw a positive growth of +9% year-over-year (yoy) for the first time since 3Q23, improving from a decline of high-teens% in 1Q25 and narrowing to -SD% in 2Q25 [3][5] - Project distributor sales reached Rmb3.4 billion, up +3% yoy, attributed to market share expansion and demand from mega infrastructure projects [5] - Retail sales increased to Rmb2.3 billion, up +6% yoy, supported by channel and product expansion [5] - Direct sales surged to Rmb1.1 billion in 3Q25 from Rmb341 million in 3Q24, driven by overseas and specialty domestic business growth [5][6] 2. Product Performance - **Waterproof Membrane Sales**: Grew +5% yoy, with volume growth of +12% offset by soft average selling price (ASP) [9] - **Waterproof Coatings**: Achieved +15% yoy growth, primarily driven by ASP increases [9] - **Special Mortar Business**: Recorded Rmb3.3 billion in sales revenue and 8 million tons in sales volume for 9M25, exceeding last year's full-year level [9] 3. Profitability and Impairment - **Gross Profit Margin (GPM)**: Declined by -4.1 percentage points yoy in 3Q25 due to ASP pressure, incentive rebates, and unfavorable product mix [9] - **Impairment**: High impairment in 3Q25 was due to increased discounts on property collateral disposals, with an expected impairment ratio of 40% by year-end [9][10] 4. Cash Flow and Capital Allocation - **Operating Cash Flow**: Turned positive for the first time in ten years for 9M25, with accounts receivable declining -19% yoy by end-3Q25 [12] - **Capital Expenditure (Capex)**: Focused on overseas factories and selective acquisitions, with limited domestic capex primarily for upstream mine acquisitions [12] 5. Industry Outlook - **2026E Expectations**: Management is optimistic about industry demand bottoming out, with expectations for project sales to stabilize and continued market share expansion [12][13] - **Overseas Business Growth**: Anticipates organic overseas sales to double yoy in 2026E, with contributions from newly acquired companies in Chile and Hong Kong [12][13] 6. Risks - **Key Risks Identified**: - Weaker-than-expected construction activities - Unexpected increases in raw material prices - Impairment losses related to receivables from risky developers [15][17] 7. Investment Thesis - **Market Position**: Oriental Yuhong is the largest producer of waterproofing materials in China, with strong leadership and competitive advantages in a fragmented market [16] - **Long-term Potential**: As the property market stabilizes, Yuhong is positioned to become a one-stop solution provider for construction chemicals [17] 8. Financial Projections - **Price Target**: Rmb15.50, with an upside of 18.5% from the current price of Rmb13.08 [18] - **Market Cap**: Rmb29.7 billion / $4.2 billion [18] This summary encapsulates the critical insights from Oriental Yuhong's recent NDR call and 3Q25 results, highlighting the company's performance, outlook, and strategic direction in the construction chemicals industry.