Steady revenue growth, high dividends enhance return on investment
The company 24H1 achieved revenue of 20.89 billion yuan, +1.68% YoY, net profit 1.399 billion, +2.28% YoY, net profit 1.402 billion, +5.97% YoY; Q2 achieved revenue of 10.607 billion, +0.68% YoY, net profit to mother of 0.763 billion, +1.61% YoY, net profit to mother of 0.748 billion, +0.95% YoY. The company's revenue was basically stable in the first half of the year. The gross margin improved year on year, and the increase in the cost ratio dragged down the profit growth rate. The company announced an increase in the dividend ratio. It is estimated that the 24-year dividend will correspond to the current stock price dividend rate of 5.06%, and high dividends will enhance investment attractiveness. Considering the downturn in the domestic cement industry, we lowered the company's net profit from 24-26 to 3.22, 3.58, and 4 billion (previous values were 3.28, 3.79, 4.38 billion), and approved to give the company 12 times PE in 24 years, with a target price of 14.9 yuan, maintaining a “buy” rating.
The growth rate of the operation and maintenance business was impressive. The equipment business accelerated the “two foreign” expansion of the company's engineering technology services, high-end equipment manufacturing, and production and operation services in the first half of '24, achieved revenue of 12.099, 2.916, and 5.673 billion, respectively, +4.82%, -23.07%, and +22.22%, with gross margins of 15.54%, 23.25%, and 21.93%, respectively, compared with +0.62 pct, -0.51 pct, and +3.18 pct.
The operation and maintenance business performed well. Mine operation and maintenance, cement and other operations and maintenance achieved revenue of 3.595 and 2.078 billion yuan, compared with +27.88% and +13.54%, with gross margins of 16.59% and 31.19%, respectively, +3.38pct and +3.92pct compared to the same period last year. The equipment business actively implemented “two foreign” expansion. The share of overseas equipment business revenue increased to 32%, and the share of revenue from the foreign industry increased to 49%. The pace of territorial operation accelerated, and 24H1 achieved overseas revenue of 9.353 billion yuan, +15.23% year over year; gross profit margin of overseas business was 22.61%, +3.65pct year on year.
The equipment, operation and maintenance business accelerated overseas expansion, and the company signed 37.09 billion new orders in the first half of the year, with sufficient on-hand orders to guarantee medium- to long-term development potential, or -9% compared to the same period last year. Among them, new overseas orders were 23.462 billion yuan, +9% year-on-year. New overseas engineering service orders were 19.726 billion yuan, +4% over the same period, and 15 cement line projects were obtained from the Czech Republic, Saudi Arabia, the Philippines, and Iraq; the new overseas orders for equipment, production and operation services were 1.241 and 2.322 billion, +58% and +37% over the same period last year. In the first half of the year, 13.628 billion new domestic orders were signed, -28% year-on-year, while new domestic orders for engineering services, equipment manufacturing, production and operation were -58%, -33%, and +42%, respectively. The operation and maintenance business added 6 new cement operation and maintenance service production lines compared to the beginning of the year, 67 more mining projects were implemented, and 1 new overseas mine project was added. As of 24H1, the company's effective carry-over contract amount was 59.244 billion, +6.89% over the previous period.
H1 gross margin increased slightly and cash flow improved year over year
24H1's comprehensive gross margin was 19.4%, +1.04pct year on year, and the Q2 quarterly gross margin was 19.31%, -0.4 pct year on year. The cost ratio increased slightly by 0.93 pct to 10.49% during the 24H1 period. Sales, management, R&D, and financial expenses rates were -0.07 pct, +0.32 pct, and +0.74 pct, respectively. Management expenses increased 0.137 billion yuan year over year, and financial expenses increased 0.155 billion year over year. Asset and credit impairment losses were 0.086 billion, a decrease of 0.035 billion compared to the same period last year. Under the combined influence, the company's net interest rate was 7.11%, -0.05pct year on year, and the Q2 net profit margin for the single quarter was 7.62%. The net CFO of 24H1 was 0.885 billion, a year-on-year correction, with an additional inflow of 1.825 billion yuan; the revenue and cash ratio changed by +4.55 pct and -4.06 pct, respectively. The net CFI was -0.967 billion, an increase of 0.974 billion over the previous year, mainly due to the payment of investment in Sinoma Cement.
Risk warning: Overseas business risks; operation, maintenance and equipment business growth falls short of expectations, order conversion falls short of expectations; domestic cement industry decline exceeds expectations.