Incident: The company's 2024H1 revenue was 45.566 billion yuan, down 30.44%; net profit to mother was 3.326 billion yuan, down 48.56%; net profit not returned to mother was 3.185 billion yuan, down 48.25%. The company's 2024Q2 revenue was 24.238 billion yuan, a decrease of 28.92%; net profit to mother was 1.823 billion yuan, a decrease of 53.40%; net profit not attributable to mother was 1.816 billion yuan after deduction, a decrease of 54.63%.

Demand is weak, volume and price have plummeted, and the company's revenue performance is under pressure. On the demand side, due to factors such as real estate demand, the country's 2024H1 cement production fell 13.99% year on year; in terms of price, the average price of 2024H1 cement fell 13.02% year on year. Under pressure from volume and price, 2024H1's revenue fell 30.44% year over year. In terms of cost, coal prices fluctuated downward in 2024H1, falling 14.50% year on year. Although hedging the price decline, cement prices had a greater impact. The performance of the 2024H1 company declined under pressure, and net profit to mother fell 48.56% year on year.

Prices are pressurizing the decline in profits per ton, and the scale effect reduces the increase in ton costs. 2024H1's cement clinker ton revenue decreased by 60 yuan/ton year on year; ton cost decreased by 33 yuan/ton year on year. On the cost side, the cost of 2024H1 cement clinker tons increased by 5 yuan/ton; specifically, management expenses (including R&D) for 2024 H1 tons were basically the same year on year, sales expenses per ton increased by 1 yuan/ton year on year, and ton financial expenses increased by 2 yuan/ton year on year. On the profit side, net profit of 2024H1 cement clinker tons decreased by 12 yuan/ton year on year, and net profit after deducting non-ton net profit decreased by 12 yuan/ton year on year.

Overall, due to the decline in the growth rate of new real estate construction, cement prices fell sharply year on year under pressure from demand. Although coal prices on the cost side declined, it was still impossible to hedge against the price impact, and net profit per ton fell year on year.

High dividends are undervalued, and the margin of safety is sufficient. At present, the company still maintains a high dividend, with a dividend rate above 4%, and the valuation is at an historically low level. As of August 27, Conch Cement's PB was less than 0.70, and the dividend rate remained around 50%. By the end of the 2024H1 quarter, the company's monetary assets exceeded 69 billion yuan, and interest-bearing liabilities were 23.6 billion yuan, with a certain margin of safety.

Investment advice: We expect the company to achieve net profit of 7.466/8.525/9.458 billion yuan in 2024-2026, an increase of -28.4%/14.2%/11.0% year-on-year. The PE corresponding to the latest closing price is 15x/13x/12x times, maintaining the “gain” rating.

Risk warning: Regional collaboration breaks down; industry competition increases risk; macroeconomic downside risk.