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
