\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 585 Anhui Conch Cement Company Limited(600585) )
Event: Anhui Conch Cement Company Limited(600585) released the annual report of 2021. In 2021, the company achieved a revenue of 167.95 billion yuan, a year-on-year increase of – 4.7%; The net profit attributable to the parent company was 33.27 billion yuan, a year-on-year increase of – 5.4%; Net profit deducted from non parent company was 31.38 billion yuan, a year-on-year increase of – 5.4%; The net cash flow from operating activities was 33.9 billion yuan, a year-on-year increase of – 2.7%. The operating revenue in the fourth quarter was 46.24 billion yuan, a year-on-year increase of – 11.5%; The net profit attributable to the parent company was 10.88 billion yuan, a year-on-year increase of + 4.4%; Deduct the net profit not attributable to the parent company of RMB 10.32 billion, a year-on-year increase of + 5.7%.
Revenue side: the year-on-year decline in trade sales is the main reason for the decline in revenue growth, and the annual ton price increased significantly year-on-year.
Sales volume: the sales volume of cement clinker produced by the company in 21 years was 304 million tons, with a year-on-year increase of – 6.5%, mainly due to the sharp contraction of supply caused by double control of energy consumption in September. In terms of subregions, the market demand in the eastern, central and southern regions of China is stable, with a slight decline in sales. The market demand in the western region is insufficient, and the decline in sales is even greater; The export sales volume was – 43.3% year-on-year, and the sales volume of overseas project companies was + 7.5% year-on-year. In 21 years, the sales volume of trade business was 105 million tons, with a year-on-year increase of – 18%, and the business income was – 11.0%. Compared with the year-on-year increase of product sales income of + 4.7%, the decline of trade sales volume was the main reason for the decline of the company’s revenue growth. We expect the sales volume of self-produced cement clinker in the fourth quarter to be about 69 million tons, more than – 25% year-on-year. The sharp decline in sales volume in the first quarter is mainly due to the slowdown of project construction in the reporting period, which affects the cement demand. In addition, some production areas are still limited in October, which also affects the production and power limitation. The sales volume of self-produced cement clinker of the company is planned to be 325 million tons in 22 years, with a year-on-year increase of + 6.9%. Considering that the company expects to add 4.6 million tons of clinker production capacity and 1.4 million tons of cement production capacity this year (excluding mergers and acquisitions), the dual control policy of energy consumption is expected to be more stable, and the production and sales growth target is expected to be achieved.
Price: in 21 years, the sales price of cement clinker produced by the company was 367.3 yuan / ton, a year-on-year increase of + 38.4 yuan. We estimate that the ton price of cement of 21q4 company is about 480 yuan / ton, more than + 100 yuan year-on-year. In September, the short-term supply contraction with dual control of energy consumption significantly pushed up the cement price. Although the subsequent price fell, it was still high as a whole, promoting the year-on-year increase of the price. As of March 25, 2012, the national average price of cement was 507 yuan / ton (mom-7, yoy + 64 yuan). Although the demand start-up slowed down due to the recent epidemic control, the demand remained high throughout the year and the willingness of supply coordination was stronger. In addition, the coal price still rose (the market price of power end coal reached 1575 yuan / ton on March 25, with a year-on-year increase of more than 100%), and the cement price center in 22 years is expected to remain high in recent years.
Profit side: the gross profit per ton has increased year-on-year, and the profit in 22 years is expected to continue to improve.
Cost per ton & gross profit per ton: in the past 21 years, the comprehensive cost per ton of cement clinker produced by the company was 203.3 yuan / ton, a year-on-year increase of + 30.7 yuan, and gross profit per ton was 163.9 yuan, a year-on-year increase of + 7.7 yuan. We estimate that the cost per ton of cement clinker produced by the company in the fourth quarter of a single year is about 240 yuan / ton, with a year-on-year increase of more than 60 yuan, and the gross profit per ton is about 240 yuan / ton, with a year-on-year increase of more than 70 yuan. During the reporting period, the price of raw coal rose sharply, resulting in a significant increase in the cost per ton. However, the price of Q4 was at a high level year-on-year, and the coal price gradually fell, reducing the cost pressure and increasing the gross profit per ton year-on-year. Considering the high proportion of the company’s long-term coal procurement Association, it is conducive to reduce the procurement cost of raw and fuel materials, and it is expected to promote the continuous improvement of gross profit per ton at a high price.
