Key points of investment

In 2022, the company achieved a total revenue of 132,581 billion yuan, or -22.03% year on year. This was mainly due to the 21.67% and 29.33% year-on-year revenue of cement clinker and concrete, respectively. In 2022, cement sales volume and price fell sharply. By product, the company's revenue from cement clinker, concrete, aggregates and other businesses achieved operating income of 132,581 billion yuan, 89.184 billion yuan, 34.321 billion yuan, and 5.504 billion yuan respectively, with year-on-year changes of -21.67%, -29.33%, +31.39%, and +6.09%, respectively.

Analysis of ton indicators: In 2022, the average tonne price of the company's cement clinker was 328 yuan, down 8.45% from the previous year; the tonne cost was 281 yuan, an increase of 9.43% over the previous year; gross profit of tons was 47 yuan, a decrease of 53.62% over the previous year. This is due to a 14.44% drop in cement clinker sales in 2022, while the company's coal and electricity costs rose year on year.

The company achieved a comprehensive gross profit margin of 16.06% in 2022, compared to -8.89pct last year. By product, the gross profit margins of the company's cement clinker, concrete, aggregates and other businesses were 14.37%, 13.98%, 47.44%, and 29.93%, respectively, compared to -13.99 pct, -0.73 pct, +1.13 pct, and -0.18 pct, respectively.

In 2022, the company achieved a net sales interest rate of 3.83%, down 4.95pct from last year; the cost rate for the period was 11.62%, compared to +1.15pct over the same period. The sales expense ratio was 1.26%, down 0.36pct from the previous year; the management expense ratio was 5.54%, up 0.51 pct from the previous year, and the management expenses were -14.19%; the R&D expense ratio was 1.44%, up 0.38 pct year on year, R&D expenses -4.41% year on year; the financial expense ratio was 3.38%, up 0.62pct year on year, and financial expenses +6.04% year on year.

Asset impairment loss plus credit loss in 2022 was -242 million yuan, compared to the same period last year - -4,462 million yuan, of which credit impairment loss was -478 million yuan, compared to the same period last year - 1,829 million yuan, mainly due to a decrease in bad debt losses and other bad accounts receivable losses. Asset impairment losses amounted to $236 million compared to the same period last year, mainly due to loss of goodwill impairment and reduction in impairment loss of fixed assets.

The company's net operating cash flow in 2022 was 15.252 billion yuan, -46.34% year on year; net operating cash flow per share was 1.76 yuan, a decrease of 1.52 yuan/share over last year. Net cash flow from investing activities was $14.232 billion, up 26.30% year on year; net cash flow from fund-raising activities was $5.234 billion, up 45.67% year on year.

Profit forecast and rating: We adjusted the company's forecasted net profit for 2023-2025 to be 3.85 billion yuan, 4.433 billion yuan, and 5.106 billion yuan respectively. The PE corresponding to the closing price on March 27 was 20.1 times, 17.5 times, and 15.2 times respectively, maintaining the “increase in holdings” rating.

Risk warning: demand in the real estate infrastructure market is declining; international macroeconomic fluctuations; prices of raw materials and fuel have fluctuated greatly; repeated epidemics have prevented cement from leaving the factory under traffic restrictions.