Results Review

3Q25 results largely in line with our expectationsWeixing New Building Materials (Weixing NBM) announced its1–3Q25 results: Revenue fell 11% YoY to Rmb3.37bn, and netprofit attributable to shareholders fell 14% YoY to Rmb0.54bn. In3Q25, revenue fell 10% YoY to around Rmb1.29bn, andattributable net profit fell 5.5% YoY to roughly Rmb269mn. Thefirm's results are largely in line with our expectations.

Challenges in the operating environment persisted; YoYdecline in revenue narrowed. In our view, demand forpipelines remained weak, and external operating conditionscontinued to post challenges. However, the YoY decline in thefirm’s revenue slightly narrowed, mainly because the firm'sefforts in repricing for its premium pipeline products partiallypaid off and declines in its retail sales of pipelines narrowed.

The firm's gross margin remained largely flat YoY butimproved QoQ. In 3Q25, blended gross margin fell 0.1ppt YoYand rose 2.5ppt QoQ to 43%, possibly due to falling rawmaterial prices for some products and the firm's adherence tothe positioning and sales of high-end products.

Expense ratios edged up YoY. In 3Q25, the firm's overallexpense ratio rose 2.8ppt YoY to 22.5%. Specifically, its selling,G&A and financial expense ratios rose 0.7ppt, 0.7ppt and 1.1pptYoY. In addition, investment income reached about Rmb60mn in3Q25, which boosted the firm’s earnings in 3Q25.

Cash flow remained strong. In 3Q25, the firm's net operatingcash flow reached Rmb367mn, with the net operation cash-torevenueratio rising 2.7ppt YoY to 109%. Its capex fell 26% YoYto Rmb67mn, and its free cash flow stood at Rmb0.3bn.

Trends to watch

Operations of home decoration and engineering pipebusinesses still faced challenges; the firm focuses onquality and is exploring new product categories. In 2026, webelieve demand for pipes used in home decoration may remainunder pressure, while the engineering pipeline segment willlikely be constrained by funding for infrastructure projects,posting external challenges to Weixing NBM's operations.

However, the firm focuses on repricing for premium products,continues to enhance product competitiveness via rollout of newproducts, and continues to upgrade business models, whichhelp it maintain relatively stable revenue and earnings.

Additionally, given its continuous expansion of waterproofingbusiness and optimization of water purification business models,we think these areas will likely contribute new earnings growthdrivers going forward.

Financials and valuation

We maintain our 2025 and 2026 EPS forecasts at Rmb0.54 andRmb0.60, and the stock is trading at 19.1x 2025e and 17.1x2026e P/E. We maintain an OUTPERFORM rating and our TPof Rmb14.0, implying 26.0x 2025e and 23.3x 2026e P/E andoffering 36% upside.

Risks

Sharper-than-expected decline in demand from completedproperty projects; disappointing new business expansion.