Investment Rating - The report maintains a "Buy" rating for Western Cement (02233) with a 6-month outlook [19] Core Views - Western Cement's overseas profitability elasticity is expected to materialize by 2025, driven by capacity ramp-up and price increases in key markets [3][10] - The company's overseas operations, particularly in Ethiopia, are expected to see significant price increases and stable profitability, with domestic prices also projected to rise [6] - Western Cement's capacity expansion in Africa, including new projects in Ethiopia, Mozambique, Uganda, and Zimbabwe, positions it well for future growth [7] - The African cement market offers substantial growth potential, with Western Cement being one of the few major Chinese players actively expanding in the region [15] Price and Profitability - In Ethiopia, cement prices are expected to increase following the government's decision to allow manufacturers to choose their distributors, reducing the impact of currency fluctuations on profits [6] - Mozambique and Congo regions maintain high cement prices at $90/ton and $150+/ton respectively, while Uzbekistan prices are stable at $50/ton [6] - Domestic prices in China are expected to recover to around 300 RMB/ton in the second half of the year, with full-year average at 250 RMB/ton, and further price increases anticipated in 2025 [6] Capacity Expansion - Western Cement's Ethiopia Lemi project, with a design capacity of 3 million tons of clinker and 5 million tons of cement annually, is operational and considered the most advanced cement project in Africa [7] - Congo's sales are expected to increase from 167,000 tons in 2023 to 700,000 tons in 2024 due to improved logistics [7] - The company plans to expand with new projects in Mozambique (2.5 million tons), Uganda (2.5 million tons), Zimbabwe (2 million tons), and Ethiopia Phase II, with some projects expected to be operational by 2025 [7] Market Potential - Africa's per capita cement consumption is less than 0.3 tons, indicating significant growth potential compared to China's historical levels [15] - Western Cement is one of the few major Chinese cement companies actively expanding in Africa, with limited competition from other players like Huaxin Cement [15] - The company's valuation is considered attractive at 0.64x PB, compared to Huaxin Cement's recent acquisition of a Nigerian company at 2.2x PB, suggesting potential for significant market value appreciation [15] Financial Projections - Western Cement is projected to achieve net profits of 1.09 billion RMB in 2024, 1.95 billion RMB in 2025, and 2.79 billion RMB in 2026 [15] - The company's PE ratios are expected to be 6.2x, 3.5x, and 2.4x for 2024, 2025, and 2026 respectively [15]

Summary of Conference Call Records Company Overview - The company discussed is **Western Cement**, a private enterprise based in Shaanxi, China, which began operations in 2004 and has expanded its production to various regions including Southeast Asia and Africa [doc id='14'][doc id='15']. Industry Context - The cement industry is currently facing challenges in domestic demand, leading companies to explore overseas expansion, particularly in Africa, where growth potential remains high [doc id='1'][doc id='2']. - The company is positioned as a key player in the cement sector, focusing on international markets to mitigate domestic demand issues [doc id='1']. Key Points and Arguments 1. **Growth Potential**: Western Cement is identified as one of the most promising growth stocks in the building materials sector, primarily due to its overseas expansion strategy [doc id='1']. 2. **Overseas Expansion**: The company is focusing on Africa for its overseas growth, with plans to increase production capacity significantly by 2030, targeting 4.8 million tons [doc id='2']. 3. **Production Capacity**: By the end of 2024, the company expects to achieve an overseas production capacity of 12.3 million tons, reflecting over a threefold increase from the previous year [doc id='2']. 4. **Regional Performance**: - In Mozambique, production is stable with a capacity of around 200,000 tons, and profitability remains strong [doc id='3']. - Ethiopia has shown recovery in production rates after resolving coal import issues, with expectations of contributing significantly to overall output [doc id='4']. - The Democratic Republic of the Congo (DRC) has improved its production utilization from 11% to 40% due to better logistics [doc id='5']. 