According to the company's mid-2023 report, 2023H1 achieved a revenue of 10.804 billion yuan, a decrease of 8.9%, and a net profit of 165 million yuan, a decrease of 56.8%. In the first half of the year, the company covers the area where mixed prices are obviously down, which puts pressure on the company's performance, but the company pays more attention to it, and its profitability is expected to rise steadily. Maintain the company's buy rating.

Support the main points of rating

The company's performance declined, and the decline in net profit was greater than that in revenue. In the first half of 2023, the company achieved revenue of 10.804 billion yuan, a decrease of 8.9%, and a net profit of 165 million yuan, a decrease of 56.8%. Of this total, 23Q2 realized revenue of 6.741 billion yuan, with a decrease of 6.0%, while the net profit returned to its mother was 226 million yuan, with a decrease of 34.5%.

Profitability declined, Q2 operating cash flow decreased compared with the same period last year. 2023H1's comprehensive gross profit margin is 9.53%, minus 1.19pct, of which Q2 company's gross profit margin is 11.30%, same as minus 1.50pct. The period expense rate of 2023H1 company is 6.05%, with the same increase of 1.07pct, of which the expense rate of Q2 period is 5.68% and the same increase of 0.61pct. In terms of cash flow, the net cash flow of 2023H1's operating activities was-1.523 billion yuan, and the net outflow decreased by 19.1% compared with the same period last year, of which the net cash flow of Q2 operating activities was 525 million yuan, a decrease of 30.3%.

The unit price of mixed sales has declined, or it is mainly due to weak demand. The number of contracts signed by 2023H1 Company was 5924.03 million square meters, with a decrease of 8.36 percent, and the sales volume was 2635.15 million square meters, an increase of 0.16 percent. The number of contracts signed by 23Q2 Company was 3980.77 million square meters, with a decrease of 5.71 percent, and the sales volume was 1642.51 million square meters, an increase of 0.61 percent. We estimate that the unit price of commercial concrete of 23H1 Company is about 397 yuan per square meter, with a reduction of 44 yuan per square meter. Among them, the unit price of 23Q2 company is about 402 yuan per square meter, which is 28 yuan lower than the unit price level of 22Q2. The sales unit price of commercial concrete decreased significantly in the second quarter and the first half of this year. We believe that the main reason is the sluggish real estate start data in the first half of the year and the lower-than-expected physical workload of infrastructure, which has led to a lack of obvious recovery in demand for businessmen, and it is difficult for sales unit prices to rise.

The company pays more attention to it and its profitability is expected to rise steadily. 1) the company is the only commercial platform under China Construction Group, and the commercial concrete provided to China Construction Group accounts for a low proportion of the total commercial concrete it needs, and there is still much room for improvement. 2) recently, the Ministry of Urban Village Reconstruction and the Ministry of Housing and Construction have issued favorable policies to stabilize the construction industry and real estate, which is expected to promote the stable and healthy development of the real estate market; the backlog of infrastructure projects is also expected to start in the second half of the year, further boosting demand for businessmen.

3) the company introduces Anhui Conch Cement as a strategic investor, and the cooperation between the two sides will reduce the purchasing cost of raw materials and help the company expand the market. 4) the company continues to promote the regional strategy, and the expansion of the new regional business scale is expected to play a scale effect and further enhance profitability.

Valuation

Considering the large decline in the company's home net profit in the first half of the year, we adjust the company's profit forecast accordingly. It is estimated that the company's income from 2023 to 2025 is 231.5 yuan, 249.2 yuan and 26.99 billion yuan, the net profit of returning to the mother is 3.6,5.9 and 820 million yuan respectively, and the EPS is 0.28,0.47,0.65 yuan. Maintain the company's buy rating.

Main risks faced by rating

The landing of infrastructure is not as expected, the effect of business expansion is not as expected, and the effect of strategic cooperation is not as expected.