The performance is in line with expectations, and the profit decline is less than that of peers.
Jidong cement achieved a net profit of 1.14 billion yuan in the first half of the year,-7.1% compared with the same period last year, which is basically in line with Bloomberg's consensus forecast (1.11 billion yuan). The decline in the company's home net profit in the first half of the year is smaller than that of its peers, mainly due to: 1) the acquisition of a minority stake in an important holding subsidiary was completed at the end of 2021, and its interest in it further increased; 2) the price in the regional market where the company is located is more resilient in half a year; excluding the impact of the thickening of subsidiary rights and interests, the total profit in the first half of the year is-28.7%, which is also less than that of most major cement enterprises. We lowered the company's annual return net profit forecast for 22-23-24 by 23%, 3%, 3%, and the target price by 13.1% to 10.43 yuan, based on 8x 2022-2023 PE (EPS average: 1.3), a 20% discount to the historical average 10xPE of the company, because the market demand outlook of the company is relatively weak. We believe that the most difficult time in the relationship between supply and demand may have passed, and the stock price basically reflects the previous decline in cement prices, and the company's pace of improving competitiveness through optimizing structure and strengthening management is still solid. Maintain "buy".
Sales decline, prices slow down, the northern market is more resilient
The decline in cement business sales combined with a decline in collaborative disposal revenue was the main drag on the company's profit decline in the first half of the year. The company achieved cement clinker sales of 38.4 million tons in the first half of the year,-20% of the same period last year. Achieve a gross profit of 84 yuan per ton, + 7 yuan per ton compared with the same period last year. The year-on-year improvement in gross margin per ton is mainly due to higher average selling prices (ASP + 70 yuan / ton to 365 yuan / ton). From a quarterly point of view, 2Q22's ASP fell 11 yuan / ton to 362 yuan / ton, reflecting that the northern market was more resilient in the first half of the year despite the same demand challenges. The revenue of collaborative disposal in the first half of the year was-9.3% to 700 million yuan compared with the same period last year, with a gross profit margin of 32.6%, year-on-year-18.2pp, month-on-month-5.9pp.
The marginal improvement of supply and demand is expected to bring profit repair, and the stock era will continue to optimize the structure, although the recovery of real estate investment demand is still faced with many obstacles, such as the depressed sales market and the unsolved liquidity dilemma of real estate enterprises. but we believe that the most difficult time of supply and demand is over. With the arrival of the peak season, further investment in infrastructure investment, the continuation of off-peak production in cement enterprises, and the supply disturbance caused by power cuts, we expect cement prices to achieve a marginal recovery in the second half of the year, promoting the company's profit recovery. In the first half of the year, the company realized the start of the rock cement upgrade project, the delivery of the Fulong cement acquisition project and the promotion of aggregate projects such as Tongchuan, Panshi and Jiaozuo, and continued to practice the optimization of market layout, industrial structure and resource endowment. We believe that this will help to further consolidate the company's competitiveness.
Risk hint: the real estate policy is stricter than expected, and the sinking effect of financial funds is weaker than expected.