The industry boom is declining, prices are falling, and performance is under pressure. 2023H1 achieved operating income of 14.486 billion yuan, -14.01% year-on-year, net profit of -369 million, year-on-year, -132.34%, net profit after non-attribution, -466 million yuan, -143.66%, basic EPS of -0.1388 yuan/share, Q2 quarterly revenue of 9.302 billion yuan, -21.70%, and net profit of 423 million yuan, -69.20% year-on-year. Affected by weak industry sentiment in the first half of the year, cement prices continued to decline, profit levels declined, and overall performance was under pressure.
The amount of cement increased and the price fell, and Q2 gross margin improved month-on-month. The sales volume of cement clinker in the first half of the year was 43.96 million tons, +14.39% year-on-year. Mainly due to a low base and suppressed demand due to specific events in the fourth quarter of last year, was released in the first half of this year. The sector achieved revenue of 12.361 billion yuan, -11.87% year-on-year. Estimated tonnage revenue/tonne cost/gross profit for the first half of the year was 281.2/251.4/29.8 yuan, respectively. Affected by weak market demand, the production capacity utilization rate in the northern region, and cement prices in the core area of the company continued to decline. Material prices The decline to a certain extent hedged the decline on the profit side; sales volume of the aggregate business was 15.95 million tons, +15.41% year on year, mainly benefited from the further release of aggregate production capacity in Guanzhong, Shaanxi, which affected a year-on-year increase of 1.8 million tons, completed sales revenue of 589 million yuan, +11.81% year-on-year, and gross profit per ton of revenue per tonne was 36.9/19.3/17.7 yuan, respectively -1.2/+2.2/-3.4 yuan.
The comprehensive gross profit margin for the first half of the year was 12.9%, -10.8 pct, Q2 was 17.3% for the single quarter, and -6.5 pct/+12.3 pct for the previous year/month, respectively. The month-on-month improvement in profit levels clearly benefited mainly from the decline in cost-side prices. Net operating cash flow for the first half of the year was 990 million yuan, +21.5% year-on-year. The fee rate for the period increased by 2.1 pct to 16.8% year on year, mainly due to the decline in revenue.
Strengthen the distribution of mining resources and steadily promote a green transformation. The company continues to actively deploy upstream mining resources. In the first half of the year, it added 628 million tons of limestone resources, and has accumulated more than 5 billion tons of limestone resources, limestone, and dolomite reserves for construction stone. Currently, the aggregate production capacity is 62 million tons, and the production capacity is currently under construction of 5 million tons. In terms of green transformation, more than 60% of the company's cement production lines currently have collaborative disposal of hazardous waste, household waste, etc., with an annual disposal capacity of 5.32 million tons, an increase of 7.3% over the previous year.
Risk warning: Project implementation fell short of expectations; cost increases exceeded expectations; repeated outbreaks.
Investment advice: North China regional cement leader, maintaining a “buy” rating.
The company is a leading cement enterprise in North China and has a strong regional voice. At the same time, the company is still actively promoting regional industrial integration, strengthening collaborative development, consolidating resource layout, and expanding the environmental protection industry. It has a good overall competitive advantage. Considering the impact of the decline in cement prices in the first half of the year, the 23-25 EPS was lowered to 1.1/1.2/1.3 yuan/share (previous value 0.72/0.91/1.01 yuan/share), and the corresponding PE was 9.7/8.7/8.2x, maintaining the “buy” rating.