5. **Financial Performance**: The company anticipates a stable profit margin, with projections of around 2.5 billion in profits for the year, despite some downward adjustments due to market conditions [doc id='6']. 6. **Market Dynamics**: The company is optimistic about price recovery in the market, which could significantly enhance profitability in the coming years [doc id='10']. 7. **Supply and Demand**: The African market is characterized by a growing demand for cement, with a significant gap between current consumption levels and potential capacity [doc id='11']. 8. **Competitive Landscape**: The company faces competition from other Chinese firms in Africa, but its strategic positioning and established relationships may provide a competitive edge [doc id='12']. 9. **Debt Management**: The company is addressing its debt levels, which were previously high due to extensive overseas investments, but is now seeing improvements as new production lines come online [doc id='13']. 10. **Future Outlook**: The company is expected to maintain a strong growth trajectory, with optimistic projections for revenue and profit margins in the next few years, particularly from its overseas operations [doc id='14']. Additional Important Insights - The company has a diversified production base with 16 production lines in China and is actively expanding its international footprint [doc id='16']. - The domestic market is experiencing a decline in prices, which may impact overall profitability, but the company is well-positioned to leverage its international operations to offset these challenges [doc id='18']. - The strategic focus on Africa is seen as a long-term growth opportunity, with significant investments planned in the region [doc id='26']. This summary encapsulates the key insights from the conference call, highlighting the company's strategic direction, market positioning, and financial outlook within the cement industry.

Investment Rating - The investment rating for the company is "Buy" and it is maintained [4]. Core Views - The company reported a revenue of 3.7 billion HKD for the first half of 2024, representing a year-on-year decline of 16%. The net profit was 390 million HKD, down 27% year-on-year [4][5]. - The cement industry is facing overall operational pressure, with national cement production in the first half of 2024 at 850 million tons, a decrease of 10% year-on-year. The scale of losses in the cement industry is significant, with losses exceeding 3.4 billion HKD [4][5]. - The company's domestic operations are under pressure, while overseas markets are gradually expanding, leading to a slight overall decline in performance [5]. Summary by Sections Financial Performance - The company achieved a revenue of 3.7 billion HKD in H1 2024, down 16% year-on-year, and a net profit of 390 million HKD, down 27% year-on-year [4][5]. Market Conditions - The cement industry is experiencing significant challenges, with a national production decline of 10% and substantial losses reported across the sector [4][5]. - In the company's core market of Shaanxi, fixed asset investment growth was 2.7%, while real estate development investment decreased by 0.4% [4]. Sales and Pricing - The company's total sales volume in H1 2024 was 8.75 million tons, a decrease of 8.3% year-on-year. Domestic sales in Shaanxi, Xinjiang, and Guizhou saw declines of 8.9%, 11.4%, and 32.1% respectively [5]. - Pricing varied by region, with prices in Xinjiang at 409 HKD/ton, Guizhou at 404 HKD/ton, and Shaanxi at 244 HKD/ton, showing a decline in Shaanxi's price compared to the previous year [5]. Capacity and Expansion - The company's total production capacity reached 34.3 million tons as of H1 2024, with significant capacities in various regions including Shaanxi, Xinjiang, and overseas markets [5]. - The overseas market is expected to be a core growth area, with ongoing expansion efforts in Mozambique, Congo, Ethiopia, and Uzbekistan [6]. Future Outlook - The company anticipates steady expansion in overseas markets, with several key projects planned in Ethiopia and ongoing efforts to stabilize operations in Mozambique and Congo [6]. - The projected earnings for 2024-2025 are 900 million HKD and 1.3 billion HKD, with corresponding price-to-earnings ratios of 5 and 3 times, supporting the "Buy" rating [6].

