Incident: Recently, the company released its semi-annual report for 2023. The company's revenue from January to June was 3.2 billion yuan, -9.5% year-on-year; net profit attributable to the mother was 5.3 billion yuan, -24.9% year-on-year; net profit after deducting non-return net profit of 390 million yuan, -50.3% year-on-year.
Comment:
Clinker production capacity continues to expand steadily. The company's Duyun Shangfeng 4000t/d clinker cement project was successfully put into operation. Benefiting from this, under the sluggish demand in the cement industry, the company's 23H1 cement clinker sales volume was +18.7% year-on-year, to 9.97 million tons. The average price per ton of cement clinker, ton cost, and gross profit per ton were -68 yuan, -30 yuan, and -37 yuan, respectively. Structurally, the southwest region's share of revenue increased (23H1 revenue +114% year-on-year), while the gross profit margin of the southwest region (3.5%) was lower than that of East China (33.1%). 23H1's aggregate business and environmental protection business revenue were -41.6% and -12.2%, respectively, and gross margins reached 70.3% and 49.3% respectively. The profit level was significantly higher than that of the main cement business. The gross margin of 23H1's non-cement business was 24%.
The main business and investment side continue to expand steadily. 23Q2 The company's projects under construction increased to 1.2 billion yuan, the proportion of projects under construction/fixed assets was 29%, and intangible assets were +17% month-on-month. It was mainly construction investment to relocate cement clinker production lines from other locations, and its core subsidiaries increased investment in limestone mining resources. 23Q2 The total amount of the company's monetary capital, transactional financial assets, other current assets, other non-current financial assets, and long-term equity investments reached 7.3 billion yuan.
The “one main and two wings” strategic expansion is just right: the company continues to promote the “one main, two wings” development strategy of the main cement building materials business+the extension of the aggregate environmental logistics industry+new economic investment: 1) Based on the main business, it has acquired or built new production capacity in the western region and the “Belt and Road” key regions. The company has already acquired Ningxia Mingfeng Mengcheng 2500t/d production line in 2019. Guizhou Jinxing 4500t/d has been built and put into operation in 20H2. An of 5000 t/d is already in 22Q4 Production was put into operation. The 4000 t/d in Duyun, Guizhou was put into operation at 23H1. It continues to promote projects such as 4,500t/d in Shangfeng Kehuan in Zhejiang, 2,800 t/d in Kyrgyzstan, and Uzbekistan. It is planned to have a clinker production capacity of more than 25 million tons and a cement production capacity of more than 35 million tons, an increase of 52% and 75%, respectively, over 2022. 2) Continue to focus on expanding the infrastructure industry chain related to aggregates, environmental protection, photovoltaic energy storage, new energy, logistics, etc. Accelerate the increase in aggregate production capacity to a target production capacity of 30 million tons or more (production capacity is 18 million tons in 2022). 3) On the investment side, it continues to maintain investment in high-quality targets in the semiconductor, new energy and related industrial chains supported by the state. 23Q2 has invested a total of 1.58 billion yuan, and many projects have already achieved profitability. We expect it to continue to contribute to performance growth in the future.
Maintain a “better than market” rating. We expect the company's EPS from 2023 to 2025 to be 1.14, 1.25, and 1.36 yuan/share, respectively, giving 9 to 10 times the 2023 PE, and a reasonable value range of 10.26 to 11.40 yuan/share.
Risk warning. The cement boom has declined more than expected, and various investment projects are progressing slowly.