Ping An Securities·2024-04-28 03:00Investment Rating - The report maintains a "Recommended" investment rating for Conch Cement (600585.SH) [2][9]. Core Views - The cement industry is experiencing pressure on both volume and price, leading to a continued bottoming out of industry profitability. The first quarter saw a significant decline in revenue and net profit due to weak demand from real estate and infrastructure sectors [3][5]. - Despite a decrease in coal costs, the drop in cement prices has resulted in a decline in gross profit per ton, contributing to a 41% year-on-year decrease in net profit for the first quarter. The company’s operating cash flow has also decreased significantly [3][4]. - The report anticipates that with the gradual implementation of special government bond projects and enhanced industry collaboration, cement profitability is expected to stabilize [3][5]. Financial Summary - For the first quarter of 2024, Conch Cement reported revenue of 21.33 billion yuan, a year-on-year decline of 32.1%, and a net profit of 1.5 billion yuan, down 41.1% from the previous year [3][4]. - The company’s projected net profits for 2024, 2025, and 2026 are 9.1 billion yuan, 10.5 billion yuan, and 11.9 billion yuan, respectively, with corresponding price-to-earnings ratios of 13.2x, 11.5x, and 10.1x [3][4][8]. - The company’s gross margin is expected to decline to 14.4% in 2024, with a net margin of 6.1% [8]. Operational Insights - The company has a strong cash position with 66.34 billion yuan in cash at the end of the reporting period, despite a decrease in operating cash flow [3][6]. - The report highlights that Conch Cement is strategically positioned in the East and South China markets, which are expected to show more resilience in demand [3][5]. Market Outlook - The report suggests that the ongoing recovery in real estate construction and the issuance of special government bonds are likely to boost future infrastructure demand [3][5]. - The company is recognized for its cost control and operational efficiency, maintaining a leading position in the industry [3][5].