Financial Performance - Total sales volume of cement and clinker decreased by 8.3% to 8.75 million tons in the first half of 2024 compared to 9.54 million tons in the same period of 2023[4]. - Revenue for the first half of 2024 was RMB 3,701.8 million, down 15.8% from RMB 4,398.3 million in the first half of 2023[4]. - Gross profit decreased by 20.2% to RMB 985.1 million, compared to RMB 1,234.2 million in the previous year[4]. - EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the first half of 2024 was RMB 1,283.9 million, a decline of 15.4% from RMB 1,517.2 million in the same period last year[4]. - Net profit attributable to the owners of the company fell by 27.3% to RMB 386.9 million, down from RMB 532.2 million in the first half of 2023[4]. - The company reported a revenue decrease of 15.8% from RMB 4,398,300,000 in H1 2023 to RMB 3,701,800,000 in H1 2024[31]. - Cement sales volume declined by 9.9% from approximately 9,140,000 tons in H1 2023 to about 8,250,000 tons in H1 2024[31]. - Gross profit fell by RMB 249,100,000 or 20.2% to RMB 985,100,000 in H1 2024, with the gross margin decreasing from 28.1% to 26.6%[34]. - The company reported a net profit for the six months ended June 30, 2024, of RMB 386,882,000, a decrease from RMB 532,160,000 for the same period in 2023, representing a decline of approximately 27.3%[108]. Sales and Market Trends - The average selling price of cement in Shaanxi, Guizhou, and Xinjiang provinces decreased due to a decline in demand[6]. - In the first half of 2024, the sales volume in Shaanxi decreased by approximately 8.9% to about 5,950,000 tons, with an average selling price dropping by around 19.5% to RMB 244 per ton[8]. - In Xinjiang, the sales volume fell by about 11.4% to approximately 780,000 tons, with an average selling price decreasing to about RMB 409 per ton[9]. - In Guizhou, the sales volume decreased by approximately 32.1% to about 360,000 tons, while the average selling price rose to about RMB 404 per ton[9]. - The Mozambique plant's sales volume slightly declined by 2.7% to approximately 720,000 tons, with the average selling price increasing to about RMB 681 per ton[10]. - The Congo plant recorded an average selling price of approximately RMB 1,049 per ton, with sales volume reaching 334,000 tons[11]. - In Ethiopia, cement sales volume decreased by 36.4% to approximately 420,000 tons for the six months ended June 30, 2024, compared to 660,000 tons for the same period in 2023[12]. - The average selling price of cement in Ethiopia was approximately RMB 842 per ton for the six months ended June 30, 2024, down from RMB 875 per ton for the same period in 2023[12]. Production and Capacity - The total production capacity reached 34.3 million tons, including 21 new suspension preheater cement production lines[6]. - The company's production capacity utilization rate in Shaanxi was approximately 55%, down from 60% in the same period of 2023[8]. - The company is set to launch a new cement production line in Ethiopia with a capacity of 5,000,000 tons per year, expected to commence operations in Q3 2024[26]. - In Uzbekistan, a new production line with a capacity of 2,500,000 tons per year is scheduled to start in May 2024, capitalizing on the country's growing cement demand[27]. Cost Management and Efficiency - The company continues to implement efficiency improvements and cost reduction measures to mitigate the impact of declining cement demand[6]. - The average cost of coal decreased by approximately 13.4% to about RMB 760 per ton in H1 2024, contributing to lower production costs[33]. - The company plans to implement multiple cost reduction measures in 2024, aiming to control sales costs and administrative expenses[28]. - The overall profit remained stable in the first half of 2024, attributed to effective cost control measures implemented by the company[7]. Assets and Liabilities - Total assets increased by 9.3% to RMB 35,953.5 million as of June 30, 2024, compared to RMB 32,902.9 million at the end of 2023[4]. - The company maintained a stable cash flow with a net debt of RMB 8,896.3 million, an increase of 3.6% from RMB 8,556.1 million[4]. - The debt-to-equity ratio was 60.1% as of June 30, 2024, slightly down from 60.4% as of