3Q23 turns into losses on a month-on-month basis, but the balance sheet is slightly optimized.
The 3Q23 of Jinyu Group realized a net profit of-399 million yuan attributed to the parent company, and the month-on-month ratio changed from profit to loss (2Q23:
+ 742 million yuan). In the context of demand-side pressure, the profitability of the two main industries, cement and real estate, are still facing challenges. Thanks to the still stable free cash flow (4.07 billion yuan in the quarter, + 0.6% from the previous quarter), the net debt ratio at the end of the period was 84.5%, and the balance sheet was still slightly optimized on a month-on-2.9pp basis. We maintain the 2023 EPS 2024 EPS 2025 forecast of 0.06 pound 0.17 pound 0.21 yuan. The target price of BMY Group Amax H is 3.62 yuan / 2.62 Hong Kong dollars, which is based on 0.6x and 0.4x2023-2024 average 2023/2024BPS:5.96/6.11 yuan, respectively, which is consistent with the historical average of BBMG Group Amax H since 2016. Although it will take time for demand to pick up and profits to recover, given the company's strong competitiveness in both cement and real estate businesses, market volatility is expected to be more relaxed and maintain "buying".
Revenue and gross profit margin fell, and cost control performed well.
3Q23's operating income is-4.4% to 23.46 billion yuan compared with the same period last year, with a gross profit margin of 10.0%, year-on-year / month-on-month respectively-6.8pp/-3.1pp. Among them, the operating income of Jidong cement, a subsidiary, was-25.2% to 7.86 billion yuan from the same period last year, mainly affected by the weakening cement prices in the region where the company is located; the gross profit margin was 17.4%, which improved 0.1pp on a month-on-month basis, reflecting that the profitability of the cement business was stabilizing. Excluding Jidong cement, the operating income is + 11.1% to 15.6 billion yuan from the same period last year, but the gross profit margin is lower than the same period last year / month-on-month, respectively, reflecting that the comprehensive gross profit margin of real estate development and operation and trade logistics still needs to be improved. 3Q23 sales management and R & D expenses of 1.98 billion yuan, year-on-year / month-on-month ratio of-17.6% /-20.7% respectively; sales management and R & D comprehensive expense rate of 8.5%, year-on-year / month-on-month ratio respectively-1.3pp/1.2pp, reflecting the company's good achievements in cost control.
Cement prices have stabilized during the peak season, and steady growth has contributed to the gradual repair of cement prices in various regions of the country since the profit recovery entered the peak season in 2024. Since late September, prices as a whole have achieved a moderate repair after stabilization. Since October, the cement price in the area where Jidong cement is located has improved by 7 yuan / ton compared with September, but it is still 4 yuan / ton lower than the average price of 3Q23. As the northern market approaches the end of the peak season, the room for further price repair may be limited, 4Q23 profits may still be under pressure. But as the determination to stabilize growth becomes clearer, we expect more marginal improvements on the demand side and more ripe conditions for earnings recovery in 2024.
Risk hint: the competition and cooperation ecology of the cement industry is weaker than expected, and real estate sales stabilize more slowly than expected.