The company achieved net profit attributable to mother of -1,498 billion yuan for the full year of '23. The year-on-year report was issued by the positive to negative company. It achieved annual revenue/net profit of 282.35/ -1,498 billion yuan, -18.26%/-2,856 billion yuan, and realized net profit without return to mother for the whole year - 1,656 billion yuan, 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 5.891/-1,176 billion yuan in a single quarter, -18.10%/-900 million yuan year-on-year, and net profit without return to mother of -1,209 million yuan, or -804 million yuan year-on-year.
The decline in cement prices dragged down revenue, and the contribution of the non-cement business further increased the company's cement clinker sales revenue by -18.6% year-on-year to 24.048 billion yuan. The company's revenue share in North China reached 74%, with cement production in North China +3% year-on-year, while the company's cement clinker sales volume +7% YoY reached more than 93 million tons. The regional market share is expected to increase further. The decline in cement prices in North China and Northeast China reached 20% and 21.8% respectively in '23. We calculated that the average price per ton of cement in the company was 258 yuan, -82 yuan year on year. In '23, the company promoted cost reduction and efficiency. At the same time, due to falling prices of major fuel materials such as coal, the cost per ton of cement clinker decreased by 37 yuan to 235 yuan. The final gross profit per ton fell 45 yuan to 23 yuan year on year, and gross margin fell by 11.1 pct year on year to 8.9%. The company actively laid out aggregate production lines and developed collaborative disposal in cement kilns. By the end of '23, the company added 10 million tons of aggregate production capacity. By the end of '23, the aggregate production capacity reached 72 million tons, and the hazardous solid waste disposal capacity exceeded 5.4 million tons/year. In '23, the aggregate/hazardous solid waste disposal business achieved revenue of 1,46/1.02 billion yuan, +26.3%/-15% year-on-year, and the gross profit margin of the non-cement business increased to 35.7%.
Net interest rates are under pressure in the short term, and cash flow continues to grow healthily
The company's overall gross profit margin in '23 was 11.78%, -8.70pct. Among them, the overall gross profit margin for the Q4 quarter was 1.44%, and -14.89/-16.01 pct yoy, respectively, driven mainly by the decline in gross margin of the cement business. The cost ratio for the 23-year period was 17.34%, +1.82pct year on year. Among them, the sales/management/R&D/finance expenses ratio was +0.28/+1.20/+0.12/+0.22pct year on year, which ultimately achieved a net interest rate of -6.19% and -10.27pct year on year. In '23, the company achieved a net operating cash flow inflow of 2.99 billion yuan, an increase of 32% over the previous year, mainly benefiting from an increase in the cash to revenue ratio. In '23, the company added 691 million tons of mine resource reserves and started construction of 100,000 tons of new alcoholamine and industrialization projects. Currently, the collaborative development of the industrial chain is progressing steadily, and the layout of new energy sources is being promoted in an orderly manner. The 15.37 MW photovoltaic projects of 6 companies have been connected to the grid and generate electricity, further consolidating the foundation for development.
Continue to be optimistic about the company's leading edge and maintain a “buy” rating
The company is a leader in the cement industry in the north. It has obvious advantages in scale, layout, resources, etc. As the cement industry enters a period of deep adjustment, the progress of mergers and acquisitions in the industry is expected to accelerate, and the company is expected to continue to play a leading role in the supply-side reform process. Taking into account the decline in performance in '23, the company's net profit forecast for 24-25 was lowered to RMB4.50/751 million yuan (previous value: RMB1,19/RMB1.50 billion), and the estimated net profit for '26 will reach 1,067 billion yuan. Referring to comparable companies, the company was given 0.6 times PB for 24 years, with a target price of 6.58 yuan to maintain a “buy” rating.
Risk warning: the company's cement sales price falls short of expectations, cement demand falls short of expectations, peak season price increases fall short of expectations, coal costs rise, etc.