Demand is weak, and performance is under pressure. 2023H1 Company completed revenue and net profit of 53.443 billion yuan and 142 million yuan respectively. After retroactive adjustments, the growth rates were -18.36% and -95.94% respectively, after retroactive adjustments, net profit of -410 million yuan, compared to -113.83%, and basic EPS was 0.0164 billion yuan/share. Among them, Q2's quarterly revenue and net income were 31.64 billion yuan and 1,373 billion yuan, respectively, in line with previous performance forecasts. Market demand has been weak since this year, and the volume and price of the company's cement clinker and commercial mixtures have dropped sharply, resulting in pressure on the company's overall performance.

The volume and price of cement have dropped sharply, and sales of aggregates have been growing steadily. In the first half of the year, the company's cement clinker revenue was 36.528 billion yuan, -17.14% year-on-year, and completed sales volume of 122 million tons, -4.27% year-on-year. We estimated that the first half of the year was 300/257/43 yuan/ton, respectively. The decline in cost-side coal prices reduced the impact of falling profits brought about by falling prices; concrete revenue was 13.028 billion yuan, -23.63%, with a year-on-year capacity of +7.7% to 512 million square meters, with sales volume of 33.75 million square meters, with a year-on-year ratio of 33.75 million square meters. 10.22%. Unilateral revenue/cost/gross profit was 386/345/41 yuan/square, respectively, -68/-47/-21 yuan/square, respectively; the production capacity of the aggregate business in the first half of the year was +21.05% to 230 million tons, sales volume +25.53% to 63.42 million tons, achieved revenue of 2,568 billion yuan, +5.98% year-on-year, and gross profit per ton was 40/25/15 yuan/ton, respectively, -7.5/+0.2/-7.7 yuan/ton.

The bottom of the Q2 profit level has been fixed, and cash flow has improved significantly. The company's comprehensive gross profit margin for the first half of the year was 15.1%, -3.34 pct year on year, of which the Q2 gross profit margin for a single quarter was 18.5%, +0.4 pct/+8.2 pct year on year, respectively.

The cost rate for the period increased by 2.33pct to 13.36% year-on-year. Among them, the sales/management/finance/R&D expense ratio was 1.25%/6.73%/3.70%/1.68%, respectively, and -0.02/+1.35/+0.28/+0.73 pct, respectively. With the further streamlining of the company's three-level control system in the future, there is still room for improvement on the cost side. Net operating cash flow for the first half of the year increased 61.5% year on year to 8.611 billion, mainly due to reduced tax payments. The debt structure continues to improve. The balance ratio at the end of the first half of the year was 67.77%, a slight decrease of 0.19 pct from the end of last year.

Risk warning: Project implementation fell short of expectations; cost increases exceeded expectations; repeated outbreaks.

Investment advice: Demand is expected to recover marginally and maintain the “buy” rating.

Xintianshan Cement is the cement company with the largest business scale in China. In recent years, it has accelerated the optimization and upgrading of the cement business, increased its integrated business development efforts, promoted the optimization and upgrading of the existing regional layout of the commercial mixed business, closely followed that the aggregate business achieved production standards and efficiency, and plans to issue convertible bonds to raise capital of about 9.3 billion dollars to focus on the aggregate business. With the recent increase in steady growth policy expectations, industry demand is expected to recover marginally, and prosperity is expected to remain favorable. Considering the impact of demand in the first half of the year, the 23-25 EPS was lowered to 0.43/0.49/0.54 yuan/share (before adjustment, 0.85/0.96/1.05 yuan/share), corresponding PE to 18.3/15.9/14.6x, maintaining the “buy” rating.