Introduction to this report:

The company announced its 2023 mid-year report. Q2: Profitability recovered, actively expanded the upstream and downstream industrial chains, and maintained a rating increase in holdings.

Key points of investment:

Maintain the “increase in holdings” rating. The company announced its 2023 interim report, achieving revenue of 4.105 billion yuan, a year-on-year decrease of 29.74%, and net profit of 267 million yuan, a year-on-year decline of 45.76%, lower than market expectations. We maintain the 2023-2025 EPS at 0.59, 0.77, and 0.96 yuan, and maintain the target price of 11.13 yuan.

Market share bucked the trend and expanded. The company sold 9.99 million tons of cement in 2023H1, up 9.5% year on year, higher than the 3.78% year-on-year decrease of H1 in Jiangxi; of these, Q2 sold about 5 million tons of cement, up 1.45% year on year. We judge that the high increase in the company's H1 sales volume is mainly due to the high sales growth rate in 23Q1. Some 22Q4 demand was delayed until 23Q1 was released. Judging from the company's Q2 sales volume, it basically matches the growth rate of the industry.

Q2 Profitability has recovered. We estimate the average factory price of 2023H1 is about 278 yuan/ton, a year-on-year decrease of nearly 18 yuan/ton, and gross profit per ton is about 59 yuan/ton. Among them, the average factory price of the company Q2 was about 294 yuan/ton, but benefiting from the decline in coal prices, gross profit per ton rose to 67 yuan/ton, and it is estimated that the company's net profit per ton recovered to 30 yuan/ton. However, considering the further decline in cement prices in July, the current volume price in August is still at the bottom to be raised, and it is determined that Q3 earnings may have some downward pressure month-on-month.

Continue to increase the upstream and downstream cement industry chains. The company is committed to the effective integration of upstream limestone resources. Currently, the annual output in Jiangxi can reach 9 million tons. On the other hand, the industrial layout of cement grinding stations and commercial concrete is market-oriented, forming an integrated layout of the upstream and downstream industrial chains of building materials, mainly cement. At the same time, we are responding positively to the national “double carbon” policy and developing industries such as solid waste disposal and photovoltaics through collaborative kilns.

Risk warning: The macroeconomic economy is declining, and the cost of raw materials is rising sharply.