Maintain an “Overweight” rating. In 2023, the company's revenue of RMB 25.55 billion decreased by 13%, and net profit of about RMB 644 million decreased by 60.1%. The company's core market is the two regions. The Guangxi pattern bottomed out, and Guangdong demand support is leading the country. The company's adoption of a more active sales strategy is expected to improve sales and reduce costs at the same time. The introduction of carbon trading in the industry in the medium to long term, and the consolidation of industry production capacity will all lead to an improvement in the industry's price center. The aggregate business, which invested heavily in the early stages, is expected to continue to increase and achieve a “gain” rating.
Reflecting a more active sales strategy, 2024 is expected to maintain the sales growth trend. In 2023, the company's cement sales volume was 66.728 million tons, down 7.5%. Compared with the previous three quarters, the decline narrowed markedly. We believe that the support for resilient demand in Liangguang is the foundation for improving sales. The obvious shift in sales strategy is the core reason, and the relatively low base also contributed to a certain extent. Looking ahead to 2024, the resilience of long-term demand in the South China region where the company is located may maintain an advantage, and the company is also expected to maintain an active sales policy, so the sales growth rate is expected to begin to improve.
Prices have bottomed out, and stability may be expected to increase on the cost side. In 2023, the average sales price of the company's cement was about 274 yuan/ton, down 9.5%. High-cost production capacity in core regional industries such as South China has come to a standstill during the off-season. Prices have entered the market-based bottoming stage, but the peak season is also constrained by the supply and demand pattern, so seasonal price volatility has narrowed. The estimated cost of the company's cement ton in 2023 is about 241 yuan/ton, with a reduction of about 15 yuan per ton. It is mainly driven by factors such as year-on-year improvement in coal costs, optimization of energy consumption per unit, etc., and factors with high cost fluctuations such as coal prices are weakening, so the cost per ton is expected to be more stable.
The company's aggregate business will be more profitable, and the industry is looking forward to a change in the pattern. By the end of 2023, the company's aggregate production capacity is 92.5 million tons per year. In addition to the newly acquired aggregate projects, the company's annual aggregate production capacity is expected to reach 146.4 million tons after completion. The company's aggregate resource reserves adopt a large base model, and the formalities are regular and smooth. Therefore, production capacity and profit releases have begun to be realized, and the share will be more obvious. The industry pattern is bottoming out, carbon trading and industry integration are progressing, and the pattern will usher in a turning point worth looking forward to.
Risk warning: Risk warning: cliff-style decline in demand and relaxation of supply-side regulation.