December 31, 2023[46]. - The company’s total liabilities increased to RMB 11,456,189 thousand from RMB 9,809,655 thousand, reflecting a rise of 16.7%[81]. - The company’s equity attributable to owners increased to RMB 12,715,749 thousand from RMB 12,283,445 thousand, a growth of 3.5%[81]. Future Outlook - In 2024, the company anticipates a moderate increase in demand in the second half, driven by new large-scale infrastructure projects starting in 2024[23]. - The company expects stable prices in 2024 due to stringent environmental policies limiting supply[23]. - The company projects that sales volume and average prices in Mozambique will increase, with a focus on cement and clinker sales in central and overseas markets[25]. - The company anticipates that the real estate market adjustments will continue to impact cement demand, but it will actively support reasonable financing needs in the sector[21]. Environmental and Social Responsibility - The company continues to implement strict environmental policies, including intermittent production halts during off-peak seasons to balance supply and demand[8]. - The group has installed waste heat recovery systems in 15 out of 21 production lines, which help reduce electricity consumption by approximately 30%[16]. - The group has reduced CO2 emissions by approximately 22,000 tons per million tons of cement produced due to the implementation of energy-saving measures[16]. - The company made charitable donations totaling RMB 3,100,000 for the six months ended June 30, 2024, including support for underprivileged students and funding for educational, sports, and cultural activities[19]. Corporate Governance and Shareholder Information - The company is committed to maintaining high standards of corporate governance and has complied with all code provisions of the corporate governance code during the reporting period[69]. - The company aims to enhance transparency and accountability to shareholders through effective board leadership and internal controls[69]. - The company has not yet established a foreign currency hedging policy but will continue to monitor foreign exchange risks[49]. - Major shareholders holding 5% or more of the company's issued share capital will be listed in accordance with regulatory requirements[55].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 1.40 HKD, reflecting a 7x PE for 2024 [4][5]. Core Views - The company experienced a decline in net profit of 27.3% year-on-year, with total revenue of 3.87 billion HKD in the first half of 2024, primarily due to domestic business challenges [1][2]. - Overseas cement sales showed resilience with a 9.4% increase in revenue, driven by favorable market conditions in Africa, while domestic sales faced significant pressure [2][3]. - The company is expected to benefit from the release of new production capacity in the second half of the year, which could enhance profit elasticity [2][4]. Summary by Sections Financial Performance - In the first half of 2024, the company reported a total revenue of 39.01 billion HKD, down 11.3% year-on-year, with net profit at 3.87 billion HKD, down 27.3% [1]. - Domestic revenue fell by 25.4% to 23.80 billion HKD, while overseas revenue increased by 9.4% to 13.22 billion HKD [1][3]. Overseas Operations - The company’s overseas cement sales volume increased by 2.4% to 1.47 million tons, with an average price rise of 6.8% to 897 HKD per ton [2]. - Significant revenue growth was noted in the Congo, with a 495.3% increase, while Ethiopia faced a decline due to production halts [2]. - The overseas profit contribution rose to 90% of total profits, highlighting the growing importance of international operations [2][4]. Domestic Operations - Domestic cement sales volume decreased by 10.7% to 7.09 million tons, with an average price drop of 15.8% to 270 HKD per ton [3]. - The overall gross margin declined to 26.61%, reflecting the pressures in the domestic market [3]. Future Outlook - The company plans to reduce capital expenditure after the completion of two overseas production lines, which is expected to ease debt pressure [3]. - With the anticipated ramp-up of new production capacity, profitability is expected to improve significantly in 2025 and 2026 [2][4].

