Description of the event

The company disclosed its 2023 quarterly report: revenue was about 22.379 billion yuan, a decrease of 20.83% over the previous year; loss of net profit attributable to shareholders of listed companies was about 1,231 million yuan; and basic earnings loss per share was 0.142 yuan.

Incident comments

Demand was under pressure, and there was a loss in performance.

The core demand for cement comes from the real estate and infrastructure side. Looking at it from the top down dimension, 2023Q1 is under significant overall pressure. In 2023Q1, the country invested 2597.4 billion yuan in real estate development, a year-on-year decrease of 5.8%: the housing construction area of real estate development enterprises was 764.57 million square meters, a decrease of 5.2% over the previous year. The new housing construction area was 241.21 million square meters, a decrease of 19.2%. Although there has been growth on the infrastructure side, the growth rate has slowed down from 2022, and there is still a time lag between infrastructure projects and physical volume. Specifically, infrastructure investment in January-March 2023 (excluding electricity, heat, gas and water production and supply industries) increased 8.8% year-on-year.

Looking at the cement industry level, from January to March 2023, the country produced 402 million tons of cement, an increase of 4.1% over the previous year. In March, the country produced 206 million tons of cement in a single month, an increase of 10.4% over the previous year. On the price side, the national average cement price in 2023Q1 was 435 yuan/ton (2022/Q1 was only 516 yuan/ton in the same period), down 81 yuan/ton from the previous year.

As an industry leader, we determine that in the face of overall demand pressure, the company's sales volume and prices will drop by a certain margin in 2023, ultimately achieving a loss of 1.23 billion yuan in the 23Q1 quarter.

Actively lay out aggregates to create new growth poles. The aggregate business has strong resource attributes, and the company initially achieved scale through a series of layouts a few years ago. The annual sales volume of aggregates in 2022 was 115 million tons, an increase of 34% over the previous year. Mainly, the company's new production capacity was gradually put into production and release in recent years; it is expected that 2023 will usher in further high growth. At the same time, the profit level of aggregates is higher than that of cement, and the volume of the company's aggregate business is also expected to bring a new support point to the company's profits.

From the perspective of steady growth, there is a high degree of certainty about marginal recovery on the infrastructure side. As far as cement is concerned, demand will remain the core fluctuation item in 2023. We believe that the fundamentals of the cement industry are at the bottom, and the height of the rebound on the right side depends on the recovery in demand. We expect the marginal recovery in demand in 2023 to provide the industry with some price elasticity.

It is estimated that the 2023-2024 performance will be 4,35.2 billion, and the corresponding PE will be 17,14 times, and the purchase rating.

Risk warning

1. The recovery in demand fell short of expectations:

2. The progress of epitaxial materials such as aggregates is slow.