Tianshan shares (000877): Q1 turned losses into profits and gradually achieved significant achievements
Event: On April 25, the company announced the 2019Q1 quarterly report.
2019Q1 The company achieved operating income9.
43 ppm, an increase of 26 per year.
08%; realized net profit attributable to mother 1.
64 million, an increase of 1061 every year.
23%; net profit after deduction is 0.
93 million, an annual increase of 551.
In 2019Q1, the price of cement in Xinjiang increased, and the volume and price in East China increased, which drove the company’s profitability significantly.
The company’s sales volume increased by about 10% in the first quarter of 2019. Based on the cross-validation of the mainstream companies in East China, we believe that the sales volume contributed by the four production lines in East China is mainly based on the performance of regional cement prices.The gross profit per ton in East China has increased by 20 yuan throughout the year, driving the overall performance in East China to increase significantly.
In Xinjiang, according to the regional price situation, we expect the gross profit per ton to increase significantly, driving the company’s overall performance to pick up.
Beginning at the end of March, the demand for cement in the region has basically started. Looking at the actual transaction price, 42.
5 Cement at 470 yuan / ton, which has recently increased to 500 yuan / ton; compared with only 450 yuan / ton in the same period last year, we believe that the company’s gross profit per ton in the future has achieved a sustained increase without significant cost end.
In the first quarter of 2019, the company continued to deleverage, reduce debt, reduce financial expenses by 35% over the same period last year, and reduce the asset-liability ratio to 45.
After the 62% change in accounting standards, the company’s 2019Q1 increase in the fair value of assets increased to the parent’s net profit of approximately 66 million yuan.
Starting from January 1, 2019, the company implemented the new financial instrument accounting standards and replaced the original construction of the financial assets of the western construction (stock code 002302) accounting for financial assets sold by financial assets by classification and classification at fair value and its changes.The financial asset items included in the current profit and loss are accounted for. The change in the fair value of assets during the reporting period increased the net profit attributable to shareholders of listed companies during the period by approximately 66 million yuan.
Although Xinjiang’s food production in the region has decreased in recent years, in the case of Xinjiang due to changes in the state of competition and cooperation between enterprises, it has achieved high profitability in 2018 with changes in the magnitude of demand changes, and the situation in 2019 is expected to becontinued.
From a geographical point of view, Xinjiang has a vast territory and is at least the most natural self-discipline area for the upstream cement industry. The most important marginal change in the past two years has been the formation of a “new normal” for corporate competition.
Interregional enterprises’ demand for “quantity” will weaken, while their demand for profit will continue to increase.
The 2015-2016 government supply-side reform proposes that supplementing and increasing production capacity with a more stable regional pattern defines the margin of safety.
The change in the supply-side enterprise competition and cooperation status is the core factor for the Xinjiang industry’s profitability and the marked rise in prices over the past two years.
From the data point of view, the overall cement output in Xinjiang in 2018 decreased by 20%. We expect the company’s cement volume in Xinjiang to change by 15%?
20%, while the company’s gross profit margin in Xinjiang is 38.
64%, a substantial increase of 7.
77, even more than 32 achieved by the company’s production lines in Jiangsu.
6% gross profit margin.
Investment suggestion: Tianshan Co., Ltd. is the largest clinker production company in Xinjiang. It is affiliated to China Construction Materials Group. About 80% of the company’s production capacity is in Xinjiang, and the remaining 20% is in Jiangsu.
From the perspective of regional capacity ratio, the throughput of Tianshan Co., Ltd. in Xinjiang reached 31%, and it was mainly concentrated in northern Xinjiang with better demand. It is an absolute leader in the region.
In recent years, the “new normal” of competition and cooperation in Xinjiang has escorted profits. Credit expansion may drive demand elasticity: Xinjiang is a relatively independent market for the cement industry in developing countries in terms of geographical conditions. Due to the low external shocks, it is beneficial to the industry structureStable; but historically, before 2015, due to the reduction of supplementary production capacity in the region, and the decline in demand due to the decline in the intensity of infrastructure investment, the supply-demand relationship in the region deteriorated significantly; and since 2015, the government has cementedIncreasing consumption and new growth, the regional competition pattern began to gradually solidify, and at the same time, due to the extremely low natural productivity, supply-side constraints continued to increase (whether spontaneous corporate collaboration or top-down government off-peak production); Xinjiang 2019 will be strongThe staggered peak production policy is still to be strengthened compared to history and will still be a safe pad for supply in the region; and the “new normal” of competition among leading enterprises in the region has basically formed, and price fluctuations in the region have decreased; and 32.
5 The cancellation of cement in Xinjiang will also help to optimize the regional industry structure to a certain extent.
On the demand side, after undergoing “maintenance” and credit crunch in the past few years, regional economic growth will gradually become the protagonist on stage in 2019. Infrastructure is expected to exert force to bring demand elasticity, and actual utilization (wrong peak production has reduced most of the capacity) It is expected that the steady recovery will lead to further improvement in corporate profits.
The strong supply and demand gap in Jiangsu “enhances” and maintains regional profitability: Although the company has only four production lines in Jiangsu, it has contributed to the company’s potential in the high cement boom in East China.
From the perspective of the supply side of Jiangsu Province, we believe that the environmental protection pressure of Jiangsu will help to promote the sustained peak-shift improvement in 2019.
On the demand side, due to the growth rate of real estate starts in Jiangsu province in 2018, which has increased by 20%, it will gradually shift inward in 2019, and real estate demand will continue to consolidate the demand for cement in Jiangsu Province. On the infrastructure side, the planned growth rate of regional internal infrastructure construction will increase.Higher, is expected to underpin cement demand.
The endogenous improvement of the company’s operations is obvious, which promotes the improvement of profitability. In recent years, the company has provided impairment for some production lines to reduce the historical burden in response to changes in its own production capacity. At the same time, the regional profit has rebounded, and the company’s asset-liability ratio has been steadily falling.It also increased the company’s profitability.
Investment suggestion: We believe that the worst time in the history of Xinjiang’s cement industry has passed. Large-scale production capacity replenishment in the region will hardly reappear. The relatively closed market under the “inventory pattern” and the cement industry’s own strong capacity control will be expected.It will stabilize the profitability of Tianshan shares; if infrastructure and communications become the main theme of 2019, Xinjiang as an important strategic prospect of the “Belt and Road” 武汉夜生活网 is expected to meet demand elasticity.
We conservatively estimate that the company’s net profit attributable to mothers will be 18 in 2020.
100 million, 18.
600 million US dollars, corresponding to 2019, PB is about 1 in 2020.
4 times, 1.
2X, there may be a margin of safety.
Give “overweight” rating.
Risk warning: Cement supply-side constraints are significantly relaxed, and regional demand is significantly reduced.