2024 results in line with market expectations

Jidong Cement announced its 2024 results: Revenue dropped 10.44% YoY to Rmb25.29bn, and attributable net loss narrowed Rmb507mn YoY to Rmb991mn. In 4Q24, revenue grew 14% YoY to Rmb6.73bn, and attributable net loss narrowed Rmb482mn YoY to Rmb694mn. The firm’s results are in line with its preannouncement and market expectations.

Efforts to raise prices in 2-3Q24 paid off; business performance in the northeastern China was strong. In 2024, the firm sales volume of clinker dropped 9.48% YoY to 84.4mn, with per-tonne ASP falling 6% YoY to Rmb243 and per-tonne gross profit increasing Rmb16 YoY to Rmb39. Per-tonne expenses of clinker increased Rm9 YoY to Rm58 in 2024. In 1Q24, the firm booked losses of Rmb1.099bn due to low prices across the cement industry. In 2-3Q24, the firm recorded earnings of Rmb802mn thanks to the peak season and its efforts to raise product prices. In the slack season of 4Q24, the firm booked loss of Rmb694mn, with per-tonne profit at more than Rmb50.

The firm led northern China-based companies to raise product prices in 2- 3Q24; as a result, cement prices in northern China were higher than in northern China, and cement price performance in northeastern China was especially strong. In 2024, the firm’s GM of business in northeastern China increased 21.57ppt YoY to 30.8%.

Financial statement stable; cash flow abundant; dividend payment continued. At end-2024, the firm’s liability-to-asset ratio was 51%, net operating cash flow grew 6.4% YoY to Rmb3.18bn, and cash on hand reached Rmb6.94bn, implying ample liquidity. Its full-year capex dropped from Rmb1.97bn in 2023 to Rmb1.68bn in 2024, mainly due to the acquisition of cement projects and the construction of production lines for aggregate and concrete. The firm plans to pay dividends of Rmb0.1/sh (tax included), with a payout ratio of around 38%, implying stable shareholder returns.

Trends to watch

The cement industry continues to raise prices; earnings of Jidong Cement likely to turn positive in 2025. We estimate that domestic cement demand will drop 5% YoY in 2025. However, given that regional cement industries in northeastern and northern China raised product　　prices in the heating season in 2024 and will likely continue to raise product prices in 2025, coupled with the relatively low inventory, we expect cement price in the overall industry to recover. Cement industries in northeastern and northern China have started price hikes recently. Given this, together with the declining coal prices, we expect net profit of Jidong Cement to turn positive in 2025.

Over 2024-early 2025, the firm achieved its first breakthrough in overseas expansion by acquiring Mamba Cement. It also completed acquisitions of Shuangyashan Cement (1,55mnt tonnes of clinker capacity) and Hengwei Cement (1mn tonnes of capacity) in northeastern China, enhancing collaborative pricing capabilities. In addition, the firm expanded the aggregate and concrete production capacity in 2024. It added 11.7mn tonnes of aggregate capacity and 7.35mn cubic meters of concrete in 2024. Against this backdrop, we expect the firm to form synergy along the industry chain. We are upbeat on its regional bargaining power and earnings growth upside in 2025. We still recommend Jidong Cement.

Financials and valuation

As we raise the cement price assumption and lower the coal price assumption, we raise our 2025 attributable net profit forecast 57% to Rmb818mn, and introduce our 2026 attributable net profit forecast of Rmb1.21bn. The stock is trading at 16.2x 2025e and 10.9x 2026e P/E. We maintain an OUTPERFORM rating and our TP of Rmb6.6, implying 21.3x 2025e and 14.3x 2026e P/E with 33% upside.

Risks

Sharper-than-expected decline in demand; fiercer-than-expected price competition.