HUAXIN CEMENT(600801)：DOMESTIC UPTREND SUPPORTS RESILIENCE;GLOBAL PRESENCE EMERGING

　　2024 recurring net profit in line with our expectationsHuaxin Cement announced its 2024 results: Revenue rose by 1.4% YoY to Rmb34.2bn, while net profit attributable to shareholders fell by 12.5% YoY to Rmb2.42bn (beating market expectations, as the firm received Rmb750mn in asset disposal income in 2024, mainly from industrial land storage). Recurring net profit declined by 23% YoY to Rmb1.78bn. In 4Q24, recurring net profit increased by 45% YoY to Rmb721mn, largely in line with both our and market expectations.

    　　1) Overseas cement sales volume continued to grow rapidly, while total sales volume remained largely stable. In 2024, the firm's cementand clinker sales volume declined by 3% YoY to approximately 60.27mnt.

    　　Overseas cement sales volume increased by 37% YoY to 16.20mnt, while domestic sales volume stood at approximately 44mnt, down by 12% YoY-a decline slightly larger than the industry average.

    　　2) Domestic price competition was fierce but recovered in 4Q24. Weestimate that the firm's cement and clinker ASP remained flat YoY at approximately Rmb311 in 2024, with gross profit per tonne at around Rmb73 (down by Rmb6 YoY). Specifically, cement gross profit increased by approximately Rmb20 QoQ to Rmb91 in 4Q24 (up Rmb11 YoY).

    　　3) Overseas cement profitability remained high. As of the end of 2024,the firm’s overseas cement production capacity in operation and under construction exceeded 25mnt. Its full-year overseas EBITDA rose 26% YoY to Rmb2.37bn, implying overseas EBITDA per tonne of Rmb146/t, compared to Rmb159/t in 2023, which remains high.

    　　4) The growth of the non-cement business slowed, and pricesremained stable. In 2024, the firm’s external sales volume of aggregates increased by 9% YoY to 143mnt (implying an ASP decrease of Rmb2 YoY to Rmb39/tonne, with gross profit per tonne largely unchanged at Rmb19/tonne). Its sales volume of concrete rose by 17% YoY to 31.81mn sqm (with a relatively low price of Rmb61/sqm for concrete due to excellent accounts receivable control).

    　　5) The expense ratio fell steadily, cash flow remained ample, and the dividend payout ratio remained stable. In 2024, the firm’s selling, G&A,R&D, and financial expense ratios decreased by 0.12ppt, increased by 0.1ppt, decreased by 0.19ppt, and decreased by 0.06ppt YoY. Its net operating cash flow was approximately Rmb5.98bn, down 4% YoY, while maintaining a 40% payout ratio.

    　　Trends to watch Domestic uptrend supports resilience; global presence emerging. Asour top pick in the cement sector for the medium and long term, the firm’s overseas business continued to show strong growth potential and stability in 2024, with its EBITDA growing rapidly for several years. The firm has established a presence in 13 countries across East and West Africa, Central Asia, the Middle East, Southeast Asia, and South America.

    　　According to the corporate filings, the aggregate project in South America was consolidated in March 2025, and the project in Nigeria is scheduled for completion in 2025. Based on the net profit of these two projects in 2023, we estimate that they could contribute an annual net profit of about US$60mn, or more than Rmb400mn. We are optimistic about its overseas growth. Meanwhile, we note that cement demand in the peak season over March-May may beat expectations due to front-loaded fiscal spending. In addition, competition on the supply side has eased, and the peak-shifting effect has been effective at the beginning of the year. We expect cement prices to recover in the firm’s core domestic regions-Hunan, Hubei, and Southwest China-boosting earnings growth and supporting further earnings improvement in 2025.

    　　Financials and valuation

    　　Due to the decline in cement sales volume, but an increase in the gross profit per ton, we raise our 2025e net profit forecast by 6% to Rmb2.3bn and introduce our 2026 net profit forecast of Rmb3bn. The stock is trading at 12x 2025e and 9x 2026e P/E. We maintain our OUTPERFORM rating, and as market expectations recover amid a coordinated industry rebound, we raise our target price by 10% to Rmb16 (14x 2025e and 11x 2026e P/E), offering 23% upside.

    　　Risks

    　　Worsening overseas competitive environment; sharper-than-expected decline in domestic demand.