Key points of investment
The company disclosed its 2023 annual report, achieving total operating income of 33.757 billion yuan for the whole year, achieving net profit of 2,762 billion yuan, +2.3% year-on-year, and achieving net profit of 2,322 billion yuan after deduction, or -10.0% year-on-year. The company plans to distribute a cash dividend of 0.53 yuan/share (tax included) to all shareholders.
Sales of cement and concrete exceeded the business plan, and aggregates continued to grow at a high rate, and the share of non-cement gross profit increased to 44%. (1) Cement and clinker achieved sales volume of 61.9 million tons, +2.5% over the same period, bucking the trend and achieving positive growth of 109% of the business plan. It is expected to mainly benefit from the increase in overseas sales, adding a total overseas production capacity of 8.54 million tons/year. We estimate that the average sales price/gross profit per ton of cement and clinker in 2023 was 311 yuan/81 yuan, respectively, -29 yuan/-3 yuan. (2) The concrete business achieved annual sales volume of 27.27 million square meters, +66.4% over the same period, and completed 109% of the business plan. The company developed a total of 23 new concrete sites in 2023, with a production capacity of 122 million square meters (including commissioned processing capacity). (3) The aggregate business achieved annual external sales volume of 131.37 million tons, +99.7% year-on-year. Thanks to an additional production capacity of 67 million tons in 2023, aggregate production capacity reached 277 million tons/year at the end of the year. We estimate that the average sales price/gross profit per ton of aggregate in 2023 was 41 yuan/22 yuan, respectively, -6 yuan/-7 yuan compared with the same period. (4) In 2023, the gross profit contribution of the aggregate and concrete business reached 27.3%/13.1% of the company's gross profit, respectively, up 6.1 pct/3.0 pct year on year, and the share of non-cement gross profit reached 44%, up 8 pcts year on year. (5) On a quarterly basis, the company's Q4 revenue in 2023 was +10.8% year-on-year, continuing to grow steadily. It is expected to continue to benefit from rapid growth in aggregate and concrete sales. The gross profit margin for the single quarter was 27.7%, down 2.3 pct from Q3. It is estimated that the average price of cement and gross profit per ton declined from Q3 due to weakening demand.
The cost rate increased slightly during the period, and asset disposal proceeds contributed to non-recurring income. (1) The company's sales/management/R&D/finance expense ratios in 2023 were 4.5%/5.4%/0.9%/2.1%, respectively, flat year-on-year, and the year-on-year flat /+0.2pct/0.6pct. The increase in financial expenses is expected to be mainly due to an increase in interest expenses due to an increase in long-term loan balances. (2) The company confirmed asset disposal revenue of 427 million yuan, an increase of 437 million yuan over the previous year, mainly because the company received compensation for industrial land collection and storage; (3) The company's net sales interest rate in 2023 was 9.5%, -0.4 pct year on year.
Capital expenditure has been strengthened, and the quality of cash flow has remained good. (1) The company paid 4.850 billion yuan in cash for the purchase and construction of fixed assets, intangible assets and other long-term assets in 2023, or -37.2% over the same period. This was mainly due to changes in the industry environment and the company's reasonable control of the investment pace. In 2023, the company plans to spend 6.9 billion yuan on capital, focusing on aggregate, concrete, overseas cement production capacity and alternative fuel construction.
(2) The net cash flow from the company's operating activities in 2023 was 6.236 billion yuan, +36.5% year-on-year, reflecting that the company's cash flow remained good against the backdrop of continued growth in the concrete business volume. (3) The company's balance ratio at the end of 2023 was 51.6%, a year-on-year decrease of 0.4 pct. The balance of interest-bearing debt at the end of the year was 21.301 billion yuan, an increase of 38.13 billion yuan over the previous year.
Profit forecast and investment rating: Supply and demand in the cement industry still need to be rebalanced, the economy continues to bottom out, corporate integration and green and low-carbon strategies continue to strengthen the competitiveness of the main business, and capital expenditure supports integration+steady overseas expansion, which is expected to continue to contribute new growth points to the company. Based on the continued decline in real estate investment, we lowered our 2024-2025 net profit to 25.45/32.17 billion yuan (previous value was 33.57/38.10 billion yuan), and added the 2026 net profit forecast to be 3,581 billion yuan. The closing price on March 29 corresponds to a price-earnings ratio of 11.2/8.8/7.9 times, maintaining the “gain” rating.
Risk warning: cement demand recovery falls short of expectations; non-cement+ overseas business expansion falls short of expectations; risk of uncontrolled real estate credit risk; risk of increased market competition.