Incidents:
Qilianshan released its 2022 annual report: annual operating income of 7.974 billion yuan, an increase of 3.93% over the previous year; net profit attributable to shareholders of listed companies was 758 million yuan, a decrease of 19.96% over the previous year, and net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 757 million yuan, a year-on-year decrease of 21.28%.
Key points of investment:
Revenue grew steadily, and the aggregate business performed brilliantly. The company achieved operating income of 7.974 billion yuan, an increase of 3.93% over the previous year; net profit attributable to shareholders of listed companies was 758 million yuan, down 19.96% from the previous year, and net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 757 million yuan, down 21.28% from the previous year. The balance ratio was 19.24% lower than at the end of 2021, a decrease of 2.71 percentage points from the end of 2021, and the balance and liability structure improved. The gross profit margin and net sales interest rate were 25.81% and 10.26% respectively. Compared with the previous year, they declined slightly, mainly due to rising operating costs, a sharp decline in market demand, and a decrease in product sales, which led to an increase in the average sales cost of products.
By product, annual aggregate sales increased 75.1% year on year; cement, clinker, and commercial concrete fell 5.89%, 2.71%, and 21.37%, respectively; cement, clinker, and aggregate revenue was 7.226 billion yuan, 208 million yuan, and 82 million yuan respectively, up 4.74%, 28.00%, and 70.81%, respectively; commercial concrete revenue was 419 million yuan, a year-on-year decrease of 22.22%. The annual gross margins of cement, clinker, commercial concrete, and aggregates were 26.89%, 12.95%, 14.19%, and 21.67% respectively, down 1.82, 2.32, 1.85, and 13.75 percentage points respectively from the previous year.
The restructuring helps the company's strategic transformation, and profitability is expected to improve. Currently, the company and China Communications Construction have separately announced that the shareholders' meeting has voted to pass the restructuring listing bill. The restructuring application has been accepted by the Shanghai Stock Exchange, and the restructuring matters are expected to proceed as scheduled. The six design institutes will become wholly-owned subsidiaries of listed companies, and the main business of listed companies will change from research, development, manufacturing, and sales of cement and commercial concrete to highway engineering design consulting business. In 2022, the company's net profit declined due to repeated epidemics, the downturn in the real estate industry, rising energy prices, and the pressure on cement prices. Given the larger profit scale, strong profitability, and better growth prospects of the engineering design consulting business, this transaction is expected to enhance the overall strength and profitability of listed companies and reverse the company's loss of profits.
Profit forecasts and investment ratings: Demand for cement was poor throughout 2022, volume and price drops sharply, while rising fuel prices squeezed profits. The company is an industry leader in the northwest region. As of the end of 2022, its market share in Gansu and Qinghai regions was 47% and 25% respectively. With the recovery of infrastructure commencement and the stabilization of real estate demand in 2023, the company's performance is expected to remain steady. Major asset restructuring matters are progressing steadily, and the company's investment value may continue to increase. Due to the principle of prudence, we will not consider the impact of the dilution of the shares issued this time. According to the company's current cement business forecast, based on our judgment on the recovery of cement demand in the northwest region in 2023 and the estimation of the company's market share in the northwest region, we lowered the company's profit forecast accordingly. We expect the company to achieve net profit of 9.41, 9.75, and 983 million yuan respectively in 2023-2025, and the corresponding PE was 9.15, 8.83, 8.76 times. Taking into account the promotion of restructuring matters to increase the expected investment value, maintain the “buy” rating.
Risk warning: raw fuel prices continue to rise; cement prices have dropped sharply; cement demand has declined sharply; infrastructure investment has fallen short of expectations; the progress of restructuring matters has fallen short of expectations; and the epidemic has repeatedly affected construction and the economy.