Financial Performance - Total sales volume of cement and clinker decreased by 8.3% to 8.75 million tons compared to 9.54 million tons in the same period last year[2] - Revenue declined by 15.8% to RMB 3,701.8 million from RMB 4,398.3 million year-on-year[2] - Gross profit decreased by 20.2% to RMB 985.1 million, down from RMB 1,234.2 million in the previous year[2] - Net profit attributable to shareholders fell by 27.3% to RMB 386.9 million, compared to RMB 532.2 million in the same period last year[2] - Basic earnings per share decreased by 27.6% to RMB 0.071 from RMB 0.098 year-on-year[2] - The group generated a gross profit of RMB 655,585,000 for the six months ended June 30, 2024[20] - The net profit for the six months ended June 30, 2024, was RMB 386,882 thousand, down from RMB 532,160 thousand for the same period in 2023, reflecting a decline of approximately 27.4%[30] - The company's profit attributable to equity holders decreased from RMB 532,200,000 in the first half of 2023 to RMB 386,900,000 in the first half of 2024[92] Assets and Liabilities - Total assets increased by 9.3% to RMB 35,953.5 million from RMB 32,902.9 million[3] - Net debt increased by 3.6% to RMB 8,896.3 million compared to RMB 8,556.1 million last year[3] - The net asset to debt ratio slightly decreased to 60.1% from 60.4% year-on-year[3] - Total liabilities amounted to RMB 11,456,189 thousand, compared to RMB 9,809,655 thousand, reflecting an increase of approximately 16.7%[10] - The total value of assets minus current liabilities stood at RMB 24,497,337 thousand, up from RMB 23,093,195 thousand, showing an increase of about 6.1%[10] - The company's equity attributable to owners was RMB 12,715,749 thousand, compared to RMB 12,283,445 thousand, marking an increase of about 3.5%[10] - As of June 30, 2024, the group's net current liabilities amounted to approximately RMB 2,075,500,000[95] Cash Flow and Financing - Cash and cash equivalents rose to RMB 1,013,860 thousand from RMB 922,662 thousand, indicating an increase of approximately 9.9%[9] - The group has unutilized bank financing of approximately RMB 1,023,835,000 as of June 30, 2024, available for daily business operations[14] - The group has secured additional bank financing of RMB 595,000,000 after June 30, 2024, which is available for immediate use[14] - The group is in discussions with several banks for additional financing amounting to RMB 1,925,835,000[14] - The group has secured additional bank financing of approximately RMB 595,000,000 after June 30, 2024[95] - The group is currently negotiating bank financing totaling RMB 1,925,800,000, with offers amounting to RMB 1,417,100,000 already received[95] Market and Sales - The company plans to enhance its market expansion strategies and invest in new product development to improve future performance[5] - Revenue from cement and related products for the six months ended June 30, 2024, is RMB 3,462,906,000, down from RMB 4,278,546,000 in the previous year[16] - Revenue from China for the six months ended June 30, 2024, was RMB 2,379,787 thousand, compared to RMB 3,189,595 thousand for the same period in 2023, representing a decrease of approximately 25.4%[25] - The average cement selling price in Shaanxi, Guizhou, and Xinjiang decreased due to reduced demand, impacting overall profitability[49] - The group maintained market share in key regions, with significant supply to various infrastructure projects including the Xi'an to Yan'an high-speed railway[53] Cost Management - The company plans to implement cost reduction measures in 2024 to control sales costs and administrative expenses[76] - Sales costs reduced by 14.1% from RMB 3,164,000,000 in the first half of 2023 to RMB 2,716,700,000 in the first half of 2024[81] - The average cost of coal decreased by approximately 13.4% from about RMB 975 per ton in the first half of 2023 to about RMB 760 per ton in the first half of 2024[81] Environmental and Social Responsibility - The company implemented energy-saving measures that reduced electricity consumption by about 30% and CO2 emissions by approximately 22,000 tons per million tons of cement produced[60] - The group has established hazardous waste treatment facilities in its Fuping and Mianxian factories, operational since March 2016 and October 2017 respectively, and plans to actively seek new opportunities for cement kiln collaborative disposal of solid waste in 2024[61] - The group has made charitable donations amounting to RMB 3,100,000, supporting education for impoverished students and funding cultural and sports activities[64] Future Outlook - The outlook for 2024 emphasizes the importance of high-quality development and macroeconomic policy adjustments to enhance economic vitality and prevent risks[66] - In 2024, the company expects moderate growth in demand due to reasonable growth in infrastructure needs, with several large projects already underway or expected to start[69] - The company anticipates stable prices in the second half of 2024, attributed to stricter government environmental policies limiting supply[69] - The company plans to enhance overseas development and ensure timely production of ongoing projects[67]

