Core views:
The company released its 2023 annual report, with revenue of 33.76 billion yuan in 2023, +10.8% year-on-year, net profit to mother of 2.76 billion yuan, +2.3% year-on-year, after deducting net profit of 2.32 billion yuan without return to mother, -9.9% year-on-year.
Revenue for the fourth quarter was 9.59 billion yuan, +10.8% year on year, net profit to mother of 890 million yuan, +87% year on year, net profit without return to mother of 50 million yuan, +11.4% year on year.
Domestic cement business profits are bottoming out, and overseas cement is growing rapidly. According to the company's annual report, the company's cement and clinker sales volume in 2023 was 61.9 million tons (+2.5% year over year), and the share of cement business revenue fell to 57%. Overseas (mainly cement business) revenue was 5.489 billion yuan, +30%, accounting for 16%. By the end of 2023, the company's effective overseas cement grinding capacity had reached 20.91 million tons/year (accounting for 16.5% of the company), and overseas growth is expected to continue relatively rapidly in 2024. In 2023, the company's cement and clinker ton price/ton gross profit were 311/231/81 yuan, respectively, -29/-26/-3 yuan year on year. All other cost items except raw materials fell year on year. Overseas ton gross profit was significantly higher than domestic, making the company's gross profit decline in cement tons significantly lower than domestic peers.
Non-cement businesses such as aggregates and concrete grew strongly, leading to significant increases in performance. In 2023, aggregate revenue was 5.36 billion yuan (+75%, accounting for 16%), sales volume was 131 million tons (YoY +100%), and ton price/ton cost/ton gross profit was 40.8/22.1/18.7 yuan, respectively, -5.8/+1.3/-7.0 yuan, respectively. In 2023, concrete revenue was 7.65 billion yuan (+49%, accounting for 23%), sales volume was 27.27 million square meters (+66% year over year), and single-party price/cost/gross profit was 281/237/43 yuan, respectively, -32.5/-26.5/-6.1 yuan.
Profit forecasting and investment advice. We expect the company's net profit to be $30/34/3.7 billion, respectively. According to the latest closing market value, PE is 9.1/8.0/7.3 times, and PB is 0.89/0.83/0.78 times, respectively. Referring to comparable company valuations and company growth, we maintain the judgment that the reasonable value of the company's A shares is 19.64 yuan/share and the reasonable value of H shares is HK$11.00 per share, corresponding to the PB valuation of 1.3 times A shares in 2024, maintaining an A/H “buy” rating.
Risk warning. Declining demand for cement, risk of declining performance due to serious overcapacity, etc.