Domestic and foreign cement prices are expected to rise

In terms of price and profit, the market was mainly concerned about the impact on profits after the devaluation of the Ethiopian birr. In early November, the Ethiopian Minister of Trade and Regional Integration announced the suspension of previous cement trade arrangements, allowing cement factories to independently choose distributors and retailers. Driven by this incident, the company's cement sales price in Ethiopia is expected to rise. However, there is still a gap with market sales prices. There are still expectations that cement prices will rise in the future, and the impact of exchange rate fluctuations on profits has basically been eliminated. We believe that prices in Mozambique and the Congo remain high, with the price per ton remaining at 90 US dollars/150 US dollars/ton, and Uzbekistan at 50 US dollars/ton. Profits are basically stable. Domestically, with the increase in prices in Shaanxi in the second half of the year, the company's tonne sales price is expected to return to about 300 yuan/ton, or 250 yuan/ton for the whole year. Domestic cement prices are expected to continue to rise in 25 years.

Production capacity continues to climb

In terms of production capacity, the company's Lemi-10,000 ton line in Ethiopia was launched on August 16, and foreign sales began after passing the inspection. It is the cement project with the highest degree of intelligence, the best performance index, and the largest production scale in Ethiopia, and is known as the “Star of Africa”. The project is designed to produce 3 million tons of clinker and 5 million tons of cement per year. After commissioning, it will effectively ease the tight cement supply situation in Ethiopia. In the past, Congolese gold was affected by logistics conditions, with sales volume of only 0.167 million tons in 23 years. With the gradual resolution of problems such as terminals and ship transportation, the annual sales volume is expected to rise to 0.7 million tons. In addition, the company is also currently planning to lay out projects such as Mozambique Phase II (2.5 million tons), Zimbabwe (2 million tons), and Ethiopia Phase II. Among them, Uganda and Mozambique Phase II are scheduled to be put into operation in 25 years.

The 25-year overseas profit flexibility has been realized

Currently, the average cement consumption in Africa is less than 0.3 tons, which is equivalent to China's level before 30 years. Currently, there is still a lot of room for growth. Currently, only Western Cement and Huaxin Cement are the leading domestic companies with new construction projects in the African region, but currently Huaxin mainly uses acquisition methods, and the degree of coincidence with Western cement from a regional perspective is not expected to have a major impact. The acceleration of Huaxin's acquisitions over the past 24 years also confirms its optimism about the African market prospects. We estimate that Western Cement's net profit for 24/25/26 will be 1.09/1.95/2.79 billion yuan, respectively, corresponding PE is 6.2/3.5/2.4 times, and the current PB is only 0.64 times. As a benchmark, we refer to the African Nigerian company recently acquired by Huaxin Cement for a price as high as 2.2 times PB. The current market value of Western Cement is expected to have a lot of room for improvement.

Risk warning: Competition in the African cement market is intensifying, there are risks in international operations, domestic infrastructure and real estate demand has fallen beyond expectations, and the estimates in the article are somewhat subjective.