Investment Rating - The report maintains a "Buy" rating for the company with a 6-month outlook [1] Core Views - The company's domestic cement business, primarily in Shaanxi, is expected to face a 10% year-on-year decline in sales volume in the first half of the year, with a 20 yuan drop in gross profit per ton due to weaker demand and high base effects [2] - The African cement market shows significant growth potential, with urbanization rates at 43% and per capita cement consumption at 0.3 tons, indicating room for expansion as infrastructure and real estate development accelerate [3] - The company is well-positioned in Africa, with current production capacity of 480 million tons and plans to expand to over 1,600 million tons by 2026, driving overseas profit growth [5] - The company's cash flow improved significantly in 2023, with operating cash flow reaching a record high of 2.7 billion yuan, up 27% year-on-year, and capital expenditure expected to decrease after 2024 [6] Domestic Operations - In 2023, Shaanxi, Xinjiang, and Guizhou accounted for 76%, 16%, and 8% of domestic revenue, respectively [2] - Domestic cement prices in Shaanxi, Xinjiang, and Guizhou decreased by 66 yuan, increased by 61 yuan, and decreased by 92 yuan, respectively, in the first half of the year [2] - Domestic cement sales volume is expected to decline by 10% year-on-year in the first half of the year [2] African Market Outlook - Africa's urbanization rate is 43%, similar to China's level 20 years ago, with per capita cement consumption at 0.3 tons, indicating significant growth potential [3] - The company's operations in Ethiopia, Congo, and Mozambique benefit from strong GDP growth rates of 6.5%, 8.6%, and 5.0%, respectively, in 2023 [3] - Africa's total cement demand is estimated at 300-400 million tons, with per capita consumption below 0.3 tons, suggesting substantial room for growth [3] African Supply Landscape - Africa's total cement production capacity is 386.1 million tons/year, with the top three companies (Dangote Cement, Lafarge Holcim, and Heidelberg Cement) holding a combined market share of 30% [4] - The company is the largest Chinese cement producer in Africa and is expected to rank among the top five after completing its current expansion projects [4] - Barriers to entry in Africa include high investment costs, reliance on local governments for raw materials and power supply, and lengthy approval processes for state-owned enterprises [4] Overseas Profit Growth - Overseas profit surged 197% year-on-year in 2023, accounting for 74% of total profit, with a per-ton profit of over 200 yuan [5] - By 2026, overseas production capacity is expected to exceed 16 million tons, with profits projected to reach 3.6 billion yuan [5] - The company's overseas operations are expected to contribute significantly to future growth, with profit margins remaining stable as capacity utilization increases [5] Financial Position - Operating cash flow reached a record high of 2.7 billion yuan in 2023, up 27% year-on-year [6] - Capital expenditure in 2023 was 3.986 billion yuan, primarily for maintenance, upgrades, and new projects in Ethiopia, Congo, and Uzbekistan [6] - The company's dividend payout ratio has remained around 30% in the past three years, with a current dividend yield of approximately 6.5% [6] Financial Projections - Revenue is expected to grow from 9.021 billion yuan in 2023 to 17.945 billion yuan in 2026, with a compound annual growth rate of 22% [7] - Net profit attributable to shareholders is projected to increase from 421 million yuan in 2023 to 2.795 billion yuan in 2026, with a significant improvement in profitability [7] - The company's P/E ratio is expected to decline from 7.96x in 2023 to 1.97x in 2026, reflecting strong earnings growth [7]

