Financial Data and Key Metrics Changes - The Argentine economy is projected to grow approximately 5% in 2025, following a contraction of 1.7% in 2024, which positively impacts the construction sector [6][11] - The company reported an adjusted EBITDA of $40 million, reflecting a 3.2% decrease in pesos, translating to $36 per ton [8][19] - Net profit attributable to owners of the company totaled ARS 21.5 billion, down from ARS 79 billion in Q1 2024, primarily due to lower financial results [22] Business Line Data and Key Metrics Changes - The Cement segment experienced a 10.9% revenue drop despite an 8.9% year-over-year increase in volumes, attributed to a softer pricing environment [14] - Concrete revenues declined by 1.4%, with a 22.8% increase in volumes offset by price pressures [14] - The Aggregates segment saw a 14.2% revenue decline despite a 29% increase in sales volumes, impacted by a weak market activity [15] Market Data and Key Metrics Changes - Cement consumption showed a year-over-year increase of 28% in April, indicating a recovery trend [7][12] - The company’s gross profit declined by 4.7%, but gross margin expanded by 116 basis points to 26.4% [17] - The railroad segment reported a 19.9% increase in transported volumes, although pricing pressures remained due to a higher share of lower-revenue grain transport [16][21] Company Strategy and Development Direction - The company aims to drive efficiency and control costs while safeguarding profitability and delivering quality products [28] - The management is optimistic about the recovery of the construction sector, expecting a more sustained recovery in the coming quarters [26] - Changes in exchange rate policy and easing of capital controls are seen as pivotal for unlocking investment projects [27] Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the early stages of recovery in the construction sector, despite challenges from adverse weather conditions [6][12] - The company remains focused on maintaining a strong balance sheet and is committed to protecting profitability [8][28] - The outlook for cement demand is positive, with expectations of double-digit growth in 2025 [43] Other Important Information - The company ended the quarter with net debt of ARS 187 billion and a debt to EBITDA ratio of 0.96x, slightly up from 0.89x at the end of 2024 [23][24] - Cash flow used in operating activities improved significantly, totaling ARS 1.3 billion compared to ARS 12 million in Q1 2024 [23] Q&A Session Summary Question: Competitive dynamics and market share - Management indicated that market share dynamics are in line with their strategy, and weather conditions impacted regional performance [31][33] Question: Pricing power and cement volume outlook - Management expects pricing to remain around $115 per ton, with a positive outlook for volume growth, anticipating double-digit growth in 2025 [38][43] Question: Volume outlook related to construction projects - Management noted positive forecasts for cement demand, with several tenders moving forward, particularly in renewable energy and public works [47][51]

Financial Performance - Net revenues reached Ps 1632 billion, down 89% (US$ 149 million) [11] - Adjusted EBITDA stood at Ps 392 billion, down 32% (US$ 40 million) [11] - Consolidated Adjusted EBITDA margin reached 240%, with an expansion of 140 bps YoY from 226% [11] - Net Profit Attributable to Owners of the Company in 1Q25 was Ps 215 billion, down from Ps 791 billion in 1Q24 [36] - Total finance gain was Ps 89 billion in 1Q25, compared to a net gain of Ps 1032 billion in 1Q24 [36] Volumes and Sales - 1Q25 Volumes Up 11% YoY [14] - Cement, masonry & lime sales volumes increased by 89% year-over-year, but revenues decreased by 109% [21, 22] - Concrete sales volumes improved 228%, but revenues decreased 14% YoY [21, 22] - Railroad sales volumes increased 199%, but revenues decreased 12% YoY [21, 22] - Aggregates sales volumes increased 290%, but revenues decreased 142% year-over-year [21, 22] Balance Sheet and Cash Flow - Net Debt of US$ 174 million, representing a Net Debt/LTM Adjusted EBITDA ratio of 096x [11] - Cash position and Investments of Ps 106 billion and total debt at Ps 1972 billion as of end of 1Q25 [37] - In 1Q25, the cash used in Operating Activities reached Ps 13 billion from a utilization of cash of Ps 120 billion in 1Q24 [37]

Financial Performance - Sales volume reached S/ 499.2 million, a 4.8% increase compared to 1Q24[7] - Sales of goods amounted to S/ 134.7 million, showing a 1.4% increase compared to 1Q24[7] - EBITDA reached S/ 27.0 million[7] - EBITDA margin increased by 0.9 percentage points compared to 1Q24[7] Strategic Focus - The company is focused on building solutions[8] - Coprocessing is a key area of focus[10] Product Categories - Cement is a significant product category[21] - Concrete, pavement, and mortar are important product offerings[22] - Precast products are part of the company's portfolio[24]

