The company achieved net profit of 229 million yuan for the full year of '23, a year-on-year decline of 41.17%. The company published its annual report, achieved annual revenue/net profit of 81.90/229 million yuan, -27.40%/-41.17%, and achieved net profit deducted from non-return to mother for the whole year, or -49.08% year-on-year. Non-recurring profit and loss were mainly government subsidies included in current profit and loss. Among them, Q4 achieved revenue/net profit to mother of 2.05/-80 billion yuan in a single quarter, a year-on-year decrease of 23.84%/year-on-year +0.99 billion yuan, after deducting non-attributable net profit of -102 million yuan, or +171 million yuan year-on-year.
The rise and fall in cement volume is dragging down revenue. Jiangxi's infrastructure investment boom is still high. The company's sales market is mainly in Jiangxi. In the past five years, Jiangxi's revenue has always accounted for about 90% of total revenue. Infrastructure investment in Jiangxi increased 19.1% year on year in '23. Among them, investment in road transport/water conservancy and environment increased by 38.9%/14.3% respectively, providing support for cement demand in Jiangxi, but due to real estate, cement production in Jiangxi fell 8.02% year on year. The company's cement sales bucked the trend and increased by 1% to 21.3689 million tons, and the market share is expected to increase further. However, due to price declines, cement business revenue was 5.22 billion yuan, down 17% year on year. We estimate that the average cost per ton of cement was 244/210 yuan, down 12/0 yuan year on year, respectively. Gross profit per ton fell 12 yuan year on year to 34 yuan/ton, and gross margin was -4 pct to 14% year on year.
Jiangxi Province proposed a total investment of 600 billion yuan for integrated transportation planning and construction in the “14th Five-Year Plan”, an increase of 34% over the “13th Five-Year Plan”. Key projects such as the Zhejiang-Jiangxi Guangdong Grand Canal and the Leping Water Conservancy Hub, a key water network construction project in Jiangxi Province, are expected to further increase and boost regional demand.
The gross margin increased slightly in '23, and the cost advantage is expected to continue to strengthen the company's overall gross profit margin of 18.43%, +0.95pct year over year, mainly due to the increase in the share of the concrete and aggregate business with high gross margin. Among them, the overall gross profit margin in Q4 was 16.35%, +0.77/+1.46pct yoy, respectively. The cost ratio for the 23-year period was 10.61%, +1.26pct year on year. Among them, the sales/management/R&D/finance expenses ratio was +0.46/+0.40/+0.23/+0.16pct year on year, respectively, and finally achieved a net interest rate of 3.85% and -1.33pct year on year. The company is actively developing the modern logistics industry, and reducing energy costs by strengthening cooperation with large coal companies, developing new procurement channels and resources, and refining production control. At the same time, the total installed capacity of photovoltaic power generation reached 21.3 MW by the end of '23, with 16.21 million kilowatts of photovoltaic power generation throughout the year, which is expected to continue to strengthen its cost advantage.
The “Cement+” development strategy continues to advance, maintaining the “increase in holdings” rating for 23 years, with a cumulative cash dividend of 72 million yuan, with a dividend rate of 31%, corresponding to the current dividend rate of 1.43%.
We continue to be optimistic about infrastructure demand in the Jiangxi region. The company has always adhered to the “cement +” development strategy and actively extended the upstream and downstream industrial chain based on the main cement business. It has a commercial concrete production capacity of 24.5 million square meters/year and an aggregate production capacity of 15 million tons/year, which is expected to create new profit growth points for the company.
Considering the sharp decline in performance in '23, Q4 profit turned negative, and under heavy pressure, the company lowered its 24-25 net profit forecast to 3.19/371 million yuan (previous value: 773/898 million yuan), and the net profit to mother is expected to reach 418 million yuan in '26. Referring to comparable companies, the company was given 18 times PE in 24 years, with a target price of 7.20 yuan to maintain the “gain” rating.
Risk warning: The company's sales fall short of expectations, cement demand falls short of expectations, peak season price increases fall short of expectations, coal costs rise, etc.