4Q25 results significantly missed expectations; Goldman Sachs maintains a Sell rating on Weixing New Materials

Overview

This report is Goldman Sachs' review of Weixing New Materials' 4Q25 and full-year 2025 results. It notes that 4Q25 results were far below expectations, mainly due to broad-based weakness in retail, construction engineering, and municipal engineering demand. Although gross margin held up relatively well thanks to premium brand positioning, product mix optimization, and some price recovery, operating deleveraging, higher-than-expected administrative expenses, and lower-than-expected interest income all pressured earnings. Goldman Sachs maintains a Sell rating and lowers the 12-month target price to Rmb9.0.

Core views

The core view is that Weixing New Materials still has the advantages of a leading plastic pipe position, channel capability, product cross-selling, and high dividend payout, but short-term earnings risks are not yet fully reflected. The downturn in the property completion cycle, intensifying industry competition, delayed cost pass-through, and a weaker growth outlook make the current valuation look expensive relative to future growth. Goldman Sachs cuts 2026E EPS by 5%, keeps 2027E EPS unchanged, and introduces 2028E EPS of Rmb0.66 per share.

Analysis framework

The report analyzes 4Q25 revenue, channel and product performance, gross margin, expenses, profit, cash flow, dividends, 2026 operating guidance, pricing strategy, and valuation revisions, and links the target price to EV/GCI multiples, CROCI, and historical valuation levels.

Methodology notes

• Valuation MethodEV/GCI and P/E Cross-Check

  The target 2026E EV/GCI multiple is 2.0x, and the 12-month target price of Rmb9.0 implies 2025E/2026E EPS multiples of 16.2x/14.5x.

  Goldman Sachs uses an EV/GCI multiple below the long-term historical average of 3.3x because 2026E CROCI is expected to be about 16%, below the long-term average; the target P/E is also below the 3-year average of 19.4x to reflect the downgraded growth outlook.

• Factor FrameworkGS Factor Profile

  Evaluates stock characteristics through growth, financial returns, valuation multiples, and an aggregate percentile ranking.

  Growth is based on forward sales, EBITDA, and EPS growth; financial returns are based on ROE, ROCE, and CROCI; multiples are based on P/E, P/B, EV/EBITDA, and EV/FCF, while the aggregate percentile combines growth, returns, and valuation cheapness.

• M&A Probability FrameworkM&A Rank

  Weixing New Materials has an M&A Rank of 3.

  Goldman Sachs' M&A Rank 3 means the probability of becoming an acquisition target is low, at around 0%–15%, and it is typically not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Weixing New Materials (002372.SZ)

  Research target; one of the leading players in China's plastic pipe and residential in-building piping market.

  Strengths

  It has premium brand positioning, retail channel capability, product mix optimization capability, a net cash position, and a high dividend payout; waterproof coating, as a second core business, is expected to achieve double-digit growth in 2026.

  Weaknesses

  4Q25 revenue and profit were significantly below expectations, and major product lines including retail, construction engineering, municipal engineering, PPR, PE, PVC, and water purifiers all declined; operating deleveraging and expense pressure were evident.

  Comparison

  The target valuation is below the company's long-term historical average and 3-year average P/E, reflecting Goldman Sachs' view that the growth outlook has been materially downgraded.

  Risks

  The property completion cycle, low-price competition in the industry, raw material price volatility, and lagged price pass-through will affect earnings and valuation.

Key data

• 12-month target priceRmb9.00Previously Rmb9.50, cut by 5%.
• Current share priceRmb10.80Price as of the close on April 3, 2026.
• Implied downside16.7%Based on a target price of Rmb9.00 and a current price of Rmb10.80.
• 4Q25 revenueRmb2.02bn, -19% yoy15% below Goldman Sachs' estimate.
• 4Q25 gross margin40.2%, -0.4ppt yoy0.9ppt above Goldman Sachs' estimate.
• 4Q25 EBITRmb243mn, -30% yoy44% below Goldman Sachs' estimate.
• 4Q25 net profitRmb201mn, -39% yoy49% below Goldman Sachs' estimate.
• 4Q25 free cash flowRmb194mnOperating cash inflow of Rmb231mn, capital expenditure of Rmb37mn.
• Year-end net cashRmb1.18bnAs of the end of 4Q25.
• 2025 payout ratioAbout 96%Final dividend of Rmb550mn plus interim dividend of Rmb157mn.
• 2026 revenue targetRmb57bn, about +6% yoyManagement target; Goldman Sachs expects about +5% yoy.
• 2026 overseas growth target17%–18%Management identifies overseas markets as a key growth driver.

Impact & implications

The report is negative for investment implications: weak near-term demand has spread from retail to engineering and municipal channels, and earnings elasticity is weaker than revenue elasticity, indicating rising pressure on operating leverage and expense control. Gross margin resilience and cash dividends provide some defense, but they are not enough to offset demand, competition, and valuation pressure from the property chain. If raw material cost increases cannot be passed through in time, 1Q profit margins remain uncertain.

Risks

• Stronger-than-expected government stimulus could lead to a smoother property completion cycle and improve demand.
• The 'product + service' strategy could be replicated faster than expected in new product cross-selling, supporting growth.
• The company's market share expansion in China's plastic pipe market could be stronger than expected, supporting revenue and profit.
• Unexpected declines in raw material prices such as PP, PE, and PVC could improve costs and gross margin.
• If competitors exit low-price competition or industry consolidation accelerates, the company's earnings resilience could be better than Goldman Sachs expects.

What to watch

• Whether the 2026 revenue target of Rmb57bn and about 6% yoy growth can be achieved.
• Whether the retail, construction engineering, and municipal engineering channels recover from the weakness seen in 4Q25.
• The pace of order conversion and revenue recognition toward the 17%–18% overseas growth target.
• The execution of price increases in waterproof coating and the double-digit growth target.
• After raw material costs rise, whether cost-plus pricing can be passed through to end-market prices in time.
• Whether administrative expenses and operating leverage improve, especially EBIT margin and net margin recovery.
• Whether cash flow and the roughly 96% payout ratio remain sustainable.