Core Insights - The company reported Q1 2025 results with revenue of 19.051 billion yuan, a year-on-year decrease of 10.67%, while net profit attributable to shareholders was 1.810 billion yuan, an increase of 20.51%, aligning with previous performance forecasts [1] Financial Performance - In Q1 2025, the company's cement production decline narrowed, with national cement output totaling 331 million tons, a year-on-year decrease of 1.4%. This indicates a gradual release of infrastructure projects, suggesting a potential easing of supply-demand conflicts in the cement market [1] - The company's gross margin significantly improved to 29.67%, up 8.09 percentage points year-on-year. The selling, administrative, research and development, and financial expense ratios were 3.95%, 7.27%, 0.92%, and -0.92%, respectively, with year-on-year increases of 0.58, 0.96, 0.05, and 0.27 percentage points. The total expense ratio rose by 1.86 percentage points to 11.22% [1] - The company recorded a net profit margin of 9.32%, an increase of 2.34 percentage points year-on-year, attributed to rising cement prices, reduced costs, and increased sales volume [1] Cash Flow and Pricing Strategy - The company experienced a significant increase in operating cash flow, with a net cash flow of 503 million yuan, a year-on-year increase of 343 million yuan, or 214.92%. The collection ratio was 110.79%, down 6.77 percentage points year-on-year, indicating improved collection performance [2] - The company anticipates further price increases in cement, with some companies in East China announcing a third round of price hikes of 20 yuan per ton, and plans for a second round of increases of 30 yuan per ton in Hubei and surrounding areas starting April 1 [2] - The company expects that the ongoing price increases in cement, coupled with increased infrastructure spending, will positively impact profitability and performance in 2025 [2] Profit Forecast - The profit forecast has been slightly adjusted, with expected net profits attributable to shareholders of 10.90 billion, 12.02 billion, and 12.30 billion yuan for 2025-2027, representing year-on-year growth of 41.6%, 10.3%, and 2.3%, respectively. The corresponding P/E ratios based on the closing market value on April 29, 2025, are 11.9x, 10.8x, and 10.5x [3]

Financial Data and Key Metrics Changes - Revenues increased by 4.8% year over year, reaching $499.2 million, driven by stronger demand for bagged cement and concrete [3][10] - Consolidated EBITDA rose to $134.7 million, a 1.4% increase compared to the same period last year [3][10] - Net profit increased by 6.5% year over year, attributed to higher revenues and gross profit, along with a slight reduction in financing expenses [14] Business Line Data and Key Metrics Changes - Sales of concrete, pavement, and mortar surged by 22.3% year over year, primarily due to major infrastructure projects [4][12] - Cement sales increased by 3.9% compared to the same period last year, with gross margin rising by 2.6% due to lower raw material costs [12] - Precast material sales grew by 6.8%, although gross margin decreased by 1.8 percentage points due to lower fixed cost dilution [13] Market Data and Key Metrics Changes - The company is positioned as a preferred choice for infrastructure development in Northern Peru, with ongoing projects like the Motupe riverbank defenses and the Tarata Bridge [4][6] - The demand for concrete is expected to increase in the coming quarters due to the initiation of new projects [25] Company Strategy and Development Direction - The company is focused on a long-term strategy to expand the use of concrete and building solutions, which is seen as essential for future growth [5][38] - A decarbonization strategy is being implemented, with a focus on reducing coal usage and exploring cleaner alternatives like biomass [6][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining positive momentum for the rest of the year, despite challenges faced in the first quarter [3][14] - The company anticipates stable EBITDA margins moving forward, with a one-time expense related to labor union bonuses not expected to recur [21][22] Other Important Information - Administrative expenses increased by 22.4% due to personnel expenses related to union bonuses [11] - The net debt to EBITDA ratio improved to 2.6x, indicating ongoing deleveraging efforts [14] Q&A Session Summary Question: Is it worth continuing the sales of concrete pavements, precast, and construction supplies when you barely make any money on it? - Management emphasized that the overall company strategy focuses on building solutions, which is crucial for maintaining market presence despite lower margins in some projects [17][18] Question: Should we expect a similar year-over-year increase in SG&A in the coming quarters? - Management clarified that the recent increase in SG&A was a one-time expense and that EBITDA margins should remain stable for the rest of the year [21][22] Question: Do you expect to maintain this level of concrete volumes for the whole of 2025? - Management indicated that concrete volumes are expected to increase for the remainder of the year due to new projects starting [25] Question: Will dividends be considered as a capital allocation avenue going forward? - Management confirmed a solid dividend policy will be maintained while also focusing on reducing debt [28][29] Question: Will the production and sale of lime continue to be reported? - Management stated that lime production will continue, although it may not be reported due to its materiality [30] Question: Do you expect the trend of recovery in dispatches to continue? - Management affirmed that they expect to see continued growth in dispatches and concrete volumes throughout the year [35]

