Above peers’ GP to maintain
FY21 results in line. Revenue and net earnings both dropped by c.5% on lower self-produced cement sales (304m tons) due to disruption from power rationing. On a bright note, Conch has guided that its self-produced sales volume would rebound to 325m tons this year. Unit GP was estimated to be RMB157 for FY21, just behind the record of RMB158/t in FY19. Final dividend increased by 12% to RMB2.38 per share, translating to a payout of 38%, comparable to 2017’s 40%.
Above peers’ unit GP. Conch has achieved superior GP compared to its major listed peers (CNBM RMB95/t and CRC HK$146/t) underpinned by its lower cost of production and higher operating efficiency. Meanwhile, Conch’s capacity expansion will boost self-supply of green energy and aggregates production during 2021-2023, providing additional growth catalyst.
Room to raise investment stakes in peers. Conch raised its stakes in four cement peers last year. Its strong balance sheet (FY21: net cash) should enable Conch’s to raise its stake further or embark on other market consolidation initiatives.