Matters:
The company announced its 2024 quarterly report, achieving revenue of 21.33 billion yuan, down 32.1% from the same period of the previous year, and net profit to mother of 1.50 billion yuan, down 41.1% from the same period of the previous year.
Ping An's point of view:
The volume and price of cement came under pressure in the first quarter, and the decline in gross profit per ton dragged down performance. The volume and price of the cement industry were under pressure in the first quarter due to the continued decline in new real estate construction and weak demand for physical infrastructure. According to the Digital Cement Network, national cement shipments fell 13 pct to 50% year on year in the 3rd week of April. Therefore, despite the year-on-year decline in coal costs in the first quarter, cement prices fell even more, leading to a year-on-year decline in the company's gross profit per ton, compounded by a contraction in sales volume, and net profit to mother fell 41% year on year in the first quarter. During the period, the company's expenses fell 10% year on year, but shrinking revenue caused the period rate to increase by 2.3 pct to 9.4% year over year. As subsequent treasury bond issuance projects are gradually implemented and the superposition industry strengthens collaborative production, cement profits are expected to bottom out and stabilize.
Net operating cash flow decreased, and cash on hand was sufficient. Net cash flow from operating activities during the period was 160 million yuan, down from 3.09 billion yuan in the same period last year. Mainly due to the year-on-year decrease of 3 pct to 118% of the payout ratio, and the year-on-year increase of 2 pct to 114% of the payout ratio. Cash in hand at the end of the period was 66.34 billion yuan, and accounts receivable, notes and other accounts receivable were 15.31 billion yuan, down 10% from the previous year.
Investment advice: Maintain the company's profit forecast. Net profit due to mother is expected to be 9.1 billion yuan, 10.5 billion yuan, and 11.9 billion yuan respectively in 2024-2026. The current stock price corresponds to PE 13.2 times, 11.5 times, and 10.1 times, respectively. At the industry level, downstream real estate construction continues to bottom out, and the issuance of special treasury bonds is expected to drive subsequent infrastructure demand; at the company level, as a leader in the cement industry, Conch focuses on East China and South China. Market demand is more resilient. At the same time, cost control and operating efficiency have maintained industry-leading levels for a long time. The dividend ratio and dividend ratio are also attractive, so it maintains a “recommended” rating.
Risk warning: 1) Demand repair or erroneous peak production falls short of expectations, and industry supply and demand conflict or increase: If subsequent real estate sales or construction repair efforts are weak, or physical infrastructure demand falls short of expectations, or poor execution of false peak production in various regions, the increase in industry supply and demand conflicts will put pressure on cement volume and price. 2) Prices of raw materials and fuels rise, and there is a risk that profit margins will be further pressured: Currently, coal prices are still high, and the pressure on the cost side of cement production is high. If coal and electricity prices rise later, it will cause further pressure on the company's profit margin. 3) Aggregate, new energy and other business development falls short of expectations: In recent years, the company has actively expanded aggregate stone, concrete, new energy and other businesses to promote collaborative development with the main business and open up future growth space, but there is a risk that related business development will fall short of expectations.