Investment Rating - The industry view for China Materials is rated as Attractive [6] Core Insights - Cement is preferred due to supply discipline, price coordination, lower costs, and no impact from trade wars. The building materials sector is recovering from improved secondary property sales [1][2] - The cement industry is experiencing margin expansion and has formed new alliances to focus on profit rather than volume. A 5-10% year-over-year decline in demand is expected, but margin recovery is anticipated due to lower coal prices and effective supply control measures [2][3] - Late-cycle building materials are recovering, supported by better secondary home sales and government initiatives. However, demand remains soft due to declining property starts and completions [3] - The float glass segment is facing weak fundamentals, with low demand from property developers and high supply levels continuing to pressure earnings [4] Summary by Sections Cement - Major cement players have agreed to prioritize profit over market share, leading to a healthier price recovery despite weak property demand. The industry is expected to see a margin recovery due to lower coal prices and effective supply control policies [2] - Top producers like Conch, CNBM, and CR Cement are likely to benefit from new supply control measures aimed at reducing overproduction [2] Building Materials - The late-cycle building materials sector is expected to see mild growth in new infrastructure and industrial investments, with demand improving from better secondary home sales and government programs [3] - Companies such as Yuhong, Weixing, and Lesso are identified as potential beneficiaries of this recovery [3] Float Glass - The float glass market is currently weak, with low order days at processing plants and high supply levels continuing to exert pressure on earnings [4] Price Targets and Ratings - Price targets for key companies include Anhui Conch (A) at RMB 37.40 with a 47% upside, Anhui Conch (H) at HKD 29.80 with a 35% upside, and China Resources Building Materials at HKD 2.30 with a 39% upside [7][11] - Ratings for companies in the cement sector are predominantly Overweight (OW), while Xinyi Glass and Zhuzhou Kibing Glass are rated Underweight (UW) due to weak fundamentals [11][12]

Investment Rating - The industry view is rated as Attractive, with a preference for gold, cement, building materials, and steel for 2Q25 [7]. Core Insights - Demand in the materials sector showed signs of recovery in 1Q25, but the outlook for 2Q25 is uncertain due to tariff concerns. Domestic excavator sales increased by 38% YoY, and orders from cathode producers rose by 20% due to strong demand from electric vehicles (EV) and energy storage [2]. - The report anticipates that metals-related stocks may outperform in 2H25 as further stimulus is expected [1][6]. - The tariff impact is projected to weigh heavily on the materials space, with a forecasted GDP growth reduction of 30 basis points to 4.2% for 2025 due to tariff shocks and domestic demand impacts [2][18]. Summary by Sections Gold - Gold is identified as the top pick within commodities, supported by ongoing central bank buying and rising ETF inflows. Lower Treasury yields are expected to enhance gold's macro backdrop. Preferred stocks include Zhaojin (1818.HK) and Zijin Mining (2899.HK, 601899.SS) [3]. Cement and Steel - Cement supply-side controls were announced in November 2024, leading to a focus on profitability rather than price wars. The report expects a significant increase in gross profit per ton due to lower coal prices and higher cement prices. For steel, a production cut of 30 million tons and an export cut of 15-20 million tons are anticipated in 2025. Preferred stocks include Anhui Conch (0914.HK, 600585.SS), CNBM (3323.HK), and Baosteel (600019.SS) [4]. Copper and Aluminum - In 2H25, copper and aluminum are expected to outperform due to continued demand from grid and EV-related green infrastructure. Additional fiscal stimulus could further support demand. Preferred stocks include Zijin (2899.HK, 601899.SS), CMOC (3993.HK, 603993.SS), and Hongqiao (1378.HK) [5]. Tariff Impact - The report highlights that the current cumulative US tariffs could have a more significant growth drag than in 2018-19, with expectations of trade talks to lower tariffs to 34% by year-end. The tariff shocks are expected to impact both trade channels and domestic demand [17][18].

