Introduction to this report:

The company announced its 2024 mid-year report. Cement shipments remained superior to the resilience of the industry and the bottom profit was stable. The price recovery from Liangguang boosted 24H2 prices and profit expectations; aggregate growth remained high, production capacity was released at an accelerated pace, and the “gain” rating was maintained.

Key points of investment:

Maintain an “Overweight” rating. China Resources Building Materials Technology released its 2024 semi-annual report, achieving revenue of 10.312 billion yuan, a decrease of 13.9%, and net profit of 0.166 billion yuan to mother, a decrease of 70.2%; calculated 24Q2 revenue of 5.467 billion yuan and net profit of 0.195 billion yuan to mother. The results forecast for the previous period was announced, which is in line with expectations. 24H1 was affected by the further decline in cement demand, continued regional rainfall, and fierce price competition, etc., and the company's cement shipments and tonnage profitability were under pressure, but Q2 has stabilized at the bottom, and aggregate growth is partly hedging the pressure on cement. As a leader in South China, the company has a strong regional voice. The two Guangzhou markets work together to promote price recovery, and the main business profit is expected to rise steadily; the aggregate business is growing rapidly, smoothing out fluctuations in cement profits, contributing to new profit growth points, and maintaining a “gain” rating.

Cement shipments remain superior to industry resilience. In 24H1, the country's cement production fell 10% year on year, with Guangdong and Guangxi falling 9.7% and 9.4%. The company shipped 28.96 million tons of cement and clinker at 24H1, a year-on-year decrease of 2.0%. Of these, 24Q2 shipped 15.93 million tons, a year-on-year decrease of 7.1%.

Since 24Q2, it has mainly been due to continued weak demand, compounded by changes in price strategies in the industry, increased profit attention, and mixed peak development. Although the company's shipments declined year over year, they still outperformed the overall level of the region, showing strong resilience.

Cement's profit or bottom stabilized, and gross profit rebounded slightly in Q2 tons. The average price of the company's 24H1 cement and clinker was 238 yuan/ton, of which the 24Q2 average price was 233 yuan, down 11 yuan. It is expected to be mainly affected by the further price reduction in the 24Q2 company's core region. The price increase in mid-late June will have a certain hedging effect; the 24H1 ton cost is 210 yuan, and the estimated 24Q2 ton cost cost is about 203 yuan, down about 14 yuan from month to month. The bottom profit trend of 24H1 ton is about 29 yuan, and the gross profit trend of 24Q2 tons is about 30 yuan, up 3 yuan from month to month., at the same time Along with the good implementation of the price recovery in Liangguang, Q3 earnings are currently expected to recover.

Aggregate growth remains high, and production capacity is released at an accelerated pace. The company shipped 29.5 million tons of 24H1 aggregates, an increase of 107% over the previous year. The average price was 36.8 yuan/ton, and the gross profit per ton was 14.5 yuan. Looking at segment performance, the absolute value and proportion of the aggregate business's profit contribution have increased significantly, smoothing out the fluctuations in cement profits. The company's aggregate production capacity was released at an accelerated pace. By the end of 24H1, the aggregate production capacity was 93.5 million tons, and production capacity is expected to reach 0.136 billion tons after full release of production capacity under construction.

Risk warning: A cliff-style decline in demand and relaxation of supply-side regulation.