The company achieved net profit deducted from mother of 1,368 billion yuan in the first quarter, down 36.56% year on year. In 24Q1, the company achieved revenue/net profit of 213.28/1,502 billion yuan, -32.08%/-41.14%, and realized net profit withheld from mother of 1,368 billion yuan, or -36.56% year on year. Non-recurring profit and loss were mainly government subsidies included in current profit and loss.
24Q1 cement volume and price may be under pressure simultaneously, and Q2 prices are expected to rebound
In January-March, the country's cement production ratio was -11.8%. The company's main region was in East China, and cement production was -10% year-on-year in January-March. Considering the company's leading position, we judge that the decline in the company's sales volume may be lower than the national level. In terms of price, we calculate that the average price of cement in East China in the first quarter was 363 yuan/ton, -80 yuan year on year. The average price of the company's ton may have decreased year on year. At the beginning of April, cement prices in the Eastern region ushered in the first round of increases this year. The overall increase was 20-30 yuan/ton, or reflected that the company's business strategy this year was adjusted compared to previous years, and demand for profit increased. As of April 26, the average price of cement in East China was 359 yuan/ton, fluctuating upward from March. On the supply side, many parts of the Yangtze River Delta region began to increase production stoppage times in April and May, which is expected to push cement prices to continue to rebound, and the company's profits may have marginal improvement opportunities. In '23, the company spent 19.51 billion yuan in capital expenditure, adding 705/40.7 million tons of cement/aggregate production capacity, 14.3 million cubic meters of concrete, 67 megawatts of installed capacity of optical storage power generation. At the end of '23, it had clinker/cement production capacity of 272/395 million tons, 49 million tons of aggregate, 39.8 million cubic meters of concrete, and 542 megawatts of installed capacity for optical storage power generation in operation. The company plans to spend 15.2 billion yuan on capital in '24, a decrease of 22.1% compared with actual expenditure in '23. It is expected to add 390/840/25.5 million tons of clinker/cement/aggregate production capacity and 7.2 million cubic meters of commercial mixing in '24, and production capacity will continue to expand.
Expenses increased year-on-year, and profits recovered month-on-month
24Q1 The company's overall gross profit margin was 17.75%, +1.24/+5.33pct YoY, respectively. The cost ratio for the period was 9.36%, +2.26pct year on year, with sales/management/R&D/finance expenses ratios of 0.87/1.62/0.06/-0.29pct year on year, respectively. The 24Q1 company achieved a net profit margin of 6.98%, year-over-year/ -1.54/+2.98pct. The balance ratio at the end of 24Q1 was 18.77%, +0.27pct year over year. The net operating cash flow for 24Q1 was 160 million yuan, or 2,935 million yuan, mainly due to the revenue ratio -3.0 pct to 117.56% year over year, and the pay-as-you-go ratio of +1.9 pct year over year of 114.09%.
The dividend rate remains high and the “buy” rating is maintained
We believe that the company's main cement business still has a strong competitive advantage. Currently, there is limited room for profit decline. If demand stabilizes, price flexibility can still be expected. At the same time, aggregates, commercial mixing, environmental protection, and overseas markets are expected to provide profit increases. The dividend amount converted from the company's cash dividends and cash repurchases of A-shares in '23 was $5.405 billion, accounting for 51.82% of net profit attributable to mother, which remains at a high level. Maintaining the previous profit forecast, net profit due to mother for 24-26 is estimated at 134.1/148.7/16.29 billion yuan. Referring to comparable companies, the company was given 0.8 times PB for 24 years, corresponding to a target price of 29.15 yuan, maintaining a “buy” rating.
Risk warning: Demand for cement falls short of expectations, price increases fall short of expectations during peak season, rising coal costs, etc.