The company achieved net profit of 1,965 billion yuan for the full year of '23, a year-on-year decline of 56.74%. The company published its annual report for the year 23 and the quarterly report for the year 24, and realized annual revenue/net profit to mother of 1073.80/1.965 billion yuan, -19.01%/-56.74%, and realized net profit deducted from the full year of 585 million yuan, -78.37% year-on-year. The non-recurring profit and loss was mainly due to income from disposal of fixed assets and intangible assets, as well as receiving more income from government subsidies such as tax rebates. Among them, Q4 achieved revenue/net profit to mother of 269.93/1.914 billion yuan in a single quarter, -20.48%/+301.08% year-on-year, after deducting non-attributable net profit of 984 million yuan, or +463.33% year-on-year. 24Q1 achieved revenue/net profit attributable to mother of RMB 163.51/ -1.923 billion yuan, or -26.94%/-56.21% YoY, and realized net profit without deduction of RMB2.148 billion, or -50.59% YoY.

The price and cost of cement fell at the same time, and gross margin remained basically flat

The company achieved revenue of 71.07 billion yuan in cement and clinker in '23, a year-on-year decrease of 20%. In terms of sales, cement/clinker in '22 was 23553/27.79 million tons respectively, down 1.4%/14.9% year on year. The average comprehensive ton price decreased by 59 yuan to 270 yuan/ton. Affected by the drop in raw materials and coal prices, the cost of a ton fell by 50 yuan to 231 yuan/ton. Ultimately, gross profit per ton was 39 yuan, a year-on-year decrease of 9 yuan/ton. The gross margin fell by only 0.07 pct to 14.3%.

Aggregate sales continued to grow. In the future, it may be an important profit growth point for the company's concrete business revenue of 27.74 billion yuan, -19% year-on-year, and -3% year-on-year sales volume reached 76.74 million square meters. Affected by the downturn in the real estate market, prices fell 71.2 yuan to 361 yuan/square meter. At the same time, due to the decline in cement and gravel prices, the cost decreased by 58.6 yuan to 314 yuan/square meter. The final gross profit margin increased by 5 yuan to 65 yuan/square meter year on year, gross margin reached 13% year on year, and gross profit ratio fell slightly by -0.7 pct year on year to 1.4 pct year on year 21% Aggregate business revenue was 5.84 billion yuan, +6% year on year, sales volume reached 142 million tons. The estimated average price per ton cost was 41/23 yuan, down 6.8/2.2 yuan, respectively. Ultimately, gross profit per ton was 18 yuan, down 4.6 yuan/ton year on year, gross margin -3.4 pct year on year reached 44%, gross profit ratio increased by 2.5 pct year on year, and performance contribution increased by 2.5 pct year on year. In 23 years, the company continued to invest in the construction of an aggregate production base project with an annual output of 40 million tons of Chizhou China Building Materials Co., Ltd., with a total investment of about 10.613 billion yuan. The profit contribution of the aggregate business is expected to continue to increase in the future.

The company's overall gross profit margin in '23 was 16.19%, +0.13pct year on year. Among them, Q4's overall gross profit margin for the single quarter was 19.46%, +5.08/+4.36pct yoy, respectively. The cost ratio for the 23-year period was 13.32%, +1.70pct year on year. Among them, the sales/management/ R&D/finance expenses ratio was 0.11/0.89/0.78/0.15pct, respectively, and the net profit ratio was 1.87%, and the net profit ratio was 1.96pct year over year. The 24Q1 company's overall gross profit margin was 7.79%, -2.54/-11.67pct yoy, respectively. 24Q1 achieved a net profit margin of -13.15%, or -6.84/-21.23pct yoy.

Optimistic about Cement+ and overseas growth prospects, the “Buy” rating company mentioned in the “Double Improvement of Quality and Return” transformation in the “Double Improvement of Quality and Return” action plan, focusing on the three major factors of “dual carbon, cement +, and internationalization”. We believe that there is still room for the company's main cement business to reduce costs and increase efficiency, and at the same time, it is expected to use the Group's advantages to speed up the pace of going overseas. Taking into account the decline in performance in '23, the company's net profit forecast for 24-25 was lowered to RMB 2.6/2.44 billion (previous value of RMB 5.73 billion), and the net profit to mother for '26 was estimated to reach RMB 2.65 billion. Referring to comparable companies, the company was given 0.75 times PB for 25 years, with a target price of 8.84 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.