\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 585 Anhui Conch Cement Company Limited(600585) )
Ping An View:
Anhui Conch Cement Company Limited(600585) is the leader in China's cement industry. The company is mainly engaged in the production and sales of cement clinker, aggregate and concrete. The total net sales of cement and clinker in 2021h1 is 208 million tons, an increase of 11.49% year-on-year. At the end of 2021, the clinker production capacity is 270 million tons and the cement production capacity is 380 million tons. The production capacity of single brand cement ranks first in the world. The industry enjoys the reputation of "world cement sees China and Chinese cement sees conch". From 2002 to 2020, the net profit attributable to the parent company rose from 260 million yuan to 35.13 billion yuan, with a CAGR of 31%.
The industry waits for the recovery of demand, and the supply and cost may drive the price to be resilient. Recently, the prices of cement and clinker along the Yangtze River Delta, Guangdong, Guangdong, Anhui and Sichuan have increased by 20-80 yuan / ton. We believe that due to the pressure on real estate investment and the bad weather, the demand for cement has not recovered, and the price rise may be caused by the resumption of work in some areas after the holiday under the background of low inventory and rising coal and electricity costs. Looking ahead, consider: 1) on the demand side, with the advance issuance of special bonds and the intensive construction of local projects, infrastructure investment is expected to start after March, and real estate policies continue to correct deviations, or drive the improvement of demand margin; 2) On the supply side, in the short term, due to the tightening of peak staggering production, the cement inventory is low, and in the medium and long term, the production capacity supply tends to shrink and the competition pattern is better, which promotes the relative balance between supply and demand; 3) On the cost side, coal and electricity costs are high and cement manufacturers are willing to increase prices. Driven by the three parties of supply and demand, the subsequent cement prices are resilient, and the range of price increases is expected to gradually expand. Throughout the year, the cement price center may be higher than that in 2021, so we need to pay close attention to the implementation of infrastructure in the future.
The regional layout is unique and the cost operation is outstanding. The company has many advantages: 1) market advantages: the company's capacity in East China and Central South accounts for more than 70%, and the capacity market in East China and Guangdong accounts for about 21% and 19%. This kind of regional economy is active, the demand is more resilient, the capacity utilization rate is higher, the supply and demand is more balanced, and the cement prices in East China and Central South China have been higher since 2018. The company also increased the expansion of grinding stations. From 2014 to 2021, the cement production capacity increased by 120 million tons, and the clinker increased by only 60 million tons. It also expanded its trade business (the sales volume in 2020 was 128 million tons, accounting for 28%) and enhanced its market voice. 2) Cost advantage: the company's gross profit per ton is at the top level of the industry for a long time and has more profit guarantee in the downward period of the market. First, due to the abundant limestone resources in Anhui, the company purchased minerals early and significantly, and the cost of raw materials is low. Second, the production line is large, the energy-saving and emission reduction technology is dominant, and the unit energy consumption is low. Third, the scale advantage brings the improvement of upstream and downstream bargaining power. 3) Operational advantages: the company solves the problem of "high transportation cost and limited sales area" in the industry through "t" strategy and Yangtze River water transportation to reduce transportation cost and expand production and sales radius; At the same time, the operation and management efficiency is high. The expense rate during the first three quarters of 2021 is only 4.8%, especially the advantages of management and financial rates are more obvious. 4) Green power advantage: the development of new energy industry has achieved results one by one. In 2021, 163 million kwh of photovoltaic power generation will be realized, which will achieve good coordinated development with the main industry.
Investment suggestion: from the industry level, under the central government's demand for steady growth, the follow-up infrastructure is expected to exert force, drive the marginal improvement of cement demand, superimpose supply contraction and maintain high costs, so as to maintain the resilience of cement prices. In the whole year, the price center may be higher than that in 2021. In the medium and long term, under the "double carbon" target, the supply of cement production capacity tends to shrink, Drive the industry to maintain a tight balance between supply and demand, and the profitability is expected to remain good. From the perspective of the company, conch, as a leader in the cement industry, focuses on East and South China, with unique regional layout and more resilient market demand. At the same time, cost control and operation efficiency have maintained the leading level in the industry for a long time, and the dividend proportion and dividend rate have also maintained about 30% and 4% all year round, which is attractive. We are optimistic about the follow-up performance of the company. It is estimated that the EPS from 2021 to 2023 will be 6.48 yuan, 6.75 yuan and 6.91 yuan respectively, and the corresponding PE of the current stock price will be 6.3 times, 6.0 times and 5.9 times respectively. The company will be given a "recommended" rating for the first time.
Risk tips: 1) infrastructure and real estate investment are lower than expected, affecting the demand of the cement industry: under the pressure of real estate fundamentals, if the follow-up policy support is too small or the introduction time is too late, it will affect the real estate investment, the level and speed of commencement and repair, and then affect the scale and price performance of cement demand; Similarly, if infrastructure investment fails to play a role in stabilizing the economy in time, the demand for cement and other building materials may be released less than expected. 2) The prices of raw materials and fuels continue to rise, and the profit margin is further under pressure: at present, the coal price remains at a high level of about 1000 yuan, the power cost has also increased, and the pressure on the cost side of cement production is large. If the subsequent coal and power prices continue to rise, the profit margin of the company will be further under pressure. 3) The development of aggregate, new energy and other businesses is less than expected: the company has actively expanded aggregate, stone, concrete, new energy and other businesses in recent years to promote the coordinated development with the main business and open up the future growth space. However, there are differences between the business model and cement clinker, and there are risks that the development of relevant businesses is less than expected.
