Incident: Recently, the company announced its 2023 semi-annual results. The company's 23H1 revenue was 12.4 billion yuan, -8.5% year-on-year; net profit was 1.4 billion yuan, -74.9% year-on-year. 23H1's net assets attributable to parent equity are $105.1 billion (excluding permanent capital instruments).
Comment:
The cement boom is declining, and the performance of the new materials business is stable.
23H1's revenue from cement, concrete, new materials and engineering services was 44.7 billion yuan (-16.3% year on year), 13.7 billion yuan (-22.2%), 23.3 billion yuan (+6.0%), and 15.9 billion yuan (+0.4%), respectively. 23H1's overall EBITDA profit margin was 14.4%, -3.6 pct year on year. Among them, the EBITDA profit margins for cement, concrete, new materials, and engineering services were -6.1 pct, -4.0 pct, -3.9 pct, and +4.4 pct, respectively.
Basic building materials sector: 23H1 cement volume has shrunk and prices have declined, and aggregate sales have increased well.
1) 23H1's total sales volume of cement clinker was 142 million tons, -2.6% year-on-year, and the average price was 298 yuan/ton, -15.5% year-on-year. 2) 23H1 concrete sales volume was 36 million square meters, -9.7% year on year, average price was 384 yuan/square meter, -14.2% year on year. 3) 23H1 aggregate sales volume was 69.3 million tons, +19.3% year-on-year, a good increase.
New materials sector: sales of wind power blades, lithium battery separators, and carbon fiber have increased significantly.
23H1 gypsum board, glass fiber, wind power blades, lithium battery separators, waterproof membranes, and carbon fiber were 0.0%, +19.7%, +27.4%, +42.5%, +12.7%, and +59.9%, respectively; the average prices were -0.8%, -28.5%, -7.7%, -2.0%, -3.2%, and -23.5%, respectively.
Maintain a “better than market” rating. The company is the core industrial platform and flagship listed company of China Building Materials Group, a large central building materials enterprise, and ranks first in the world in 7 businesses. We believe that in the context of self-innovation, continuous integration, and a long-term boom in cement, the company's cost control, regional market control, balance sheet, etc. have greatly improved, and its competitiveness is no longer the same. Furthermore, we believe that the importance of the company's new materials business is increasing day by day, and has gradually become the company's second pillar industry. The company established a graphite platform company and its subsidiary Sinoma Lithium Film to increase capital and expand shares, which is expected to open up space for the company's medium- to long-term growth. The company's EPS is expected to be 0.46, 0.50, and 0.55 yuan respectively from 2023 to 2025. According to the exchange rate of 1 HKD = 0.93 CNY, the company will be given 8 to 9 times PE in 2023, and the reasonable value range of HKD is 3.96 to 4.45 HKD/share.
Risk warning. Impairments such as goodwill continue to increase in excess of expectations; the relationship between cement supply and demand has weakened, etc.