Core Viewpoint - The company has developed a valuation enhancement plan for 2025 to improve its overall value and investment valuation, aiming for sustainable growth and high-quality development in response to market conditions and internal strategies [4][14]. Group 1: Triggering Conditions and Procedures - The company has been required to formulate a valuation enhancement plan due to its stock price being below the audited net asset value per share for 12 consecutive months [2]. - The board of directors approved the 2025 valuation enhancement plan on April 23, 2025 [3]. Group 2: 2025 Valuation Enhancement Plan - The plan aims to clarify strategic paths for growth, transitioning from a "dual-wheel" to a "three-horse" model, focusing on core business, new economic investments, and second growth curve businesses [4][5]. - The company has maintained resilient growth in its main product capacity and revenue, with cumulative tax payments of approximately 5.1 billion yuan and cash dividends of 2.65 billion yuan, achieving an average annual dividend rate exceeding 40% [4]. Group 3: Business Quality Improvement and Innovation - The company has established a high-efficiency operational mechanism in the cement and building materials industry, maintaining competitive advantages even during downturns [6][7]. - The focus will be on enhancing quality and efficiency through smart, ecological, and high-end upgrades, while also improving product structure and resource allocation [7]. Group 4: Capital Integration and Second Growth Curve - The company has invested over 1.7 billion yuan in equity investments, particularly in semiconductors, new energy, and new materials, achieving significant returns [8]. - The five-year plan outlines a framework for developing new business directions, including silicon-based and carbon-based materials, and emphasizes the integration of industry and capital resources [8]. Group 5: Governance and Incentive Mechanisms - The company will enhance its governance structure and internal control systems, ensuring compliance with regulations and improving management capabilities [9]. - An employee stock ownership plan has been implemented to align management incentives with company valuation [9]. Group 6: Shareholder Returns and Social Responsibility - The company has distributed approximately 3.819 billion yuan in dividends since its restructuring, with a new dividend plan proposing a minimum of 35% of net profit for cash dividends from 2024 to 2026 [10]. - The company aims to enhance its social responsibility through annual ESG reports and by optimizing its dividend strategy to increase shareholder satisfaction [11]. Group 7: Communication and Transparency - The company plans to strengthen investor relations by proactively disclosing operational and strategic information, ensuring fair treatment of all shareholders [12]. - Regular communication activities will be organized to engage with investors and analysts, enhancing confidence in the company's performance [12]. Group 8: Evaluation of the Valuation Enhancement Plan - The company will assess the implementation of the valuation enhancement plan annually, especially if it remains in a long-term undervalued situation [13].

Investment Rating - The industry view is rated as Attractive, with a preference for gold, cement, building materials, and steel for 2Q25 [7]. Core Insights - Demand in the materials sector showed signs of recovery in 1Q25, but the outlook for 2Q25 is uncertain due to tariff concerns [2]. - The report anticipates that metals-related stocks may outperform in 2H25 as further stimulus is expected [1][6]. - The impact of tariffs is projected to lower China's 2025 real GDP forecast by 30 basis points to 4.2% [2][18]. Summary by Sections Gold - Gold is identified as the top pick within commodities, supported by ongoing central bank buying and rising ETF inflows [3]. - Lower Treasury yields are expected to enhance gold's macro backdrop [3]. Cement and Steel - Cement supply-side controls were announced in November 2024, leading to a focus on profitability rather than price wars [4]. - A production cut of 30 million tons and an export cut of 15-20 million tons for steel is anticipated in 2025 [4]. Metals - In 2H25, copper and aluminum are expected to outperform due to continued demand from grid and EV-related infrastructure [5]. - The report notes that aluminum will benefit from margin expansion amid limited supply increases [5]. Tariff Impact - The cumulative US tariffs are expected to have a more significant growth drag compared to the 2018-19 period, with a projected weighted average tariff hike on China reaching 34% by year-end [17]. - The tariff shocks are anticipated to affect both trade channels and domestic demand, contributing to a GDP growth reduction of 90 basis points [18].

CITI'S TAKE Materials demand in 1Q25 was mostly in line with our expectation, with stronger prints on steel and cement, and weaker on coal. As the trade war between the US and China escalates, we assess the impact from trade disruptions and potential RMB depreciation on materials. We believe the impact of tariffs has already kicked in for the battery supply chain (see note) and expect more to be felt through commodities in the coming months. This should call for more decisive policies from Chinese side to b ...