Description of the event
In 2023, revenue was 33.76 billion yuan, up 10.79% year on year; net profit to mother was 2.76 billion yuan, up 2.34% year on year.
Incident comments
Aggregates and overseas are expected to provide core support. In 2023, the entire domestic cement industry declined, showing a sharp decline in volume and price, and many companies were on the verge of losing money. As far as the company is concerned, the total annual sales volume of cement clinker was 61.9 million tons, an increase of 2.5% over the previous year. We judge that it was mainly supported by overseas sales. At the same time, in terms of employment performance, we judge that the rapid release of aggregates and overseas stocks may become a major component of profits. Looking at a single quarter, 23Q4 achieved net profit of 890 million yuan, of which asset disposal income was 420 million yuan, mainly from the collection and storage of a total of 48,336 square meters of industrial land located in Qingshan District of Wuhan. In addition, 23Q4 recorded impairment losses of 153 million yuan.
Aggregates: Volume increases and prices fall, becoming the company's core profit point. In 2023, the company sold 131 million tons of aggregates, an increase of about 100% over the previous year, mainly due to the continuous expansion of new production capacity. Annual aggregate revenue was 5.36 billion yuan, a year-on-year increase of 75%; we further estimated that the aggregate price was 41 yuan/ton, down 6 yuan/ton; aggregate cost was 22 yuan/ton, an increase of 1 yuan/ton; gross profit of aggregate tons was 19 yuan/ton, a year-on-year decrease of 7 yuan/ton. Further, in 2023, the company's aggregate business added 67 million tons of production capacity during the year, with an annual production capacity of 277 million tons.
Overseas: The African market continues to expand. Overseas revenue in 2023 was 5.49 billion yuan, an increase of about 30% over the previous year; in 2023, the company added a total production capacity of 8.54 million tons/year; by the end of 2023, the company's effective overseas cement grinding capacity had reached 20.91 million tons/year. Currently, the company has locations in 11 countries including Tajikistan, Kyrgyzstan, Uzbekistan, Cambodia, Nepal, Tanzania, Zambia, Malawi, South Africa, Mozambique and Oman, and has become a leader in the cement market in Central Asia.
Commercial concrete: the idea of integration continues to advance. Sales volume for the full year of 2023 was 27.27 million square meters, up 66% year on year; revenue of 7.65 billion yuan was achieved, up 49% year on year. The rapid growth in mixed business is due more to the company's continuous industrial chain integration strategy.
Strategic expansion is progressing steadily: 1) Continued overseas expansion, particularly strengthening the market layout in Africa. The boom in Africa is expected to drive a significant increase in the company's overall profit. 2) Aggregates continue to enter the harvest period, and it is expected that with the gradual improvement of resource facilities, there is still room for reduction in aggregate costs. 3) Domestic cement cost leading peer optimization. In 2023, 4.37 million tons of alternative fuel were used, an increase of 500,000 tons over the previous year; the Group's consolidated calorific value replacement rate reached 20%, an increase of 6 percentage points over 2022.
The expected 2024-2025 performance is 3.2 billion to 3.9 billion yuan, corresponding PE is 9 to 7 times, and the purchase rating.
Risk warning
1. Demand recovery falls short of expectations; 2. Aggregates, etc. are progressing slowly.