The company released its 2024 quarterly report, achieving revenue of 7.08 billion yuan, +6.9% year on year, net profit of 290 million yuan, +3.3% year on year, and net profit to mother of 180 million yuan, -28.4% year on year.
Domestic cement is under pressure, and overseas cement is contributing to growth. Demand for real estate and infrastructure was weak in the first quarter. According to the National Bureau of Statistics, the Q1 cement industry's output fell 12% year on year (16% decline in direct calculation of production), and the company's domestic cement business sales are expected to decline by double digits; overseas cement sales increased year on year, mainly due to the three national projects in Oman, South Africa and Mozambique, which were acquired in 2023, contributing to the increase in the first quarter. According to Digital Cement Network and Wind, the average Q1 prices in the Hubei and Southwest regions, where the company's core layout is -18% and -15%, respectively, and the average price of coal is -20%. Domestic cement profits are expected to be under pressure; overseas cement profits will continue to be at a high level to hedge against the decline in domestic cement.
Aggregate profits have stabilized, contributing to increased performance. As the company's aggregate and concrete production capacity is released and utilization rates increase, Q1 sales are expected to grow strongly. Outstanding aggregate cost competitiveness, resource attributes and company location advantages stabilize profit levels, and integrated concrete operations bring strong competitiveness.
Exchange gains and losses and minority shareholders' equity affect performance. Expenses increased by 223 million yuan year-on-year during the Q1 period, of which sales/management/R&D/finance expenses increased by 0.24/0.63/0.22/ 113 million yuan respectively. The year-on-year increase in sales and management expenses was mainly due to the company's aggregate concrete and overseas project expansion. The year-on-year increase in financial expenses was mainly due to a year-on-year decrease in exchange profit and loss. Q1 The profit and loss of minority shareholders was 115 million yuan, an increase of 80 million yuan over the previous year, mainly due to an increase in the share of some non-wholly-owned projects.
Profit forecasting and investment advice. We expect the company's net profit to be $29/33/3.6 billion, respectively. According to the latest closing market value, PE is 10.5/9.2/8.5 times, and PB is 1.0/0.94/0.88 times, respectively. Referring to comparable company valuations and company growth, we maintain the judgment that the company's A shares have a reasonable value of 19.64 yuan/share and H shares have a reasonable value of HK$11.00 per share, corresponding to the 2024 PB valuation of A shares, maintaining an A/H “buy” rating.
Risk warning. Risks such as falling demand for cement, risk of declining performance due to severe overcapacity, and low expectations for overseas cement and aggregate expansion.