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DBS: West China Cement Ltd – Hold Target Price HK$1.10

Posted on August 30, 2022August 30, 2022 By alanyeo No Comments on DBS: West China Cement Ltd – Hold Target Price HK$1.10
West China Cement’s 1H22 core earnings drop 10% y-o-y in line

<Earnings First Take> West China Cement’s (2233 HK) 1H22 core earnings drop 10% y-o-y in line 

  • Revenue dropped c.1% y-o-y to RMB4,152m
  • Core earnings dropped 10% y-o-y due to higher opex
  • The results were in line with expectations 
  • We have a HOLD rating and TP of HK$1.1 
What’s New
  • In 1H22, revenue dropped c.1% y-o-y to RMB4,152m. Sales volume of cement and clinker products drop 11% y-o-y in the period. 
  • Gross profit rose c.1% y-o-y to RMB1,352m and gross profit margin slightly expanded to 32.5% from 1H21’s 31.7%, riding on higher products selling price.
  • Headline net earnings slumped 37% y-o-y to RMB658m. Excluding the one off gains last year, core earnings dropped 10% y-o-y in the period due to higher opex.
  • Net borrowing increased 12% to RMB6,325m in Jun-22 from Dec-21’s RMB5,622m.
Our View:
  • The results were in line with expectations. 
  • Although consumption is expected to modestly pick-up in the province with the resumption of certain construction projects, we believe that the company’s sales won’t rebound sharply.
  • Although the company’s overseas project in Mozambique, Africa has turnaround, we reckon overall project ramp-up progress to remain low (capacity utilisation only 50% for 1H22). 
  • We have a HOLD rating and TP of HK$1.1 

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Research - Equities Tags:West China Cement

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