The company achieved net profit of 0.052 billion yuan in the first half of the year, down 65.36% year on year. In the first half of the year, it achieved revenue/net profit to mother of 4.3/0.052 billion yuan, +0.85%/-65.36% year-on-year, and realized net profit without return to mother 0.028 billion yuan, or -79.40% year-on-year. Among them, Q2 achieved revenue/net profit attributable to mother of 2.733/0.068 billion yuan in a single quarter, -12.49%/-53.15% year-on-year, after deducting non-return net profit of 0.066 billion yuan, or -53.00% year-on-year. Non-recurring profit and loss were mainly government subsidies included in current profit and loss.

Revenue from basic building materials has declined, and digital logistics can be expected to grow

24H1's basic building materials business revenue was 1.27 billion yuan, or -32.9% year over year. Among them, cement and clinker achieved sales revenue of 1.08 billion yuan, or -35.2% year over year, and sales volume -25.8% year over year reached 4.57 million tons. It is estimated that the average price per ton fell by 35 yuan to 236 yuan/ton over the same period last year. Affected by the drop in raw fuel prices, the cost per ton was reduced by 20 yuan to 203 yuan/ton. Ultimately, gross profit per ton was 33 yuan, a year-on-year decrease of 15 yuan/ton, and gross margin of -3.6 pct year-on-year reached 14.1%. Since the second quarter of this year, there has been a wave of cement price increases across the country. By the end of July, the average price of cement in Ningxia/Inner Mongolia was 440/415 yuan respectively, 50/20 yuan higher than before the price increase. In August, the price of cement in Ningxia fell slightly by 20 yuan to 420 yuan/ton. The company's cement profit is expected to improve in the second half of the year compared to the first half of the year. 24H1 aggregate/concrete sales volume was 2.06 million tons/0.44 million square meters, respectively, -2.8%/-23.2% year over year, gross margin +9.0/+3.9pct reached 37.2%/24.9%, respectively. Aggregate profitability improved. In 24, the company plans to achieve 11.17 million tons/3.85 million tons/1.24 million square meters of cement clinker/aggregate/concrete sales. In 2014, H1's digital logistics business revenue was 3.02 billion yuan, +28.63% year on year, and gross margin of -0.06pct reached 0.11% year on year. Of these, revenue from transportation services/value-added services was 2.91/0.111 billion, gross margin was 0.01%/2.71%, respectively, and -0.01/-2.88pct year on year. Up to 24H1's digital logistics business has covered 31 provinces, with a cumulative total of 1.647 million registered vehicles, +0.317 million vehicles compared to the previous year, which is expected to form a new growth pole in the future.

The gross margin increased month-on-month, and the cost ratio was reduced

The company achieved a gross profit margin of 4.93% in the first half of the year, with an overall gross profit margin of 6.77% in the Q2 quarter, and -2.73/+5.04pct yoy, respectively. The cost rate for the first half of '24 was 3.65%, -0.08pct year on year, with sales/management/ development/ finance expense ratios of -0.08/-0.27/+0.19/+0.08pct year on year, respectively. The decrease in sales expenses was mainly due to a decrease in employee remuneration and production safety costs. In the end, the company's net interest rate for the first half of '24 was 1.12%, -2.65pct year on year. The balance ratio at the end of 24H1 was 34.97%, +4.65pct year-on-year. Net operating cash flow in the first half of the year was 0.157 billion yuan, -0.039 billion yuan year on year, revenue ratio +0.92 pct year on year reached 68.72%, and payment ratio of +3.08 pct year on year reached 60.98%.

The digital logistics business is expected to empower the company's growth and maintain the “buy” rating. In the long run, the company's digital logistics business is expected to form a new growth pole. Considering the decline in the company's performance in the first half of the year, the 24-26 net profit forecast was lowered to 0.2/0.3/0.38 billion yuan (previous value 0.36/0.41/0.47 billion yuan), giving the company 0.75 times PB for 24 years, and the target price of 11.41 yuan.

Risk warning: Demand for cement falls short of expectations, price increases fall short of expectations during peak season, rising coal costs, etc.