Incident: The company's revenue in 2023 was 33.757 billion yuan, up 10.79%; net profit to mother was 2,762 billion yuan, up 2.34%; net profit after deduction was 2,322 billion yuan, down 9.95% from the same period. Among them, the company's revenue for the Q4 single quarter was 9.592 billion yuan, up 10.77%; net profit to mother was 888 million yuan, up 87.21%; net profit after deduction was 499 million yuan, up 11.44%.
The main domestic cement industry is under pressure, and aggregates and overseas are increasing. On the demand side, due to factors such as real estate demand, cement prices in Hunan, Hubei, and Yunnan provinces, the company's main cement production capacity regions, all fell in 2023.
Specifically, in 2023, the price of cement in Hunan Province was 360 yuan/ton, down 18.24% year on year; cement price in Hubei Province was 398 yuan/ton, down 13.26% year on year; cement price in Yunnan Province was 328 yuan/ton, down 4.42% year on year. Affected by this, against the backdrop of a sharp 30% increase in overseas revenue, the company's main cement business still fell 2.64% year on year, and profit fell 9.95% year on year after deduction. However, when sales volume nearly doubled year on year, the aggregate business contributed 5.364 billion yuan in revenue, up 75.01% year on year. Under the sharp increase in aggregates and overseas business, the company's revenue scale increased 10.79% year on year. At the same time, when the comprehensive gross margin declined by 4-5% from its peers, it still increased 0.49 pct against the market.
The decline in tonnes of revenue affects profits, and overseas business and cost savings hedge against the decline in revenue. In 2023, the company's revenue per ton of cement clinker decreased by 29 yuan/ton year on year; ton cost decreased by 26 yuan/ton year on year. On the cost side, the cost of cement clinker tons increased by 4 yuan/ton year on year in 2023; specifically, in 2023, ton management expenses (including R&D) increased by 3 yuan/ton, ton sales expenses decreased by 1 yuan/ton year on year, and ton financial expenses increased by 1 yuan/ton year on year. On the profit side, net profit per ton of cement clinker in 2023 fell by 3 yuan/ton year on year, and net profit after deducting non-ton net profit decreased by 6 yuan/ton year on year. Overall, due to the impact of domestic demand, cement prices declined significantly year on year. Although the cost of coal prices declined significantly and the company accelerated energy consumption and energy-saving transformation, the net profit per ton still declined year on year.
Overseas development increases profits, and integrated development increases growth. By the end of 2023, the company had achieved a production capacity layout in 11 countries in Central Asia, Southeast Asia and Africa. The overseas cement grinding production capacity reached 20.91 million tons/year, and the planned clinker production capacity under construction reached 2.17 million tons, further strengthening the company's layout in Central Asia. The overseas market layout also brought the company a marginal increase in revenue and profit. The company's overseas revenue in 2023 was 5.439 billion yuan, an increase of 30% over the previous year. While developing overseas markets, the company is vigorously developing the aggregate business. By the end of 2023, the company's aggregate production capacity reached 277 million tons. In 2024, the company plans to continue to invest 6.9 billion yuan in aggregate, concrete, and overseas cement production capacity and alternative fuel construction, and business competitiveness is expected to be further strengthened. In 2023, the company's aggregate business revenue was 5.364 billion yuan, which increased to 15.89%, making it one of the company's core businesses.
Industry profits are low, corporate valuations are low, and high dividends highlight investment value. As of March 22, the industry's profit situation (cement and coal price spread) has reached the bottom of history, at only 237 yuan/ton, and there is limited room for future growth. On the corporate side, as of March 28, 2024, Huaxin Cement's PB was 0.94, which is close to the historical bottom. However, the company continued to increase its dividends this year. The dividend ratio reached 39.89%, corresponding to the dividend rate of 4.03% on March 28. The dividend rate is already quite attractive.
Investment advice: We expect the company to achieve net profit of 25.08/30.85/37.96 billion yuan in 2024-2026, an increase of -9.2%/23.0%/23.0% year-on-year. The latest closing price corresponds to PE 11.3/9.2/7.5 times, maintaining the “increase” rating.
Risk warning: Regional collaboration breaks down; industry competition increases risk; macroeconomic downside risk.