CITIC Securities: Initiates coverage on WESTCHINACEMENT with a "Buy" rating and a target price of HKD 3.73

According to the Zhitong Finance APP, Guotai Junan has released a research report stating that it has initiated coverage on WESTCHINACEMENT (02233) with an "Overweight" rating. It is expected that the company's net profit attributable to shareholders from 2025 to 2027 will be 1.143 billion, 1.422 billion, and 2.015 billion yuan respectively, with EPS of 0.21, 0.26, and 0.37 yuan. Given that the company is a leader in overseas expansion with strong growth potential, and referencing comparable companies, the firm recognizes a 13x PE for the company in 2026, with a reasonable price of HKD 3.72 (RMB to HKD = 0.91:1), and assigns a 1.3x PB valuation for 2026, with a reasonable price of HKD 3.74. For prudence, a target price of HKD 3.73 is selected.

Guotai Junan's main points are as follows:

Active Overseas Expansion of Shaanxi Cement Leader

As of the end of 2024, the largest shareholder, Mr. Zhang, holds approximately 32.3% of the shares directly and indirectly, while Conch holds 29.0%. In 2024, the company sold 15.74 million tons of cement domestically (of which 13.2 million tons were in Shaanxi), achieving revenue of approximately 5.2 billion yuan and a profit of about 350 million yuan. Overseas, it sold 4.03 million tons of cement, generating revenue of about 3.2 billion yuan and a profit of approximately 890 million yuan. The company's overseas profit margin is high, making it a model for active overseas expansion.

Declining Domestic Demand Makes Overseas Expansion Essential

China's cement production has been declining year by year since 2022, and the rate of decline is rapid. Weak demand has made it difficult to maintain supply-side price stabilization, leading domestic cement prices to fall to rock bottom. Overseas expansion has become an essential topic. The company took precautions and initiated its overseas strategy as early as 2020, with its first production line established in Mozambique, and has expanded at a rate of entering one new country each year. By the end of 2024, the company has established a presence in Mozambique, the Democratic Republic of the Congo, Ethiopia, and Uzbekistan. The firm believes that the company's determination to expand overseas is strong, timely, and progressing rapidly.

Sale of Xinjiang Assets to Steadfastly Promote Overseas Strategy

In 2024, the company's overseas gross profit reached 288 yuan/ton, far exceeding the domestic figure of 42 yuan/ton. The company is steadfast in promoting its high-margin overseas layout strategy. In June 2025, the company announced plans to sell its Xinjiang cement assets for 1.65 billion yuan. The firm believes this move will help alleviate debt pressure and ensure the progress of overseas expansion (including new projects in Uganda, acquisitions in the Democratic Republic of the Congo, production lines in Zimbabwe, and northern Mozambique, with long-term projects in Angola).

Risk Warning

Exchange rate risk, foreign exchange control risk, cost inflation risk