Introduction to this report:

The company published its 2022 annual report. Impairment losses and calculation of employees' on-call remuneration affected profits and maintained the increase in holdings rating.

Key points of investment:

Maintain an “increase in holdings” rating. Revenue reached 11.281 billion yuan in '22, a year-on-year decrease of 20.58%, and Guimu's net profit was 388 million yuan, a year-on-year decline of 75.64%, lower than market expectations. Considering that real estate demand is yet to recover, we lowered the 2023-2024 EPS to 0.59 (-0.56) and 0.77 (-0.68) yuan, added the 25-year EPS forecast by 0.96 yuan, and maintained the target price of 11.50 yuan.

Cement sales fell 14% in 2022. The company sold 21.18 million tons of cement in 2022, a year-on-year decrease of 14.2%, higher than the national decline of 10.5%; among them, Q4 sold about 5.3 million tons of cement, a year-on-year decrease of 20%. Our judgment is mainly that the company, as the leader in Jiangxi, played a leading role in cutting off production in order to maintain market balance. 2023Q1 According to our judgment, the company's sales have resumed single-digit growth, and sales are expected to recover moderately throughout the year.

Q4 operating margins were marginal, and profitability returned to 2015. In 2022, the company's average annual factory price was about 295 yuan/ton, a year-on-year decrease of nearly 40 yuan/ton, and the gross profit per ton was about 52 yuan/ton. Among them, the average factory price of the company's Q4 was about 285 yuan/ton, an increase of 30 yuan/ton over the previous month, but due to the impact of the wrong peak and the shutdown of production, there was an increase on the cost side. At the same time, the remuneration payable by employees on duty was calculated, which led to a significant increase in management expenses. Excluding the impact of rising non-operating expenses, it is estimated that the company's net profit per ton was 10 yuan/ton, and profitability returned to 2015, when the entire industry lost money.

The Q4 quarterly losses were mainly due to impairment losses and the calculation of employees' on-call remuneration. The company lost 179 million in Q4, but looking at the split, the company's Q4 fair value change loss was 48 million (investment and financial management), and asset impairment losses amounted to 123 million. On the other hand, the company's management expenses increased sharply by nearly 170 million yuan year on year in Q4, and the annual management expenses increased 29% year on year. The main Q4 focused on accounting for the long-term remuneration payable by employees waiting for work. If you exclude this, it affects earnings of around 100 million in a single quarter.

Risk warning: The extension of the industrial chain falls short of expectations, and there is a risk that coal prices will rise.