Conch Cement (600585) Company Comments: Q3 Continues to Realize Positive Growth Value for Many Years
Event: On October 22, the company announced the third quarter report of 2019, and achieved operating income of 1107 from the first quarter to the third quarter.
5.6 billion, an increase of 42 every year.
37%; net profit attributable to mother is 238.
16 ppm, an increase of 14 per year.
Among them, Q3 single quarter realized operating income of 391.
1.3 billion, an increase of 22 per year.
04%; net profit attributable to mother 85.
56 ppm, an increase of 10 per year.
We think the company’s third quarter report is in line with expectations.
In the third quarter, the company paid a premium based on volume, and its single-quarter profit continued to grow, demonstrating the leading profitability.
Sales volume: We expect the company’s Q3 single-quarter production and sales volume to achieve approximately 10% growth.
Put into use, and actually benefited from better new starts and a pick-up in construction growth. The infrastructure end continued to pick up from the third quarter; replacement and replacement of the company’s internal accumulated production capacity, including 4 units in 2018 and 1 unit in 2019, Acquisition of Guangying Cement, and overseas production lines completed and put into operation.
Gross profit per ton: We estimate that the company’s self-produced cement gross profit per ton for Q3 is 144 yuan, a slight increase over last year’s 7 yuan.
In the third quarter, due to the heavy rain weather in Central and South China, as well as the decline in cement prices in Guizhou and other places, and the increase in the overlapping cost end, we calculated that Q3 ton gross profit alternated slightly from 7 yuan to 144 yuan.
The industry has entered a mature stage, and the company has entered the harvest stage. In the future, the “heavy asset” attribute will gradually weaken, and sufficient ammunition and leverage will be the basis for future horizontal integration.
We estimate that the company’s net cash is expected to approach 60 billion by the end of this year.
Sufficient cash in hand can provide a good basis for the next round of mergers and acquisitions.
In the same area of merger and acquisition in the cement industry, the horizontal integration of the industry is a comprehensive synergy effect. In the case of the relatively underestimated estimate of the acquired company, Conch’s future integration will help increase the company’s actual value.
The sales volume of the platform continued to increase, and sales control was further strengthened.
Since 2018, the business scope of the company’s expected trading platform has continued to expand, and the volume of trade has grown significantly.In 2018, the scale of trade reached 7,000 tons, and in 2019H1, it reached 5700 tons. We expect that it will exceed 1 billion tons.
The ton price of trading through the platform in 2019H1 is about 346 yuan, but it does not contribute to actual profits.
The company’s control over sales channels has been further strengthened, and market control capabilities and shares have continued to increase. At the same time, the company has transferred the sales of some factories to Haizhong Building Materials Trading Co., Ltd., which has led to a rapid growth of the company’s revenue.
Investment suggestion: Supply and demand supplements for the cement industry will be connected in 2019.
The current stock demand is still at a high level, and the “counter-cyclical” adjustment may bring the balance of demand-side substitution that will bring in 2019; while the supply-side is strongly constrained by administrativeization, the growth of the supply curve is suppressed, although the supply-side administrativeization is restricted in 2019年 年可能会出现边际上的松动，但是行业对于产能自发调节的极强能力将会发生在需求扩展，供给约束彻底重置之前对行业盈利中枢稳定作用.
We believe that the downward cycle of the industry’s earnings this round will be alternating and flat.
From the perspective of Conch Cement, there is still room for growth and the value of assets needs to be explored.
The company’s assets are of high value and have been on the basis of sustainable development in the medium and long term, with safety marginal interests.
First of all, the limestone resource whose value has been gradually revalued in recent years is “a golden mountain” in Conch’s balance sheet, and the company’s market, resource endowment and “T-shaped” volume distribution have irreproducible cost advantages and market basis。
In the future, even the demand for cement will decline, and the industry will enter a new round of reshuffle. Conch’s increasingly competitive advantage and the increase in industry concentration in recent years have also set the company’s strong profit margin. We believe the bottom of the next round of profit will alsoHigher than the bottom of the 2015 cycle.
The company’s future development space looks on.
In recent years, it has actively explored the aggregate market and strengthened the control of the entire industrial chain. According to the plan, the company will strive to achieve at least 100 million tons of aggregate capacity per year by 2020.
The strong endowment of resources has led to Conch Cement’s excellent foundation and potential for the development of aggregate business.
The company’s overseas expansion has accelerated, and its global presence has reduced corporate operating risks.
Conch Cement plans to build 5,000 tons of overseas capacity by the end of the 13th Five-Year Plan.
From the domestic to the international, Conch Cement has gradually moved towards internationalization with the help of the “Belt and Road” initiative, and achieved continuous expansion through its global layout.
At the same time, the continuous accumulation of capital in hand and the continuous optimization of the balance sheet have laid a strong foundation for the company’s continuous integration in the downturn of the industry in the future.Conch sales in the next round of reshuffle are expected to exceed 400 million tons, achieving continuous counter-expansion expansion.
Conch cement is a soil of natural value.
We recommend that investors start from the perspective of the company’s intrinsic value and take a long-term view; this is also in line with the trends and laws of the cement industry investment in mature markets.
Based on our consistent point of view, through the gradual withdrawal of traditional industries and the growth of the main stage of economic growth, the general trend of the cement industry’s concentration on the leader will not change.
In the process of strong demand stimulus in the future and the gradual ebb of supply-side constraints, this is an important period of transformation of 武汉夜网论坛 the capital structure of cement leaders such as Conch. In the past 2-3 years, the pursuit of supply-side drive to bring back ROE funds will gradually withdraw,Not sensitive to the length of investment, the pursuit of deterministic trends in the long-term industry pattern, and increasing capital adequacy.
From the perspective of Conch’s expected holding period earnings, we believe that the demand for entering the industry enters the downward channel, and the substantial de-capacity can be gradually promoted. As a leader in the industry, Conch will obviously benefit from the increase in concentration.
Due to the company’s resource endowment and strategic distribution, the cost advantage is difficult to surpass. The stability and certainty of the company’s earnings are the best in cement stocks. At present, the company’s 南京桑拿网 potential return rate after replacing net cash is very attractive.Lili.
In the future, after another cycle of conch, the market share can continue to increase, and profitability will still return to a high level. At the same time, the company will gradually strengthen dividends and increase value attributes.
Conch Cement has entered the stage of increasing the market value of its net assets. Although the annual price and profit may return to the average value in terms of the annual time dimension, the safety margin of the asset side has gradually become clear. We still recommend long-term growth and long-term investors.The holding cycle can enjoy a large amount of stable dividend income, and the second growth dividend of Conch as a leader.
We expect Conch Cement’s 2019 net profit to be approximately 33.1 billion, corresponding to PE of approximately 6.
7X, if net cash is deducted, the corresponding PE is only 5X.
Maintain “Buy” rating.
Risk Warning: 1.
Macroeconomic risks; 2.
Supply-side reform exit