Rising from the ashes
The first results post group’s cement asset restructure. Net earnings growth was better than expected at 29% and outpaced revenue increase of 7% in the period. Cement sales volume dropped by only 4% despite the power shortage. Unit GP was stable at RMB95/t (FY20: RMB96/t). Meanwhile, contribution from non-cement (new materials and engineering services) businesses increased to 35% of total net profit (FY20: 23%) amid accelerating expansion in those markets.
Three-year debt reduction plan is progressing well. Net gearing fell to 76% at end-2021 from 85% the year before. With the latest guidance that capex will not be more than RMB35b for FY22F, gearing should be less than 70% by FY23F. On increased earnings and cashflow, the company’s final dividend was increased by 47% to RMB0.693 per share on a payout of 36%, the highest in the past three years.
Maintain BUY in view of the continuous value unlocking from the group efficiency improvement. We raised our FY22F/FY23F net earnings by 4% each on faster growth expansion in the non-cement business.