Investment Rating - The report gives a "Buy" rating for the company with a target price of HKD 1.55, based on a 7x PE for 2024 [4][2]. Core Insights - The company is a leading cement enterprise in Shaanxi, China, with a dual market presence in both domestic and international sectors. It has 16 cement clinker production lines in China, with a total domestic capacity of 27 million tons per year by the end of 2023. The overseas capacity, primarily in Africa and Central Asia, is expected to reach 4.8 million tons by the end of 2023 [1][10]. - The company's overseas revenue and profit have shown significant growth, with overseas revenue reaching HKD 2.77 billion and profit HKD 1.015 billion in 2023, representing year-on-year increases of 145% and 197%, respectively [1][2]. - The company is well-positioned to benefit from the growing cement demand in Africa, particularly in populous countries with strong economic growth, and aims to increase its market share significantly in the region [1][3]. Domestic Business Summary - Domestic revenue has been declining, with revenues from Shaanxi, Xinjiang, and Guizhou in 2023 being HKD 3.79 billion, HKD 0.81 billion, and HKD 0.39 billion, respectively. Shaanxi accounts for the largest share at 76% [3][20]. - The demand in Shaanxi is under pressure due to a decline in real estate, while Xinjiang shows resilience with a 24% increase in cement production in 2023 [21][20]. - The supply side indicates a high concentration in the Shaanxi market, with the top three companies holding a 68% market share, which may provide the company with significant pricing power [27][20]. Overseas Business Summary - The overseas business is experiencing high growth, with a focus on Africa and Central Asia. The company has established a strong presence in countries like Ethiopia and Mozambique, where the economic conditions support robust cement demand [1][3]. - The company’s first overseas project in Mozambique has expanded its capacity significantly, and future capacity is projected to reach 12.2 million tons in 2024 and approximately 19.7 million tons in 2025 [1][3]. - The competitive landscape in Africa is intense, but the company is expected to rank among the top 10 cement producers as it increases its capacity in the region [1][3].

Financial Performance - Total sales volume of cement and clinker reached 20.5 million tons, an increase of 6.2% from 19.3 million tons in 2022[4] - Revenue for the year was RMB 9,020.9 million, reflecting a growth of 6.3% compared to RMB 8,489.1 million in the previous year[4] - Gross profit increased by 12.8% to RMB 2,460.0 million, up from RMB 2,181.8 million in 2022[4] - The net profit attributable to the owners of the company was RMB 421.3 million, a decrease of 65.3% from RMB 1,214.7 million in 2022[4] - The company’s total assets increased by 8.8% to RMB 32,902.9 million, compared to RMB 30,239.3 million in the previous year[4] - The net debt increased by 14.3% to RMB 8,556.1 million, up from RMB 7,487.1 million in 2022[5] - The proposed final dividend per share is 2.3 cents, a decrease of 65.7% from 6.7 cents in 2022[4] - The gross profit margin improved to 27.3%, up from 25.7% in the previous year, indicating better cost management[4] Market Conditions - In 2023, the overall cement demand in China declined due to slow economic recovery, high inflation, and strict environmental regulations, impacting the performance of the cement industry[19] - The competitive supply side continues to influence the average selling price of cement in Shaanxi province, with measures taken to balance supply and demand during off-peak seasons[19] - Fixed asset investment and real estate development investment growth rates have both declined, leading to an overall drop in cement product demand in Shaanxi province[19] - The group maintained a stable profit margin despite lower average prices in China, thanks to higher profit margins from African plants and successful cost reduction measures[19] Environmental Initiatives - The group has been actively pursuing energy-saving and emission-reduction initiatives, aiming to meet the highest industry standards[20] - The group achieved an 80% installation rate of waste heat recovery systems, reducing electricity consumption by approximately 30% and cutting CO2 emissions by about 22,000 tons per million tons of cement produced annually[20] - The nitrogen oxide emissions per ton of clinker were reduced by approximately 60% due to the installation of De-NOx equipment in all production facilities in China[20] - The group has engaged in hazardous and municipal waste incineration as part of its environmental initiatives[20] - Significant investments in environmental protection have been made, achieving pollutant discharge concentrations well below national standards[42] Production Capacity and Expansion - The company’s cement production capacity reached 31.8 million tons, with significant operations in Shaanxi, Xinjiang, Guizhou, and several African countries[8] - The company plans to leverage the "Western Development Policy" and "Silk Road Economic Development Plan" to expand its market presence in western China and Africa[9] - The company’s total cement production