Ton cost & net profit per ton: the ton cost of the company in 2021 was 32 yuan, a year-on-year increase of + 6.9 yuan. The expense rate during the 21-year period was 5.7%, with a year-on-year increase of + 1.1pct. After excluding trade business income, the expense rate during the period was 7.6%, with a year-on-year increase of + 1.2pct. In terms of split, the sales expense ratio is -0.1pct year-on-year; The management fee rate was + 0.6pct on a year-on-year basis, which was due to the increase of social security expenditure paid by the company for employees compared with the same period in the 20-year epidemic period; The R & D expense rate was + 0.5pct year-on-year, which was due to the year-on-year increase in investment in energy conservation, environmental protection, green and low-carbon technology development; The international financial situation and political events in Myanmar caused an increase in exchange losses year-on-year, resulting in a decrease in financial gains. In 2021, the net profit attributable to the parent company was 109.4 yuan / ton, a year-on-year increase of + 1.3 yuan. During the reporting period, the company’s single ton profit level increased year-on-year, but affected by the decline in sales, the annual profit decreased year-on-year.
Future highlights:
In the short term, the annual demand is expected to decline slightly, but it is still in a high platform period. However, under the contraction of demand, the supply side coordination of enterprises in order to maintain steady development is expected to be strengthened. At present, the company and Xinjiang Tianshan Cement Co.Ltd(000877) , Tangshan Jidong Cement Co.Ltd(000401) , Gansu Shangfeng Cement Co.Ltd(000672) and other enterprises are actively cross holding shares. Leading enterprises are playing a leading and exemplary role together and are expected to promote pattern optimization. In addition, under the pressure of maintaining a high price, the repair cost will continue to support in the short term.
In the medium term, the increase of ship freight rate, the restriction of clinker import and the establishment of northeast South mechanism all reduce the market impact; Abundant cash flow and large capital expenditure are conducive to the company’s steady expansion of the global market, making every effort to build a new growth pole such as aggregate, commercial concrete, prefabricated construction and new energy, and constantly expand new business fields, so as to open up secondary growth space.
In the long run, the normalization of dual control of energy consumption has helped optimize the industrial structure, and the replacement proportion and indicators have been further tightened under the new industrial replacement regulations; Under the dual carbon policy, as a leading enterprise, the company has its own advantages in carbon emission reduction technology, and its layout in new energy fields such as photovoltaic power stations and energy storage is expected to continue to reduce the proportion of purchased electricity, with strong cost control ability; With the continuous merger and reorganization of enterprises in the industry and the improvement of market concentration, the price competition will be gradually replaced by competition and cooperation in the future. As a leading enterprise, the company has stronger pricing power.
It is suggested that investors should look at and grow from the perspective of the internal value of the company Anhui Conch Cement Company Limited(600585) has entered the stage of net assets pushing up the market value. In recent years, the company has abundant cash flow and continuously improved the dividend rate, which has increased to 5.9% in 21 years. In this position, we suggest investors pay attention to the “long-term” investment opportunities of the company: for the restoration of overly pessimistic expectations, if the actual downstream demand exceeds the expectation, we believe that the profitability toughness of the leading conch is expected to exceed the expectation; At present, the valuation of the sector is at a low level, and the company, as an industry leader, has strong defensive attributes.
Profit forecast: considering the current supply and demand of cement industry and cement price / cost, we adjust and update the profit forecast. It is estimated that the net profit attributable to the parent company in 2022 and 2023 will be 36.65 billion yuan and 36.64 billion yuan respectively (the previous forecast is 35.64 billion yuan and 37.55 billion yuan respectively); The current share price corresponding to PE is 5 and 5 times respectively, maintaining the “buy” rating.
Risk warning: the demand is less than long-term; Supply side constraints are less than expected; Energy consumption double control and production restriction exceeded expectations; Raw materials rose more than expected; The price of cement fluctuates greatly.
