The company's performance is basically in line with the forecast, the price increment decreased in the first half of the year, and the gross profit per ton is basically flat. The key is to look at the synchronous landing of the physical workload of infrastructure after the arrival of the peak season in the second half of the year, and to be optimistic about the simultaneous rise in volume and price. Maintain the buy rating.

Support the main points of rating

The performance was basically in line with the forecast, and the cash expenditure increased with the rise in coal prices. In the first half of the year, the company achieved revenue of 16.845 billion yuan, an increase of 3.24%, and a net profit of 1.141 billion yuan, down 7.08%. The net cash flow of operating activities was 814 million yuan, down 74.34%. The cash change was mainly due to a year-on-year rise in coal prices and an increase of 2.435 billion yuan in cash paid for goods and services over the same period last year. The revenue in the second quarter was 11.877 billion yuan, an increase of 5.86%, while the net profit returned to the mother was 1.374 billion yuan, an increase of 7.41%.

Volume and price: price toughness basically flattens the rise in costs, and the decline in sales affects performance. The company realized cement clinker sales of 38.43 million tons in the first half of the year, down 9.57 million tons from the same period last year, down 19.9%. We estimate that the average price of cement and clinker in the first half of the year is 365 yuan / ton, up 70 yuan / ton and 21 yuan / ton compared with the second half of last year; the cost per ton is up 68 yuan from the same period last year, up 25 yuan from the previous year; gross profit per ton is up 1.70 yuan from the same period last year, down 4.0 yuan from the previous year. Overall, in the first half of the year, regional prices are basically stable and can pass on the rise in coal costs, with a small change in gross profit per ton, but the decline in demand leads to a greater decline in sales.

We estimate that the cash inflow of tons of cement clinker is 337.7 yuan, the cash outflow of tons is 250.2 yuan, and the net cash flow of tons is 87.50 yuan. The large increase in cash expenditure per ton was the main reason for the decrease in cash flow in the first half of the year.

Looking forward to the second half of the year, the key point is the landing of infrastructure. The growth rate of infrastructure investment remained high in the first half of the year, but many high-frequency indicators related to capital construction, including the operating rate of asphalt units, the working hours of excavators, cement shipments and many other indicators were lower than those of the same period in previous years, or it shows that the capital allocation of infrastructure investment is not good. We expect that with the recent strengthening of infrastructure promotion by the central government and the end of the peak season of hot and rainy weather, cement demand is expected to recover gradually.

Valuation

The company's performance is in line with expectations, but considering the weak demand in the industry, we downgrade our performance forecast. It is estimated that the company's income from 2022 to 2024 is 363.4 yuan, 372.5 yuan and 38.23 billion yuan, the net profit of returning home is 30.1,34.5 and 3.64 billion yuan respectively, and the EPS is 1.13,1.30,1.37 yuan respectively. Maintain the company's buy rating.

Main risks faced by rating

Coal prices continue to rise, the physical workload of infrastructure is less than expected, and real estate remains depressed.