Description of the event

In the first three quarters of 2024, the company's revenue was 61.46 billion yuan, down 23.55% year on year, and net profit to mother was -3.748 billion yuan, down 7471.1% year on year. Looking at a single quarter, total revenue for Q3 was 21.76 billion yuan, down 19.24% year on year, and net profit to mother was -0.334 billion yuan, down 267.64% year on year.

Incident comments

Industry-level demand and profits continue to be under pressure. The area of new housing construction in the first three quarters of 2024 decreased by 22.2% year on year; infrastructure investment (excluding electricity, heat, gas and water production and supply) increased by 4.1% year on year, down from the 5.9% growth level for the whole of last year. In the first three quarters of 2024, the country's cement production was 1.327 billion tons, down 10.7% year on year; among them, cement production growth rates in a single month of 7/8/9 were -12%, -12%, and -10%, respectively.

At the company's operating level, in the first three quarters, the company sold 165.3 million tons of cement clinker, down 15.52% year on year; sellers mixed 53.15 million square meters, down 0.73% year on year; sold 93.36 million tons of aggregate, down 9.22% year on year. Based on this, we estimate that the company's sales volume declined by about 20% in a single quarter in 24Q3, which is more than the industry average. Furthermore, on the aggregate side, we expect prices to drop slightly from month to month as some additional production capacity is implemented in the region.

Aggregate resource attributes are strong, and prices and profits have remained at a good level in the past few years. Based on this, peers, including companies outside the industry, have also chosen to expand. The company has a central enterprise background and has an advantage in mine layout, so the aggregate layout is at the forefront. Currently, the cement business is basically at the bottom, and we expect the company to achieve higher growth flexibility overseas and in the aggregate business.

24Q4 The domestic market ushered in elasticity. According to the Digital Cement Network, the Yangtze River Delta and some other regions have made significant price increases since September, and the actual implementation situation is relatively good. We think there are a few differences between this price increase and the previous one: 1) it occurred during the peak season; 2) the supply was more intense; 3) the price increase was larger in a single round; 4) the policy expectations were more clear. 24Q4 is the traditional peak season, and it is expected that supply constraints during the peak season will bring some profit flexibility.

Looking forward to medium-term flexibility overseas. In July 2024, the company announced that Sinoma Cement, its holding subsidiary, plans to acquire 100% of the shares of CJO in Tunisia and its GJO company. This acquisition is the company's first project to be implemented in Africa in recent years based on Sinoma Cement. It will follow up or rely on the company's technical reform service capabilities to further reduce costs and increase efficiency. The African market is booming. As a state-owned enterprise, the company has strong resource endorsements from both downstream channel customers (close cooperation with construction central enterprises) and its own equipment EPC construction (Sinoma International). They are optimistic about the company's future layout in the African market, and look forward to the implementation of more projects to bring medium-term flexibility to the company.

The 2024-2025 performance is expected to be 0.18, 1 billion, and the corresponding PE is 257 or 46 times.

Risk warning

1. Demand recovery falls short of expectations; 2. Aggregates, etc. are progressing slowly.