capacity reached 33.3 million tons by the end of 2023[27] - The company plans to focus on high-quality development in Africa for 2024 and beyond[28] Sales and Pricing - The average selling price of cement in the core market of southeastern Shaanxi province remains premium, with stable profit margins despite a decline in overall fixed asset investment and real estate development investment growth rate in 2023[36] - The average selling price in Shaanxi decreased by approximately 17.5% to about RMB 269 per ton, down from RMB 326 per ton in 2022[53] - The average cement price rose slightly to RMB 360 per ton in 2023 from RMB 358 per ton in 2022, contributing to revenue growth despite declines in aggregate and commercial concrete sales[81] Strategic Focus and Future Outlook - The company plans to enhance risk identification and control while promoting international development strategies[46] - The group anticipates that infrastructure investment will continue to support cement demand in 2024, despite low real estate investment negatively impacting the market[44] - The group expects stable prices in 2024 due to limited supply from stringent environmental policies[71] - The company is focusing on green development and carbon reduction technologies to explore cost-effective carbon emission control methods[46] Corporate Governance - The company remains committed to high corporate governance standards, ensuring transparency and accountability to shareholders[110] - The board consists of eight members, including four executive directors and four independent non-executive directors, ensuring compliance with listing rules[113] - The company has established a whistleblowing policy to allow employees and stakeholders to report misconduct confidentially[132] - The company’s risk management and internal control systems are deemed effective and sufficient by the board[137] Employee and Community Engagement - The group employed a total of 8,297 full-time employees, an increase from 7,736 in 2022, with employee benefits expenses rising to RMB 933,100,000 from RMB 776,600,000[104] - The group's charitable donations for the year ended December 31, 2023, reached RMB 21,100,000, compared to RMB 6,500,000 in 2022[200]

Investment Rating - The report maintains a **Buy** rating for Western Cement (2233 HK) [7] Core Views - Western Cement is a leading private cement enterprise with a strong market position in Shaanxi and expanding presence in Xinjiang and Africa [4] - The company has completed comprehensive layout in production equipment, resource supply, and logistics, entering a period of volume expansion [2] - Africa's cement demand exceeds 200 million tons, with prices ranging from 600-1200 RMB/ton, making it a new target for Chinese cement companies [2] - Western Cement is expected to achieve net profits of 1 37 billion and 1 81 billion in 2024 and 2025, respectively, with P/E ratios of 3 7x and 2 8x [6] Domestic Market: Shaanxi and Xinjiang - In Shaanxi, the company holds a 27% market share in clinker capacity, with a regional CR3 of 69%, ensuring stable market conditions [5] - Shaanxi's cement price is 375 RMB/ton, higher than the Yangtze River Delta, reflecting good market order [5] - In Xinjiang, the company ranks 5th in clinker capacity, with two production lines in Yili and Hotan, contributing to significant profit elasticity [5] - Xinjiang's cement production in 2023 was 48 1 million tons, up 25% YoY, with prices and profitability remaining high [5] Overseas Market: Focus on Africa - Africa's cement demand is driven by population growth and urbanization, with a total demand exceeding 200 million tons [6] - Western Cement has focused on four countries: Congo, Mozambique, Ethiopia, and Uzbekistan, with Congo and Ethiopia showing strong GDP growth [6] - In Congo, the cement price exceeds 1000 RMB/ton, and in Ethiopia, it remains above 800 RMB/ton due to supply shortages [6] - The company's overseas revenue reached 2 77 billion in 2023, accounting for 30 7% of total revenue [12] Competitive Landscape - In Africa, the top 10 companies account for 52% of the market, with Dangote being the leader with a capacity of 48 6 million tons [31] - Western Cement's overseas clinker capacity is expected to reach 853,000 tons by 2024, with a significant focus on Africa [40] Financial Performance and Outlook - The company's revenue in 2023 was 9 024 billion, up 6 3% YoY, while net profit decreased by 65 3% to 421 million due to impairments [12] - Capital expenditures have accelerated, with 1 7 billion, 3 1 billion, 4 2 billion, and 3 7 billion spent from 2019 to 2022, respectively [41] - The company's overseas projects are entering a profit release phase, with cash flow expected to stabilize [41]