Introduction to this report:
The company released its 2022 annual report, which is in line with market expectations. Profits have fallen back to a low level in 2016, and the environmentally friendly orthopedic business is expected to gain strength later.
Key points of investment:
Maintain an “increase in holdings” rating. Revenue of 34.544 billion was achieved in '22, down 4.94% from the previous year, and net profit of the mother was 1,358 million, down 51.69% from the previous year, in line with market expectations. Considering the uncertainty of real estate demand, we lowered the 2023-2024 EPS forecast to 0.45 and 0.56 (-0.55, -0.53) yuan, and added the 2025 EPS forecast by 0.69 yuan. According to the average valuation of 0.87xPb for comparable companies in '23, the target price remains 10.00 yuan.
Sales fell nearly 13% year over year in '22. Sales of cement clinker were about 86.88 million tons in '22, of which Q4 sold about 1.9 million tons, down about 9% from the previous year. Entering 2023, we believe that under profit pressure, production execution in the North and Northeast China regions is relatively good. The overall market only began to recover after mid-March, and it is expected that the company's 23Q1 sales may still drop slightly.
Earnings fell back to 2016 lows. We estimate that the company's average annual factory price was 342 yuan/ton, an increase of 20 yuan/ton over the previous year, but the increase on the cost side leveled off the price increase, and the gross profit per ton fell 17 yuan/ton to 70 yuan/ton year over year. Among them, the average price of leaving the factory in Q4 was about 330 yuan/ton, while production and shutdown costs increased due to high coal prices and increased production stoppages, and the net profit loss per ton was nearly 20 yuan/ton. Considering that the North and Northeast China region fully entered the winter peak and ceased production in November '22, and production only resumed in mid-March '23, it is estimated that the company's 23Q1 loss is still a probable event.
The environmentally friendly aggregate business is expected to gain strength later. The company further extended the aggregate industry chain, adding 13 million tons of aggregate production capacity. After the company completed the integration with Jinyu cement assets in December '21, its hazardous waste disposal capacity ranked among the top five in the country, with a market share of around 12%. By the end of the reporting period, the company's hazardous waste disposal capacity reached 5.25 million tons/year. During the reporting period, 570,000 tons of hazardous (solid) waste disposal capacity were added, and the waste disposal capacity was further enhanced.
Risk warning: Macroeconomic downturn, raw material costs rising.