The company achieved net profit deducted from mother of 155 million yuan in the first quarter, down 35.09% year on year. In 24Q1, the company achieved revenue/net profit of 70.84/177 million yuan, +6.87%/-28.43% year-on-year, and realized net profit withheld from mother 152 million yuan, or -35.09% year-on-year. Non-recurring profit and loss were mainly government subsidies included in current profit and loss.
The decline in domestic cement prices dragged down profits. Non-cement and overseas business contributed to a slight year-on-year increase in revenue in the first quarter, mainly driven by revenue growth from overseas and aggregate businesses. The company's annual overseas cement production capacity increased by 8.54 million tons to 20.91 million tons in '23, an increase of 69% over the previous year, and aggregate production capacity +67 million tons to 277 million tons year-on-year. We estimate that the average price of 24Q1 cement in the two lakes and southwest regions of the company was 338/329 yuan/ton, or -92/-57 yuan/ton year on year. As of April 26, cement prices in the two lakes/southwest regions were 330/308 yuan respectively, or -83/-96 yuan year on year, respectively. Prices fell a lot from last year, or were the main factors dragging down profits.
The company's non-cement gross profit in '23 reached 44.4%, +7.8pct year on year, overseas revenue increased 30% year on year, and the share of total revenue +2.4pct reached 16.3% year on year. Non-cement businesses such as aggregates and overseas sectors have become the company's main profit growth points.
Profit declined month-on-month, and financial expenses increased a lot
The 24Q1 company's overall gross profit margin was 21.89%, +1.66/-5.82pct yoy, respectively. The cost ratio for the period was 15.14%, +2.32pct year on year. Among them, the sales/management/ R&D/finance expense ratios were -0.02/+0.50/+0.30/+1.54pct year over year, respectively. The increase in financial expenses over the same period last year was a drag on net profit. We speculate that mainly due to exchange rate changes, the company's exchange losses increased compared to the same period last year. The 24Q1 company achieved a net profit margin of 4.12%, -0.14/ -6.25pct yoy/month-on-month. The balance ratio at the end of 24Q1 was 51.81%, -0.55pct year on year, and the capital structure was optimized. Net operating cash flow was 107 million yuan, -225 million yuan year on year, mainly due to revenue ratio of -4.88pct year on year reaching 88.20%.
Non-cement and overseas business prospects are promising. Maintaining a “buy” rating for 23 years, the company has accumulated a cash dividend of 1.1 billion yuan, with a dividend rate of 40%, corresponding to the current dividend rate of 3.6%.
Against the backdrop of declining domestic demand for cement, the company's aggregate, concrete, and overseas business growth have all begun to materialize, and we continue to be optimistic about the company's medium- to long-term growth. Maintain the company's 24-26 net profit forecast to 32.3/36.5/4.13 billion yuan. Referring to comparable companies, the company was given 12 times PE in 24 years, with a target price of 18.65 yuan to maintain a “buy” rating.
Risk warning: Demand for cement falls short of expectations, price increases fall short of expectations during peak season, rising coal costs, etc.