Conch Cement (600585): H1 profit hits record high again
Investment Highlights Event: On August 22, the company announced the 2019H1 report, realizing operating income of 716.
44 trillion, an increase of 56 each year.
63%; net profit attributable to mother was 152.
60 ppm, an increase of 17 per year.
We believe that the interim report of Conch Cement is in line with expectations.
The sales volume of cement clinker from H1 company in 2019 is 1.
4.6 billion tons, an increase of 6 in ten years.
We estimate that sales in 2019Q1 will be approximately 6,200 digits, and sales in 2,019Q2 will be approximately 8,400 digits.
From the perspective of trade volume, in 2019H1, the sales volume of cement clinker trading business was zero.
5.7 billion tons, a nine-fold increase in ten years.
We believe that the growth rate of products from 6% to 10% in the first half of the year has increased the rate of new start-ups and construction-side growth, and has infrastructure support; and gradually expand the company’s internal expansion capabilities, including 4 units in 2018, 2019Taiwan cement mills were successively completed and put into operation in January. Guangying Cement was acquired and overseas production lines were completed and put into operation.
As of 2019H1, the company has clinker production capacity2.
5.2 billion tons, cement production capacity 3.
5.5 billion tons.
Maximum demand + capacity expansion drives the company’s cement sales to increase.
We estimate that the company’s gross profit per ton of cement and clinker produced in 2019H1 is about 155 yuan, of which 147 yuan in 2019Q1 and 161 yuan in 2019Q2.
With the burden on the demand side and the constraints on the supply side continuing, the cement price and profit center of the company in 2019H1 continued to increase slightly under the high base in the same period last year. We estimate that the price of self-produced cement and clinker in 2019H1 will be 330 yuan, which will increase during the period.19 yuan; due to the increase in the purchase price of bulk commodities and the increase in labor costs, the cost of tonally produced cement and clinker in 2019H1 is 175 yuan, which is an increase of 9 yuan; therefore, the gross profit per ton of cement and clinker produced in 2019H1 is 155 yuan,The annual increase is 11 yuan.
The industry has entered a mature stage, and the company has entered the harvest stage. In the future, the “heavy asset” attribute will gradually weaken, and sufficient ammunition and leverage will be the basis for future horizontal integration.
We estimate that the company’s net cash is more than 40 billion, and by the end of this year, it is expected to approach 60 billion.
Sufficient cash in hand can provide a good basis for the next round of mergers and acquisitions.
In the same area of merger and acquisition in the cement industry, the horizontal integration of the industry is a comprehensive synergy effect. In the case of the relatively underestimated estimate of the acquired company, Conch’s future integration will help increase the company’s actual value.
The sales volume of the platform continued to increase, and sales control was further strengthened.
The business platform of the company’s leading trading platform has continued to expand since 2018, and the volume of trade has increased significantly.In 2018, the scale of trade reached 7,000 tons, while 2019H1 reached 5700 euros. The price of ton traded through the platform in 2019H1 was about 346 yuan, but basically notContribute to actual profits.
The company’s control over sales channels has been further strengthened, and market control capabilities and shares have continued to increase. At the same time, the company has transferred the sales of some factories to Haizhong Building Materials Trading Co., Ltd., which has led to a rapid growth of the company’s revenue.
Investment suggestion: Supply and demand supplements for the cement industry will be connected in 2019.
当前存量需求仍处高位，叠加“逆周期”调节或将在2019年带来需求端替代的平衡；而供给端受到行政化强力约束导致曲线增长被抑制，虽然供给端行政化约束在2019年 年Marginal loosening may occur, but the industry ‘s strong ability to spontaneously adjust production capacity will occur before the expansion of demand and the supply constraints are completely reset to stabilize the industry’s profit center.
We believe that the downward cycle of the industry’s earnings this round will be alternating and flat.
Simply put, we are not pessimistic about the overall cement demand in 2019, and the profit center of the cement industry may be better than market expectations.
From the perspective of Conch Cement, there is still room for growth and the value of assets needs to be explored.
The company’s assets are of high value and have been on the basis of sustainable development in the medium and long term, with safety marginal interests.
First of all, the limestone resource whose value has been gradually revalued in recent years is “a golden mountain” in Conch’s balance sheet, and the company’s market, resource endowment and “T-shaped” volume distribution have irreproducible cost advantages and market basis.
In the future, even the demand for cement will decline, and the industry will enter a new round of reshuffle. Conch’s increasingly competitive advantage and the increase in industry concentration in recent years have also set the company’s strong profit margin. We believe the bottom of the next round of profit will alsoHigher than the bottom of the 2015 cycle.
The company’s future development space looks on.
In recent years, it has actively explored the aggregate market and strengthened the control of the entire industrial chain. According to the plan, the company will strive to achieve at least 100 million tons of aggregate capacity per year by 2020.
The strong endowment of resources has led to Conch Cement’s excellent foundation and potential for the development of aggregate business.
The company’s overseas expansion has accelerated, and its global presence has reduced corporate operating risks.Conch Cement plans to build 5,000 tons of overseas capacity by the end of the 13th Five-Year Plan.
From the domestic to the international, Conch Cement has gradually moved towards internationalization with the help of the “Belt and Road” initiative, and achieved continuous expansion through its global layout.
At the same time, the continuous accumulation of capital in hand and the continuous optimization of the balance sheet have laid a strong foundation for the company’s continuous integration in the downturn of the industry in the future.
Conch sales in the next round of reshuffle are expected to exceed 400 million tons, achieving continuous counter-expansion expansion.
Conch cement is a soil of natural value.
We recommend that investors start from the perspective of the company’s intrinsic value and take a long-term view; this is also in line with the trends and laws of the cement industry investment in mature markets.
Based on our consistent point of view, through the gradual withdrawal of traditional industries and the growth of the main stage of economic growth, the general trend of the cement industry’s concentration on the leader will not change.
In the process of strong demand stimulus in the future and the gradual ebb of supply-side constraints, this is an important period of transformation of the capital 苏州夜网论坛 structure of cement leaders such as Conch. In the past 2-3 years, the pursuit of supply-side drive to bring back ROE funds will gradually withdraw,Not sensitive to the length of investment, the pursuit of deterministic trends in the long-term industry pattern, and increasing capital adequacy.
From the perspective of Conch’s expected holding period earnings, we believe that the demand for entering the industry has entered the downward channel, and the substantial de-capacity can be gradually promoted. As a leader in the industry, Conch will obviously benefit from the concentrated improvement.
Due to the company’s resource endowment and strategic distribution, the cost advantage is difficult to surpass. The stability and certainty of the company’s earnings are the best in cement stocks. At present, the company’s potential 杭州夜网论坛 return rate after replacing net cash is very attractive.Lili.
In the future, after another cycle of conch, the market share can continue to increase, and profitability will still return to a high level. At the same time, the company will gradually strengthen dividends and increase value attributes.
Conch Cement has entered the stage of increasing the market value of its net assets. Although the annual price and profit may return to the average value in terms of the annual time dimension, the safety margin of the asset side has gradually become clear. We still recommend long-term growth and long-term investors.The holding cycle can enjoy a large amount of stable dividend income, and the second growth dividend of Conch as a leader.
We estimate that Conch Cement’s 2019 net profit will be approximately 32.5 billion, corresponding to PE of approximately 6.
Maintain “Buy” rating.
Risk Warning: 1.
Macroeconomic risks; 2.
Supply-side reform exit