Dongwu Securities: Upgraded Conch Cement to an Overweight rating

Dongwu Securities Co., Ltd. Huang Shitao recently conducted research on Conch Cement and published a research report titled “2025 Annual Report Commentary: Self-discipline Stabilizes Profitability, Industry Chain Extension,” giving Conch Cement a buy rating.

Conch Cement (600585)

Investment Highlights

The company disclosed its 2025 annual report, achieving total revenue of 82.532 billion yuan, down 9.3% year-on-year, and a net profit attributable to shareholders of 8.113 billion yuan, up 5.4% year-on-year. In Q4 2025, the company achieved total revenue of 21.234 billion yuan, down 7.2% year-on-year, and a net profit attributable to shareholders of 1.809 billion yuan, down 27.6% year-on-year. The annual profit distribution plan is to distribute a cash dividend of 0.61 yuan per share (including tax).

The cement business maintained stable volume and rising prices throughout the year, with Q4 profits affected by impairment provisions. (1) The company’s annual sales volume of self-produced cement and clinker was 265 million tons, down 1.1% year-on-year, corresponding to an average price per ton/gross profit/net profit of 230 yuan/64 yuan/30 yuan, down 16 yuan/up 5 yuan/up 1 yuan year-on-year. The company improved cost control through technological innovation, strengthened logistics management, increased the use of alternative fuels, and optimized the procurement channels for raw materials, resulting in a year-on-year decrease of 11.12% in the comprehensive cost of self-produced cement and clinker. (2) Since the second half of 2025, cement demand has continued to be under pressure, and industry supply discipline has experienced fluctuations, with national cement prices oscillating at low to mid-levels in Q4. The company’s overall Q4 single-quarter gross profit margin and net profit margin increased by 1.3 percentage points and decreased by 3.2 percentage points to 23.8% and 6.9%, respectively, with the decrease in net profit margin mainly due to an impairment loss of 523 million yuan recognized in Q4. The company’s per-ton period expenses for self-produced products in 2025 were 35.6 yuan, up 0.3 yuan year-on-year, with overall expenses remaining stable. (3) The company is coordinating industrial development and project construction, actively consolidating its main business and extending its chain. The domestic cement main business is developing with precision, the Xinjiang Yaobo project has completed its acquisition, overseas project development is steadily advancing, and the Conch Cement in Phnom Penh, Cambodia has been successfully completed and is in operation. The industrial chain has been extended, with nine aggregate projects in Congyang, Yingde, and others completed and put into production, adding 22 commercial concrete stations and continuously expanding market coverage; at the same time, the development of the consumer building materials business is accelerating, with 13 dry-mixed mortar, tile adhesive projects, and one putty powder project completed and put into production.

Capital expenditures continue to contract, and the dividend payout ratio has increased year-on-year. (1) The company’s net cash flow from operating activities in 2025 was 16.644 billion yuan, down 9.9% year-on-year, mainly due to a year-on-year decrease in trade revenue in 2025; capital expenditures for 2025 were 11.032 billion yuan, down 29.4%, with planned capital expenditures of 11.820 billion yuan in 2026. The company’s debt-to-asset ratio at the end of 2025 was 20.4%, down 0.9 percentage points year-on-year. (2) The company’s cash dividend payout ratio for 2025 was 55.3%, up 6.6 percentage points year-on-year.

Industry self-discipline continues to provide a bottom support for profitability, with attention to industrial policies and changes in demand. We judge that in 2026, the consensus on self-discipline will strengthen, and the industry’s staggered efforts will increase, providing bottom support for profitability; however, under the backdrop of unstable demand, the industry’s supply and demand will need frequent rebalancing, limiting the elasticity of industry profitability. If physical demand stabilizes and improves, cement peak season price elasticity could be considerable. We believe that the industry’s prosperity in 2026 is expected to show a fluctuating improvement compared to the second half of 2025.

Earnings Forecast and Investment Rating: The company demonstrates comprehensive advantages such as cost leadership during the downturn, with steady expansion providing new growth momentum. The current price-to-book ratio valuation of the cement sector is at a bottom level, and the implementation of industrial policies is expected to promote steady recovery in profitability and valuation rebound. Leading enterprises are expected to benefit from the optimization of the industry structure in the medium to long term. We expect the company’s net profit attributable to shareholders for 2026-2028 to be projected at 9.14/10.122/11.079 billion yuan (the original values for 2026-2027 are 11.18/12.62 billion yuan, with the addition of the 2028 forecast), maintaining a “buy” rating.

Risk Warning: Cement demand declines exceed expectations; upstream and downstream expansion of the industry chain falls short of expectations; risks of increased market competition.

The latest earnings forecast details are as follows:

In the past 90 days, 11 institutions have given ratings for this stock, with 7 buy ratings and 4 hold ratings; the average target price from institutions in the past 90 days is 28.82.

The above content is organized by Securities Star based on publicly available information and generated by AI algorithms (Internet Information Office Filing No. 310104345710301240019), and does not constitute investment advice.