3Q25 results missed our expectations

Beijing New Building Materials (BNBM) announced its 1–3Q25results: Revenue fell 2% YoY to Rmb19.9bn and net profitattributable to shareholders fell 18% YoY to Rmb2.6bn. In 3Q25,revenue fell 6% YoY to around Rmb6.3bn and attributable netprofit fell 29.5% YoY to about Rmb657mn. The results missed ourand market expectations, mainly due to pressure on its gypsumboard business and sharper-than-expected declines in prices andprofit margins.

Falling demand for gypsum board weighs on earnings;revenue from waterproofing and coatings businessesmaintains positive YoY growth. Due to market demandweakness, sales volume and average selling price (ASP) ofgypsum boards declined YoY in 3Q25. We estimate gypsumboard sales volume fell 2% YoY, and ASP dropped approximately7% YoY. Pre-tax gross margin fell 2.3 ppt YoY to 27.8% in 3Q25,with the core business gross margin likely down 4 ppt YoY. Thewaterproofing and coating businesses maintained solidperformance, achieving positive YoY growth in 3Q25. Theexpense ratio increased 1.55ppt YoY to 16.2% in 3Q25, mainlydriven by higher sales and G&A expense ratios (+0.5ppt and+1.0ppt YoY). Net margin fell 3.4ppt YoY to 10.3% in 3Q25.

The gearing ratio declined YoY. Operating cash flow decreased43% YoY to Rmb1.5bn in 1–3Q25, mainly due to the high baseeffect from the consolidation of Carpoly’s financial statements inthe prior year. The cash-to-revenue ratio fell 3ppt YoY to 83% in1–3Q25. In 3Q25, accounts receivable days increased by fivedays YoY to 60 days, while accounts payable days rose by sevendays to 52 days. Inventory days remained stable at 52 days. Thegearing ratio fell 4ppt YoY to 24% in 3Q25.

Trends to watch

We expect improved performance as operating pressure inthe gypsum board business eases and the waterproofingand coating businesses gain momentum. Industry-wide pricesface pressure from sluggish market demand and homeowners’tight control over decoration budgets. Meanwhile, the firm’s midrangeand high-end brands are experiencing growing competitivepressure, weighing on near-term profit margins. However, thefirm’s gypsum board sales volume has fluctuated less than theindustry average, supported by optimized marketing strategies,deeper penetration of existing products, and an improved productmix. We recommend monitoring the stabilization of its corebusiness and the strengthening competitiveness of itswaterproofing and coatings operations.

Financials and valuation

As the gypsum board business is under pressure, we lower our2025 and 2026 net profit forecasts by 16% and 33% to Rmb3.3bnand Rmb3.6bn. The stock is trading at 12x and 11x 2025e and2026e P/E. We maintain an OUTPERFORM rating and cut ourtarget price 22% to Rmb28, implying 15x and 13x 2025e and2026e P/E and offering 19% upside.

Risks

Sharper-than-expected decline in gypsum board demand;disappointing growth of coatings and waterproof materials.