HUAXIN CEMENT(SH:600801) Huachuang Securities·2024-03-28 16:00Investment Rating - The report gives a "Buy" rating for the company with a target price of 17.3 CNY [1][9]. Core Views - The company has a strong historical performance with a revenue compound annual growth rate (CAGR) of 13.2% and a net profit CAGR of 16.0% from 2007 to 2022 [1][21]. - The company is well-positioned in the aggregate industry, which has strong resource attributes and competitive barriers, despite current demand being at a low point [1][34]. - The overseas cement market presents significant growth opportunities, with the company having established a diversified presence in multiple regions over the past decade [1][30]. - The domestic cement industry is currently at a low profitability point, but the company maintains a competitive advantage in its core regions [1][30]. Summary by Sections Company Overview - The company, founded in 1907, has a rich history and a strong governance structure with a mix of foreign and state-owned shareholders [1][14][16]. - The management team has extensive experience, with the president having led the company for 25 years [1][18]. Aggregate Industry - The aggregate industry is characterized by strong resource attributes, with limited downside for leading companies' profitability due to ongoing consolidation and policy constraints [1][34]. - The company has a significant market share in the East Hubei region, with a production capacity of 241 million tons as of H1 2023 [1][34]. Cement Business - The domestic cement market is expected to remain under pressure, with industry profits projected to decline significantly in 2023 [1][30]. - The company has been proactive in adopting carbon reduction technologies, which may provide a cost advantage in the future [1][30]. Financial Projections - The company is expected to achieve net profits of 2.546 billion CNY in 2023, 2.998 billion CNY in 2024, and 3.398 billion CNY in 2025, with corresponding earnings per share (EPS) of 1.22 CNY, 1.44 CNY, and 1.63 CNY [2][9]. - The report anticipates a recovery in profitability post-2023, driven by the company's integrated business model and international expansion [1][9]. Investment Thesis - The company's integrated business model and international strategy are expected to yield long-term benefits, enhancing its competitive moat [1][8]. - The report highlights the company's ability to maintain profitability despite industry challenges, indicating strong operational resilience [1][8].