2025-08-29 02:19Summary of Anhui Conch Cement (0914.HK) Earnings Review Company Overview - Company: Anhui Conch Cement - Stock Codes: 0914.HK (Hong Kong), 600585.SS (Shanghai) - Market Cap: HK$126.8 billion / $16.3 billion - Industry: Basic Materials, specifically Cement Production Key Financial Highlights - 1H25 Net Profit: Rmb4.6 billion, EPS of Rmb0.874/share, up 33% YoY [1] - Recurring Net Profit: Rmb5.1 billion, up 32% YoY, excluding one-offs [1] - Interim Dividend: Proposed Rmb0.24/share, 27% payout ratio, compared to nil in previous interims [1] - Sales Volume: 126 million tons of self-produced cement, flat YoY, outperforming national market decline of -4.3% [23] - Gross Profit from Cement: Increased by 34% YoY, driven by higher unit profit in domestic and overseas markets [23] Earnings Estimates and Projections - 2025E Recurring Earnings: Revised down by 13% due to persistent low cement margins in China [2] - 2026E and 2027E Earnings Growth: Expected growth of 34% and 3% respectively [2] - Price Target: Revised to HK$31.00 / Rmb32.00, implying a 2026E P/E of 10.4x [2] - Free Cash Flow (FCF): Expected to be Rmb6.7-12.7 billion in 2025-26E, with a FCF yield of 5.5-10.5% [22] Operational Insights - Cement Operations: Contributed 84% of total gross profit, with improved overseas margins from pricing recovery in Uzbekistan and Cambodia [23] - Aggregate and RMC Operations: Gross profit above expectations, with RMC sales up 3% YoY [24] - Cost Management: Total SG&A better than expected due to lower administrative costs [25] - Cash Flow: Operating cash flow increased by 21% YoY in 1H25A, with slight improvements in working capital management [26] Market and Industry Outlook - Cement Pricing: Expected to improve in 2026E and 2027E due to industry control on unauthorized capacity [2][38] - Risks: 1. Weaker-than-expected property and infrastructure demand affecting utilization and pricing [40] 2. Slower exit from unauthorized cement capacity leading to depressed prices [40] 3. Increased competition and potential new production lines affecting market share [40] 4. Rising raw material costs impacting margins [40] Valuation Metrics - P/E Ratios: 2025E at 11.4x, 2026E at 7.9x [13] - P/B Ratios: 2025E at 0.6x, 2026E at 0.6x [13] - Dividend Yield: Expected to be 4.3% in 2025E and 6.5% in 2026E [22] Conclusion - Investment Recommendation: Maintain Buy rating on Anhui Conch Cement, with an attractive risk-reward profile based on potential margin improvements and strong cash flow generation [2][38]