09/04/2020

Qilian Mountain (600720) Interim Review: Benefiting from Demand Recovery

Qilian Mountain (600720) Interim Review: Benefiting from Demand Recovery
Event: On August 15, 2019, Qilianshan released its semi-annual report for 2019. The report consolidated and the company realized operating income29.100,000 yuan, an increase of 23 in ten years.86%; realized net profit attributable to mother 5.20,000 yuan, an increase of 128 in ten years.81%; realized basic profit income of 0.6469 yuan.  Opinion: Regional infrastructure demand has recovered and the company’s product sales have increased.In 2019, after the resumption of the postponed construction of Gansu Province and the start of some new projects, the regional cement demand has increased.As the largest cement clinker manufacturer in Gansu, Qilian Mountain has fully benefited from the improvement of the environment. In the first half of 2019, it sold a total of 964 cement (including commercial clinker).9 Initially, it increased by 199 per year.75 for the first time; production and sale of commercial concrete 55.90,000 countries, an increase of 19 every year.250,000 countries.  The gross profit margin rose and financial expenses fell significantly.In total, the company’s overall gross margin is 35.60%, an increase of 3 per year.The 34 淡水桑拿网 units were mainly due to the increase in the production and sales of the company’s cement and clinker, and the lower gross amortization of the old and old cement products due to the decrease in the amortization of the old tonnage.In addition, the company’s asset and liability structure continued to be optimized, and financial expenses were reduced accordingly, which increased the company’s profits.As of June 30, 2019, the company’s asset-liability ratio was only 31.30%, a reduction of 7 per year.65 units.In the first half of 2019, the company’s financial expenses were 2521.730,000 yuan, a decrease of 49 per year.84%.  With the commissioning of the new line, production capacity continues to be released.In July 2019, the company’s 4500t / d clinker production line in Wushan, Tianshui, has been officially put into operation, and the company’s overall output has increased by about 8%.  According to the division of sales regions, the company’s Tianshui area has a higher market share and is also one of the areas where the company has better profits.In the first half of 2019, the company’s Tianshui area achieved operating income6.9 trillion, accounting for 23 of total revenue.71%, the company’s control in the region will continue to strengthen in the future.  Follow-up demand is still guaranteed.According to the report’s baseline, the infrastructure sector, as the main force of cement consumption in the Gansu-Qingdao region, has driven the rapid growth of cement demand in the region.The infrastructure in the Gansu-Qinghai region has always been weak. With the introduction of the “Struggling to Fight the Poverty Alleviation Campaign” and “Infrastructural Weaknesses” at the 19th National Congress of the Communist Party of China, we believe that the government’s investment in infrastructure construction will continue.In August 2019, the National Development and Reform Commission formally issued the “Master Plan for the New Western Land, Sea and Sea Passage”, which is also expected to boost regional demand.  Earnings forecast and rating: Based on the company’s existing share capital, we expect the company’s diluted earnings for 2019-2021 to be 1.34 yuan, 1.44 yuan, 1.51 yuan, calculated based on the closing price of 2019-08-14, corresponding PE is 6 times, 6 times, 6 times respectively, maintaining the “Buy” rating.  Risk factors: Infrastructure investment rebounds less than expected; downside risks in real estate investment; market competition risks; regional supply exceeds expected release risks; risks of rising raw material costs; risk of off-peak production falls short of expectations; environmental and safety risks;Local cement demand is less than expected