The company achieved total operating income of 68.15 billion yuan in the first three quarters of 2024, down 31.27% year on year; realized net profit of 5.198 billion yuan, down 40.05% year on year; net profit after deducting 4.879 billion yuan, down 40.18% year on year; basic EPS was 0.99 yuan/share, down 39.81% year on year; weighted average ROE was 2.80%, down 1.91 pct year on year. (As a result of the company's acquisition of Anhui Hailuo Information Technology Engineering Co., Ltd. and its subsidiary China Carbon (Anhui) Environmental Technology Co., Ltd. in January 2024, it is an enterprise merger under the same control. Historical financial data are all calculated after traceability in this report.)

Market demand is weak, and cement faucet operations are under pressure. The company achieved total operating income of 68.15 billion yuan in the first three quarters of 2024, a year-on-year decrease of 31.27%; realized net profit of 5.198 billion yuan, a year-on-year decrease of 40.05%; net profit after deducting 4.879 billion yuan, a year-on-year decrease of 40.18%; revenue and profit declined significantly, mainly due to the year-on-year decline in sales and prices of the Group's cement business products. Looking at a single quarter, 24Q3 achieved operating income of 22.585 billion yuan, a year-on-year decrease of 32.89%; net profit before and after deduction was 1.873 billion yuan/1.694 billion yuan, respectively, -15.13%/-15.38% year-on-year. According to data estimates from the National Bureau of Statistics, in terms of volume, China's cement production in the first three quarters of 2024 was 1.327 billion tons, down 10.7% year on year; 24Q3 cement production in a single quarter was about 0.476 billion tons, down 12.2% year on year; in terms of price, the average price of 2024Q3 in the national ordinary cement (P.O 42.5) market was 348.72 yuan/ton, up 2.51% year on year 23Q3 and 2.23% month on month. Under weak demand, the cement industry's self-regulation and erroneous peak production brought prices A certain amount of support.

Marginal improvement in profitability and excellent cash flow in 24Q3. The company achieved a gross sales margin of 19.54% in the first three quarters of 2024, +1.19pct, and a net sales margin of 7.70% year-on-year, -1.45pct; the period expense ratio was +2.49pct to 9.93% yoy. Among them, sales/management/ R&D/ financial expenses ratios were +0.87pct/+1.72pct/-0.05pct/ -0.04pct to 3.42%/6.29%/-1.06%. Looking at a single quarter, 2024Q3 gross sales margin/ net sales margin was 20.78%/8.24%, respectively, +4.57pct/+1.50pct; 24Q3 gross sales margin and net sales margin both increased to a certain extent, and the company's profitability recovered. The company's net operating cash flow in the first three quarters of 2024 was 10.348 billion yuan, an increase of 7.15% over the previous year.

Optimize the market layout and continue to expand overseas production capacity. Facing increased competition in the industry and changes in market demand, Conch Cement continues to optimize the market layout, promote the steady implementation of international development strategies, and actively expand the upstream and downstream industrial chains to enhance overall competitiveness. The company focuses on technological innovation and product structure optimization. Through independent innovation and technological progress, the company vigorously promotes energy saving and emission reduction, and develops a low-carbon circular economy, thereby enhancing profitability. In terms of market expansion, the company takes a two-pronged approach in domestic and foreign markets to achieve steady business growth. In terms of project layout, production capacity construction of Conch Cement at home and abroad is progressing steadily. The domestic Wuhu Conch cement grinding project and the Mengcheng Conch grinding project have been put into operation one after another, further strengthening the domestic market layout; in overseas markets, the Andiyan project in Uzbekistan has already been put into operation, and the Phnom Penh project in Cambodia is progressing smoothly.

Supply-side reforms continue, demand-side infrastructure expectations improve, and maintain the “Highly Recommended” rating. On the supply side, on 10/30, the Ministry of Industry and Information Technology revised and issued the “Implementation Measures on Capacity Replacement in the Cement and Glass Industry (2024 version)”. The main contents of the revisions include: further tightening cement replacement requirements; improving production capacity approval methods to promote the unification of registered production capacity and actual production capacity; implementing regional differences management; simplifying cross-regional capacity transfer procedures; and strengthening coordination with energy efficiency and environmental protection policies. On the demand side, expectations for localized debt have increased, helping to release infrastructure investment demand, which is expected to bring performance elasticity to cement leaders. Considering the significant decline in cement demand, we lowered our revenue expectations, but the Q4 cement price increase is expected to bottom out. The company's profitability is expected to bottom out in 25-26. The company's 2024-2026 EPS is expected to be 1.52 yuan, 1.86 yuan, and 2.05 yuan respectively. The corresponding PE is 17.6x, 14.4x, and 13.1x, respectively, maintaining a “highly recommended” investment rating.

Risk warning: Real estate and infrastructure investment has declined sharply, raw material and fuel costs have risen sharply, industry competition has intensified, and new construction projects have fallen short of expectations.