The company released its 2023 annual report: In 2023, it achieved revenue of 33.757 billion yuan, +10.79% year-on-year, net profit to mother of 2,762 billion yuan, +2.34% year-on-year, net profit of not attributable to mother of 2,322 billion yuan, or -9.95% year-on-year.
Among them, 23Q4 revenue was 9.592 billion yuan, +10.77% year on year, net profit to mother was 800 million yuan, +87.34% year over year, after deducting non-net profit of 498 million yuan, +11.63% year over year. In 2023, the company's gross profit margin was 26.71%, +0.49pct year on year, net profit margin 9.53%, and -0.39pct year on year, of which 23Q4 gross profit margin was 27.71%, +4.58pct year on year, and -2.25pct month on month.
The main cement business structure was optimized, and the cement+ business achieved high growth. Affected by weak downstream demand in the industry, the company's net sales volume of cement clinker for the whole year was 619 billion tons, +2.48% year-on-year, which is expected to be mainly due to the growth of overseas mergers and acquisitions. Cement and clinker achieved revenue of 18.332 billion yuan and 947 million yuan respectively, or -2.64% and -46.14%, respectively, accounting for 54.3% and 2.81% respectively (61.80% and 5.77% in 2022, respectively). The share of revenue from cement and clinker decreased significantly, and the structure was further optimized. The tonnage price was 311 yuan, -29 yuan (-8.63% YoY), the tonnage cost was 231 yuan, and the year-on-year -26 yuan (-10.29% YoY) was mainly due to a drop in coal and raw material prices. The gross profit per ton was 81 yuan, or -3 yuan (-3.52% YoY).
Actively promote the cement+ business layout and optimize the structure: ① Aggregate sales volume was 131 million tons, doubling year on year, achieving revenue of 5.364 billion yuan, a significant increase of 75.01% year on year. Production capacity at the end of the period was 277 million tons (+67 million tons compared to the beginning of the year), a year-on-year increase of 32%; the price of a ton of aggregate was 41 yuan, -6 yuan (-12.36%); gross profit per ton was 19 yuan; year-on-year -7 yuan (-27.25%); gross margin was about 46%. ② Concrete sales volume was 27.27 million square meters, up 66% year on year, and achieved revenue of 7.652 billion yuan, up 49.08% year on year. Production capacity at the end of the period was 122 million square meters (+53.25 million tons compared to the beginning of the year), the single-party price was 281 yuan, the year-on-year -32 yuan (-10.40%), the single-party gross profit was 43 yuan, the year-on-year -6 yuan (-12.36% year over year), and the gross margin was about 15.5%.
Reasonable expenses, reduced capital expenditure, improved cash flow, and implemented dividends. The company's financial expenses in 2023 were $699 million, +52.62% year over year, financial expense ratio 2.07%, mainly due to an increase in interest-bearing debt, short-term loans of $644 million at the end of the year, +8.60%; non-current liabilities maturing within one year (+$2,394 billion), +51.82% year over year; long-term loans of $8.623 billion (+1.341 billion yuan compared to the beginning of the year), +18.42% year over year; bonds payable of 3,964 million ($462 million compared to the beginning of the year), -10.44% YoY. The company's capital expenditure plan decreased year-on-year, with a 2023 plan of 11 billion yuan, actual use of 6.917 billion yuan, and a 2024 plan of 6.9 billion yuan, or -37.27% year-on-year.
Net operating cash flow at the end of the period was $6.236 billion, +36.51% year-on-year. The company plans to pay a dividend of 0.53 yuan (tax included) per share in 2023, with a cash dividend ratio of 39.89% (39.59% in 2022).
Overseas performance is growing rapidly, creating future cost competitiveness. In 2023, the company's overseas revenue reached 5.439 billion yuan, +30% year-on-year, accounting for 16% of the total. The annual production capacity of overseas cement effective cement grinding was 20.91 million tons, a significant increase of 69% over the previous year. During the reporting period, the acquisition of 64.66% of Oman Cement Company's SAOG shares and 100% of Natal Portland Cement Company (Pty) Ltd.
Overseas business expanded to the Middle East and Southern Africa. In addition, the second phase of the 4,500 ton/day production line of the Tanzanian Marvini Company was put into operation, adding a total production capacity of 8.54 million tons/year.
The company excelled in controlling energy consumption in cement production, using a total of 4.37 million tons of alternative fuel per year, an increase of 500,000 tons over the previous year; the Group's consolidated calorific value replacement rate reached 20%, an increase of 6 pcts over 2022, and achieved 23% in China, up 7 pcts from 2022. The comprehensive energy consumption of domestic kiln lines is 94.7 kg/tcl, and 33 kiln lines have reached the benchmark level, accounting for 63%. The direct carbon dioxide emission intensity of domestic tons of cement has been reduced to 576.47 kg.
Investment advice: Forward-looking overseas, “cement +” and low carbon. Facing the future slowdown in domestic real estate infrastructure demand, Huaxin Cement has more choices and a firm path of transformation compared to its peers. We expect the company's net profit to be 30.5, 34.3, and 3.70 billion yuan respectively in 2024-2026. The closing price on March 29 corresponds to dynamic PE of 9x, 8x, and 8x, maintaining the “recommended” rating.
Risk warning: Risk of infrastructure projects and real estate policies falling short of expectations, risk of fluctuations in raw material prices.