Event: the company disclosed its mid-2022 report that its operating income in the first half of the year was 5.844 billion yuan, down 1.79% from the same period last year, and its net profit was 492 million yuan, down 40.53% from the same period last year. The comments are as follows:

The income drops slightly, the performance stage pressure is obvious. In the first half of 2022, the company's operating income fell 1.79% year-on-year to 5.844 billion yuan, net profit decreased 40.53% to 492 million yuan, and non-net profit decreased 36.75% to 472 million yuan. Of this total, Q2 operating income fell 4.08 per cent year-on-year to 3.107 billion yuan, net profit from home fell 43.70 per cent to 283 million yuan, and non-net profit decreased 42.76 per cent to 269 million yuan. 1) Trade and aggregate business are growing better. In terms of products, the revenue of cement / concrete / new wall materials / trade / aggregate business in the first half of the year was 28.21112.05pm, 0.2819pm, 154,000,000 yuan, respectively, year-on-year changes-18.32% Universe 3.29% Universe 54.83% 40.92% Universe 112.57%. 2) the impact of fuel prices is greater. In the first half of the year, the gross profit margin decreased by 8.75pct to 19.58% compared with the same period last year, and the net profit margin decreased by 7.40pct to 11.67% compared with the same period last year. Among them, the gross profit margin of cement / concrete / trade is 30.77%, 16.17% and 0.34% respectively, which changes respectively over the same period of last year-10.69pct/-0.80pct/+0.21pct. The cement manufacturing process is greatly affected by the price of coal and electricity. The insufficient supply of coal and the "double control" policy of energy consumption in the first half of the year directly led to the rise of the price of coal and electricity and pushed up the cement manufacturing cost of the company. 3) the net operating cash flow changes from positive to negative. In the first half of the year, the net operating cash flow of the company was-82.0913 million yuan, from positive to negative compared with the same period last year, mainly due to the decline in cash received from selling goods and providing services compared with the same period last year; the net cash flow generated by investment activities was-483 million yuan The net cash flow generated by fund-raising activities was-72.1779 million yuan, mainly due to a combination of 600 million yuan of corporate bonds issued in the first half of this year and a year-on-year increase in cash payments for debt repayment.

The annual production capacity of Jiangxi cement faucet, cement and clinker is 26 million tons and 13.75 million tons respectively. The company has strong comprehensive strength in cement enterprises. According to the data of China cement Association, the company ranked 10th among 23 listed cement companies in 2022. The company is a leading regional cement enterprise based on Jiangxi market, with good brand awareness and strong regional competitive advantage. according to the data of the National Bureau of Statistics, the cement output of Jiangxi Province in 2021 is 101 million tons, of which the company's cement output accounts for more than 20%. In terms of production capacity, as of the first half of 2022, the company has 11 clinker production lines, 60 commercial concrete production lines and 32 cement mills. The production capacity of clinker, cement, commercial concrete, aggregate and new brick is 1375 million tons / year, 2600 million tons / year, 22 million cubic meters / year, 1400 million tons / year and 680 million standard blocks / year respectively. In terms of capacity utilization, as of March 2022, the production capacity utilization rate of cement / clinker / commercial concrete / new brick was 94.78% 122.62% 32.44% 88.56% respectively. The cement capacity utilization rate of the company is relatively stable, the clinker capacity utilization rate is still at the full load level, the new brick capacity utilization rate decreases with the reduction of product output, and the concrete capacity utilization rate is still low, but it is in line with the overall characteristics of the industry.

In the second quarter, some subsidiaries stopped production affected by the epidemic, and there is much room for improvement in profits in the second half of the year after resuming work and production. On April 29, 2022, an announcement was issued that affected by the sudden epidemic situation of COVID-19 in Wannian County, Shangrao City, Jiangxi Province, some subsidiaries in Wannian County, such as the Wannian cement Factory of Jiangxi Wannianqing cement Co., Ltd., Jiangxi Wannianqing Commercial concrete Co., Ltd., and Jiangxi Wannianqing Mining Co., Ltd., have temporarily suspended work and production in accordance with the relevant epidemic prevention and control policies. The above-mentioned enterprises are cement (including clinker), commercial concrete and aggregate production enterprises, all of which are wholly owned subsidiaries of the company. The total operating income in 2021 accounts for about 14% of the company's total operating income, and the total operating profit accounts for about 27% of the company's total operating profit. Net profit accounts for about 39% of the company's net profit. The temporary shutdown of the above-mentioned subsidiaries is expected to have an adverse impact on the company's short-term operating results, but the company has adjusted its production and operation strategy in time, co-ordinated the transportation and warehousing of cement, clinker and raw materials, and made purchasing and sales related work arrangements or adjustments to minimize the adverse impact. On May 18, the company announced that from 00:00 on May 18, 2022, Wannian County will lift the global static management (except the designated closed and controlled areas), and the subsidiaries in Wannian County have the conditions for resuming work and production, and will gradually resume work and production in an orderly manner.

Investment advice: the performance is under pressure in stages, the production capacity is sufficient and optimistic about the follow-up growth, and maintain the holding rating. It is estimated that the company's net profit for 2022-2024 will be 12.6,14.6 and 1.53 billion yuan respectively, a year-on-year change of-21%, 16% and 5%, corresponding to a price-to-earnings ratio of 6, 6 and 5 times PE. One of the leading enterprises in Jiangxi Province, the profitability has improved steadily; the production capacity has increased steadily, reducing costs and increasing efficiency to enhance competitiveness; the company's gross profit margin, ROE industry leadership, equity incentives to set higher income growth targets.

Risk tips: substantial increase in coal prices, higher or higher than expected raw material prices; weak real estate start data, lower downstream demand or lower than expected; repeated environmental protection policies; intensified competition in the industry, etc.