Description of the event

The company released its 2024 semi-annual report: achieved revenue of 3.7 billion yuan, a year-on-year decrease of 16%; net profit of 0.39 billion yuan, a year-on-year decrease of 27%.

Incident comments

2024H1 The entire cement industry is under pressure to operate. According to statistics from the National Bureau of Statistics, in the first half of 2024, the country's cement production was 0.85 billion tons, a year-on-year decrease of 10%. In January-May, the large-scale cement industry lost about 3.4 billion yuan, and the company lost more than 55%; according to Digital Cement Network, the cement industry lost about 1 billion yuan in the first half of the year. Looking at the company's core market, 2024H1 Shaanxi's fixed investment growth rate was 2.7% (1.4% increase in the same period last year), and real estate development investment fell 0.4% year on year (5.9% increase in the same period last year).

As far as the company is concerned, domestic pressure is under pressure, there is an increase overseas, and overall performance has declined slightly.

From a sales perspective, the company's 2024H1 overall sales volume was 8.75 million tons, a year-on-year decrease of 8.3%. Looking at the subregions: 1. Domestic companies' cement sales in Shaanxi, Xinjiang, and Guizhou were 5.95, 0.78, and 0.36 million tons, respectively, down 8.9%, 11.4%, and 32.1% year on year, respectively. Guizhou saw the biggest decline, mainly due to strong regional financial pressure. Key projects and real estate were all under greater pressure. The relatively small decline in Shaanxi was mainly due to the acceleration of construction of some key highways and high-speed railways. 2. Overseas, sales volumes in Mozambique and Ethiopia were 0.72, 0.42, and 0.33 million tons, respectively, down 2.7% and 36.4% year on year, and increased 756%, respectively. The large decline in sales in Ethiopia was mainly due to the local government's ban on the import of coal, which prevented the company's production and sales.

In terms of prices, domestic pressure is under pressure, and overseas is better. Looking at regions: 1. The company's price in Xinjiang is 409 yuan/ton (415 yuan/ton in the same period last year), the price in Guizhou is 404 yuan/ton (385 yuan/ton in the same period last year), and the price in Shaanxi is 244 yuan/ton (303 yuan/ton in the same period last year). 2. The company's sales price in Mozambique is 681 yuan/ton (638 yuan/ton in the same period), the sales price in Ethiopia is 842 yuan/ton (875 yuan/ton in the same period last year), and the price of gold in the Congo is 1,049 yuan (1,509 yuan/ton in the same period last year).

The company's production capacity layout is gradually improving, and overseas is the core increase. As of 2024H1, the Group's total production capacity reached 34.3 million tons, including 21 clinker production lines. Production capacity in Shaanxi Province, Xinjiang Province, Guizhou Province, Mozambique, Congo Gold, Ethiopia and Uzbekistan reached 2170, 350, 180, 200, 1.5, 1.3, and 2.5 million tons, respectively. In addition, the company's total aggregate and commercial concrete production capacity is 15 million tons and 12.4 million square meters, respectively.

Overseas market outlook: steady expansion, declining business. 1. Mozambique: Currently, the civilian sector in the southern market has stabilized. In 2024, the focus will be on sales in central and overseas (South Africa, Zimbabwe, Madagascar); 2. Congo Gold:

The Great Lakes plant can export clinker and cement to neighboring countries such as Burundi, Rwanda, and western Tanzania. In the Lake Tanganyika area, there is currently only one established cement factory and 4 grinding stations. Currently, the region is facing a shortage of clinker. Locally imported clinker mainly comes from Tanzania, Zambia, etc., and the amount of clinker is unstable. The company's Dahu plant can quickly occupy the market with stable quality and lower price strategies. 3. Ethiopia: Demand for cement is currently strong. The company expects that regions such as Addis Ababa, Amhara and Oromia will carry out a number of key projects, such as new capital construction, airport construction, and national highway and railway projects. The company's 10,000-ton line was also put into operation in 2024Q3, and it is expected that the gradual climb will release increases. 4. Uzbekistan: The company built a new 6000tpd daily clinker production line in Andiyanzhou, which was put into operation in May 2024. Currently, the average price of local cement is about 50 US dollars per ton. It is expected that the two new projects will contribute even more to the company's performance after they are put into operation. The company's 2024-2025 performance is expected to be 0.9 or 1.3 billion, and the corresponding PE is 5 or 3 times, and the purchase rating.

Risk warning

1. Demand recovery falls short of expectations; 2. Overseas outreach is progressing slowly.