According to the Financial Intelligence APP, CICC released a research report stating that it maintains a "outperform the industry" rating for CR Bldg Mat Tec (01313). Due to significant temporary price pressure, the 2024/25E net income attributable to the parent company has been lowered by 34% / 10% to 0.558 billion yuan / 1.13 billion yuan. Considering the market expectations warming up with industry synergistic recovery, the target price remains unchanged at 2.5 Hong Kong dollars.

CICC's main points are as follows:

The performance in the third quarter of 2024 meets the bank's expectations.

The company announced the performance for the first three quarters of 2024: revenue of 15.77 billion yuan, -13.1% year-on-year, and net income attributable to the parent company of 0.309 billion yuan, -51.6% year-on-year. Among them, the revenue in the third quarter of 2024 was 5.46 billion yuan, -11.5% year-on-year; net income attributable to the parent company was 0.143 billion yuan, +74.5% year-on-year. The company's performance in the third quarter of 2024 meets the bank's expectations.

Cement clinker: The widening decline in sales volume in the third quarter reflects intensified production restrictions. Prices remain in a downward channel after a previous price increase, with a slight recovery in gross profit per ton. Sales volume in the first three quarters of 2024 was 43.875 million tons, -7.3% year-on-year, average price of 237.5 yuan/ton, -51 yuan/ton year-on-year, gross profit per ton of 30 yuan, -9 yuan per ton year-on-year. Sales volume in the third quarter of 2024 was 14.912 million tons, -16.2% year-on-year, average price of 236.6 yuan/ton, -9 yuan/ton year-on-year, -9 yuan/ton quarter-on-quarter, +4 yuan/ton year-on-year, gross profit per ton of 32 yuan, +12 yuan/ton year-on-year, +2 yuan/ton quarter-on-quarter.

Aggregate: Due to the progress of large project supporting facilities construction and adverse market conditions, production and sales release as well as per-ton profit performance fell below expectations. Sales volume in the first three quarters of 2024 was 46.283 million tons, +70.7% year-on-year, average price of 36.2 yuan/ton, basically flat year-on-year, gross profit per ton of 22 yuan, +5 yuan per ton year-on-year. Sales volume in the third quarter of 2024 was 16.786 million tons, +30.4% year-on-year, average price of 35.2 yuan/ton, -2 yuan/ton year-on-year, -2 yuan/ton quarter-on-quarter, -1 yuan/ton year-on-year, -6 yuan/ton quarter-on-quarter, -3 yuan/ton, cost rate increased year-on-year, losses from joint ventures narrowed. The company's operating / management / financial expense ratio in the third quarter of 2024 decreased by -0.1ppt / +2.2ppt / +0.4ppt year-on-year, and losses from joint ventures narrowed by approximately 0.0355 billion yuan year-on-year.

Cash balance increased quarter-on-quarter, and the borrowing rate slightly decreased.

As of the end of 3Q24, the company's cash balance is approximately 1.7 billion yuan, an increase of 0.583 billion yuan from the end of 1H24. The company's loan-to-deposit ratio at the end of 3Q24 is 38.6%, a decrease of 0.2 percentage points from the end of 1H24. The bank believes that the company's 3Q24 may have accelerated its collection, and the overall financial leverage is stable.

Southern China may usher in another price increase opportunity, with significant profit elasticity for the company.

The bank believes that in 4Q24, as the Xijiang River enters the dry season, Southern China may continue to see price increase opportunities. The current strategic focus on profit priority by the company has been firmly established, and core operating area prices are expected to marginally recover. Performance in 4Q24 is expected to rebound quarter-on-quarter. Looking ahead to 2025, as the market collaboratively recovers, the bank believes that the company's profit per ton is expected to increase year-on-year. Simultaneously, with the steady release of the company's aggregate business production and sales, and the alleviation of previous production and transportation bottlenecks, the production, sales, and profit of the aggregate business are expected to accelerate.

Risk

Slow implementation of price increases, demand falling more than expected.