Revenue bucked the trend and grew steadily, and asset disposal contributed to profits. In 2023, the company achieved revenue of 33.76 billion yuan, +10.8% year-on-year, net profit of 2.76 billion yuan, +2.34% year-on-year, net profit after deduction of 2.32 billion yuan, -10.0% year-on-year, EPS was 1.33 yuan/share, and plans to pay 10.5.3 yuan (tax included), benefiting from the growth of non-cement business and overseas expansion, and revenue bucked the trend. Q4 achieved revenue of 9.59 billion yuan in a single quarter, +10.8% year-on-year, net profit to mother of 890 million yuan, +87.2% year-on-year, net profit after deducting non-return to mother of 500 million yuan, +11.4% year-on-year, of which asset disposal contributed 420 million yuan, mainly due to receiving compensation for industrial land collection and storage.
The non-cement business has grown dramatically, and overseas development has made steady breakthroughs. By product, 1) Annual cement clinker sales volume was 61.9 million tons, +2.5% year over year, achieving revenue of 19.28 billion yuan, or -6.4% year over year, estimated revenue of 311/231/81 yuan/ton of cement clinker tonnage, -29/-27/ -3.0 yuan/ton. The decline in unit profit was mainly due to falling demand and increased competition, leading to price pressure. The gross profit margin was 26%, +1.4pp; 2) Concrete sales volume of 27.27 million square meters, +66.4% YoY, achieved revenue of 7.65 billion yuan, +4.65 billion yuan YoY 9.1%, Gross profit margin 15.5%, -0.4 pp; 3) Aggregate sales volume of 130 million tons, +100% year over year, achieved revenue of 5.36 billion yuan, +75% year over year, gross profit margin of 45.9%, -9.4pp. Benefiting from the full development of integrated business, aggregate and concrete sales and revenue both achieved significant year-on-year growth, and the overall revenue share of the non-cement business increased by 10pp to 43% year on year, which has become an important contributor to the company's profit. By region, there have been steady breakthroughs in overseas development. Through the completion of the acquisition of 64.66% of Oman Cement's shares and 100% of Natal Portland Cement's shares, and the second phase of production line in Tanzania was put into operation, cement grinding production capacity has reached 20.91 million tons, +69% over the same period. Overseas clinker production capacity ranked second in the country, achieving revenue of 5.44 billion yuan, +30% over the same period last year.
Expense rates increased slightly, cash flow improved year-on-year, and dividend rates remained stable. In 2023, we achieved a comprehensive gross profit margin of 26.7%, +0.5pp year on year, with a period cost ratio of 12.9% and +1.4pp. Among them, sales/management/finance/R&D expenses remained flat year-on-year /+0.2pp/+0.6pp/+0.6pp, respectively. Profitability was generally stable, and the cost ratio increased slightly. Benefiting from a year-on-year increase in profit and a year-on-year improvement in cash flow, achieving net operating cash flow of 6.24 billion yuan, +36.5% year over year. As of the end of 2023, the balance ratio was 51.6%, which is basically the same as the previous year. At the same time, a cash dividend of 1.10 billion yuan is proposed, and the dividend rate is stable at 40%.
Risk warning: demand recovery falls short of expectations; competition intensifies supply pattern deterioration; cost increases exceed expectations.
Investment advice: At the bottom of the profit range, strategic expansion is steadily advancing contribution growth. Maintaining the “buy” rating, cement profits are currently close to the bottom, and there is limited room for further decline in the future. At the same time, the company continues integrated transformation and overseas development, and the non-cement business and overseas markets gradually contribute new growth points, and it is expected that they will continue to provide support in the future. Based on the slow recovery in overall demand, the 24-25 profit forecast was lowered. EPS is expected to be 1.36/1.61/1.83 yuan/share for 24-26, corresponding PE is 10.3/8.7/7.6x, maintaining the “buy” rating.