Revenue remained relatively stable, and the pressure on performance was obvious. In 2022, the company achieved operating income of 34,544 billion yuan, -4.94% year-on-year, net profit of 1,358 million yuan, +-51.69%, the basic EPS was 0.513 yuan/share, and the proposed 10 disbursements were 1.5 yuan (tax included), in line with previous performance forecasts. Among them, Q4's revenue for a single quarter and net profit of Fumo were 7.192 billion yuan and -277 million yuan respectively, compared with -29.03% and -127.96%, respectively. The pressure on performance throughout the year was mainly due to factors such as repeated epidemics and the downturn in the real estate industry, which led to a decline in cement clinker sales. At the same time, prices of raw fuel materials rose sharply year on year.
Profit levels are under pressure, and the aggregate business is expanding smoothly. The company sold 86.88 million tons of cement clinker throughout the year, compared to -12.9%. We estimated that the company's cement clinker tonne price/ton cost/ton gross profit was 339.9/272.1/67.8 yuan respectively, +19.6/+36.9/-17.3 yuan respectively. Due to the investment of production capacity in the aggregate business, annual aggregate business revenue was 1,157 million yuan, +18.17% year on year. During the reporting period, the company's expense ratio was +0.87pct to 15.52% over the same period. Among them, the sales/management/finance/R&D expenses ratio was -0.08/+0.75/+0.15/+0.05pct to 1.51%/11.72%/1.95%/0.33%, respectively.
Affected by the price range and cost side, net operating cash flow for the year was 2,269 million yuan, -63.5% year on year. At the end of the reporting period, the company's balance ratio was 47.43%, up 3.42 pct from the end of the previous year. There is still some room for decline in the future.
Strengthen regional cement market integration and actively improve the industrial chain layout. During the reporting period, the company and Tianshan Co., Ltd. invested in the establishment of Liaoning Jinzhong Cement Group Co., Ltd., which is expected to promote the optimization and upgrading of the cement industry in Liaoning and even Northeast China in the future and improve the efficiency of business operations. In terms of the industrial chain, the company completed the equity acquisition of Shanxi Environmental Protection, the civil construction of the Panshi Building Materials Industrial Park project and the installation of mainframe equipment. At the same time, it completed the construction of new aggregate projects in Tongchuan, Panshi and Jiaozuo, adding 13 million tons of aggregate production capacity, completing the construction of more than 10 environmental disposal projects in Hebei, Shanxi and other regions, adding 570,000 tons of hazardous (solid) waste disposal capacity, taking its comprehensive competitive strength to the next level.
Risk warning: supply growth exceeds expectations; demand falls short of expectations; cost increases exceed expectations.
Investment advice: The supply and demand pattern is expected to improve and maintain the “buy” rating.
As a leading cement enterprise in the northern region, the company actively promotes regional industrial integration, strengthens collaborative development, promotes the improvement of supply and demand patterns, and at the same time strengthens the layout and development of aggregate and environmental protection businesses in the industrial chain. Under the overall tone of “steady and progressive” work throughout the year, cement demand is expected to maintain a gradual recovery trend throughout the year. Considering that the overall cement production capacity in the northern region is still overcapacity, the profit forecast is adjusted in conjunction with the company's business plan. It is estimated that 2023-25 EPS will reach 0.72/0.91/1.01 yuan/share (previous value of 1.26/1.31 yuan/share before 23-24), and the corresponding PE is 12.0/9.5/8.6x, maintaining the “buy” rating.