Events:
Evergreen released the third quarterly report of 2022: in the first three quarters of 2022, the company achieved operating income of 8.386 billion yuan, down 12.95% from the same period last year; the net profit attributed to shareholders of listed companies was 567 million yuan, down 49.79% from the same period last year.
Main points of investment:
The demand for cement in the region was weak in the first three quarters, and rising costs weighed on profits. The cement market was weak in the first three quarters of 2022, and the company's Jiangxi region was affected by the decline in overall demand in East China, resulting in poor short-term demand and greater downward pressure, while coal prices rose and profits were temporarily under pressure.
From January to September 2022, national cement production fell 12.5% year on year. In 2022, national cement production rose 1% year on year, and market demand slowly rebounded. During the reporting period, the company realized operating income of 8.386 billion yuan, down 12.95% from the same period last year, and realized net profit belonging to shareholders of listed companies of 567 million yuan, down 49.79% from the same period last year. During the reporting period, the company's holdings of stocks and securities suffered floating losses, and the fair value of financial assets declined more, affecting the consolidated net profit. The cost of coal is high, and the company's gross profit margin and net profit margin fell by 7.65pct and 7.16pct to 18.13% and 9.34%, respectively.
Demand is expected to recover gradually, and the pattern of regional supply and demand is relatively stable. In July and August, the demand of domestic cement market was affected by high temperature, typhoon and other bad weather, as well as the impact of epidemic recurrence in some areas, which maintained a weak operation, and prices showed a trend of shock adjustment. As the hot weather is coming to an end and the construction season is approaching, the speed of construction is expected to speed up. As one of the main building materials, the demand of the cement market has increased in late September, and the demand side is expected to improve gradually. With the elimination of the impact of the epidemic, the repair of the fundamentals of the industry, and the off-peak production of cement enterprises since July, the contradiction between inventory pressure and overcapacity will be gradually alleviated, and in the later stage, the relationship between supply and demand in the market will improve, and cement prices are expected to stop falling and rebounding. As the cement market enters the traditional peak season cycle, the price upward momentum will be further strengthened. At the same time, affected by the low macroeconomic situation, the recovery of market demand in the early stage is expected to be weak, and prices may rise repeatedly in some areas with serious overcapacity, but the overall trend is still to maintain a volatile upward trend.
Profit forecast and investment rating: affected by infrastructure, real estate, high costs and the impact of the epidemic in East China, the cement demand in Jiangxi is poor, the price is low, the company's sales decline during the reporting period, and profits are under pressure temporarily. The cement market demand has increased in late September, and the demand side is expected to gradually improve. In the later period, the relationship between supply and demand in the market will improve, and cement prices are expected to stop falling and pick up.
Considering the large decline in performance in the third quarter, we downgrade our profit forecast and expect the company to achieve net profit of 8.73,11.97,1.307 billion yuan respectively from 2022 to 2024, corresponding to PE of 7.24,5.28,4.83 times. Considering the company's leading position in Jiangxi, the company will be the first to benefit after the improvement of regional demand and maintain the company's "overweight" rating.
Risk hints: cement prices rise less than expected; construction progress of infrastructure projects is not as expected; production capacity is added too much in some areas; macroeconomic downward pressure continues; high cost pressure exceeds expectations.
