Riding on non-cement growth
Group asset restructure plan unlocking value. After the reorganisation of the cement and glass businesses, the company continues to develop new growth drivers in engineering relating to the emission reduction market, with a target of non-cement revenue reaching 50% of earnings from 25% by 2025.
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 RMB35bn for FY22F, gearing is expected to decline to below 70% by FY23F. In the midst of the rising contribution from its non-cement operation, we believe the company’s gearing level could further improve going forward.
Maintain BUY. We believe the current valuation, at only 0.5x FY22F P/BV, has reflected the earnings cut on lower sales volume assumptions. But we also expect its transformation would bring more development prospects and drive share outperformance.