The company achieved net profit of 297 million yuan for the full year of '23, a year-on-year decline of 43.78%. The company published its annual report, achieved annual revenue/net profit of 10.4.10/297 million yuan, +20.24%/-43.78% year-on-year, and realized net profit without return to mother of 225 million yuan for the whole year, or -51.98% 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 attributable to mother of 2,922/0.06 billion yuan in a single quarter, +33.59%/+108.39% year-on-year, after deducting non-attributable net profit of -0.13 billion yuan, or +021 million yuan year-on-year.

The performance of basic building materials is under pressure, and digital logistics revenue continues to grow

The company achieved sales revenue of 3.357 billion yuan for cement and clinker in '23, down 19.1% year on year, sales volume of 13.1 million tons, down 9.7% year on year, and average price per ton fell by 30 yuan to 256 yuan/ton year on year. Affected by the drop in raw fuel prices, the cost of a ton decreased by 11 yuan to 212 yuan/ton, and finally achieved gross profit of 44 yuan per ton, a year-on-year decrease of 18.7 yuan/ton, and a gross margin of -4.7 pct year-on-year to 17.2%. The company's aggregate/concrete sales volume in 23 years was 4.98 million tons/1.17 million square meters, respectively, -8.7%/-24.8%. The plan is to achieve cement clinker/aggregate/concrete sales volume of 1117/3.85 million tons/1.24 million square meters in 24 years, and the basic building materials business revenue is 3.8 billion yuan.

The company's digital logistics business revenue in '23 was 6.54 billion yuan, +82.5% year-on-year, including transportation services of 6.34 billion yuan (of which transportation services provided to enterprises belonging to China Building Materials Group accounted for 69.52%, and other external companies accounted for 30.48%), value-added service revenue of 195 million, and the gross profit margin of the digital logistics business was 0.38%, of which the gross margin of transportation services/value-added services business was 0.3%/4.2%, respectively. By the end of '23, the first phase of the company's data center project had been completed and put into operation. The “I'm looking for a car” platform had a total of 1.54 million registered vehicles, +322,000 vehicles over the same period last year. We believe that the scale of the business continues to grow, and future profit contributions are expected to be gradually realized.

It is expected that restructuring transactions will continue to advance, and digital collaborative development can be expected

The company's overall gross profit margin in '23 was 6.97%, -6.20pct. Among them, the overall gross profit margin for the Q4 quarter was 2.97%, and -3.59/-6.01pct, respectively. The cost ratio for the 23-year period was 3.64%, -0.15 pct. Among them, the sales/management/ R&D/finance expenses ratio was +0.03/-0.31/+0.12/+0.006pct year on year, and finally achieved a net interest rate of 3.15% and -3.53 pct year on year. The current profit is still under pressure. Earlier, the company announced plans to exchange shares and absorb information on the merger of China Construction. We expect that if the transaction proceeds smoothly, the two sides can give full play to the synergy of their respective businesses, form healthy interactions with mutual promotion and resource sharing, and continue to be optimistic about the transformation and development of “New Ningxia”.

The dividend rate remains high and the “buy” rating is maintained

The company has accumulated dividends of 120 million yuan in 23 years, with a dividend rate of up to 40%, corresponding to the current dividend rate of about 1.53%. The company also announced the “Shareholder Return Plan for the Next Three Years (24-26)”. The plan suggests that the cumulative profit distributed in cash for the last three years should be no less than 30% of the average annual profit distributed in the last three years, and the dividend rate is expected to remain at a high level. Considering the decline in performance in '23, the company's net profit forecast for 24-25 was lowered to $309.414 million (previous value: $516./$590 million), and the estimated net profit for '26 will reach 472 million yuan. Referring to comparable companies, the company was given 1.3 times PB for 24 years, with a target price of 20.2 yuan to maintain a “buy” rating.

Risk warning: restructuring transactions fall short of expectations, cement demand falls short of expectations, peak season price increases fall short of expectations, coal costs rise, etc.