occurrences

24H1 revenue of 20.89 billion yuan, yoy +1.7%, net profit of 1.4 billion yuan, yoy +2.3%, net profit of 1.4 billion yuan, yoy +6.0%; single 24Q2 revenue of 10.61 billion yuan, yoy +0.7%, net profit to mother 0.76 billion yuan, yoy +1.6%, net profit due to mother 0.75 billion yuan, yoy +1.0%. Revenue growth was dragged down by the domestic cement business, and the slowdown in net profit growth was mainly due to a large increase in exchange losses (24H1 was 0.22 billion, up 0.16 billion).

Stable engineering infrastructure, continuous rapid growth in operation and maintenance and overseas

24H1 engineering/equipment/operation and maintenance revenue was 12.1/2.92/5.67 billion yuan, yoy +4.8%/-23.1%/+22.2%.

The basic structure of the project is steady, operation and maintenance continues to increase. Equipment is affected by the sluggish domestic cement boom, and “two external” expansion is effective, declining or phased. At the end of 24H1, 348 mine operation and maintenance projects were implemented, including 6 overseas; the mineral supply volume was 0.031 million tons, yoy +9%, cement supply market share increased, and 62 cement operation and maintenance production lines were implemented.

24H1 domestic and foreign revenue was 11.44/9.35 billion yuan, yoy -7.2%/+15.2%. Overseas revenue is growing rapidly, and domestic cement companies' capital expenditure capacity is weak, which affects domestic revenue growth in stages.

Q2 Gross margin was slightly pressured, and exchange losses affected net interest

24H1 gross profit margin 19.4%, yoy+1.0pct; single Q2 gross profit margin 19.3%, yoy-0.4pct. 24H1 engineering/equipment/operation and maintenance gross margin was 15.5%/23.3%/21.9%, yoy+0.6/-0.5/+3.2pct. The cost ratio yoy+0.9pct to 10.5% for the period was mainly due to higher exchange losses, and the financial expense ratio yoy+0.7pct to 1.1%. Impairment losses were reduced, and the net interest rate for 24H1 was 6.7%, the same as the previous year; the net interest rate for single Q2 was 7.2%, yoy+0.1pct.

The balance sheet continues to be consolidated, and operating cash flow has improved significantly

The balance ratio at the end of 24H1 was 62.5%, yoy-1.5pct. The interest-bearing debt ratio is 12.2%, yoy-0.8pct. 24H1 Futures has a turnover of 204 days, yoy+33 days. 24H1 operating cash flow increased by 1.83 billion year on year to a net inflow of 0.89 billion, mainly due to the company's enhanced project settlement payments; investment cash flow increased by 0.97 billion year over year to a net outflow of 0.97 billion yuan, mainly due to the payment of investment in cement.

Competitiveness continues to improve, and the business model continues to be optimized to maintain the “purchase” rating. We expect the company's revenue for 24-26 to be 50.5/56.4/63.8 billion yuan, respectively, +10%/12%/13% year over year; net profit to mother will be 3.3/3.7/4.3 billion yuan, respectively, and +13%/14% year over year, respectively. EPS was 1.25/1.42/1.62 yuan/share, respectively. The company is a leading service leader in the global cement industry. The “trifecta” trend of operation and maintenance/equipment/engineering is beginning to show. Digitalization/intelligence/greening leads the transformation of the cement industry and maintains a “buy” rating.

Risk warning: cement industry downturn exceeds expectations, overseas expansion falls short of expectations, operation and maintenance equipment development falls short of expectations, exchange rate fluctuations