Qilianshan (600720) Company Comments: Investment in Northwest China Maintains High Growth Rate and Drives Company Performance Over Expectations

Qilianshan (600720) Company Comment: Investment in Northwest China Maintains High Growth Rate, Drives Company Performance Over Expect
Event: The company released the 2019 third quarter report, which reported that the company realized operating income52.19 ppm, an increase of 20 in ten years.90%; net profit attributable to mother 10.420,000 yuan, an increase of 88 in ten years.98%; realized basic profit income1.3416 yuan. Main point of view: Benefiting from the high investment growth rate maintained by Gansu Province, the company’s performance slightly exceeded expectations. From January to September 2019, the fixed asset investment quota in Gansu Province increased by 5.5%, Gansu’s cement output is 3329.07 for the first time, growing by 14.45%.Qilian Mountain, as a leading cement company in Gansu Province, has a market share of 42% and continues to benefit from the higher investment growth rate in Gansu Province. Operating cash flow increased significantly, and the asset-liability ratio continued to decline. The company’s operating cash flow in the third quarter of 2019 was 19.25 ppm, an increase of 88 in ten years.37%.In addition, the company’s asset and liability structure continued to be optimized, and the reduction in financial expenses also increased the company’s profits.As of September 30, 2019, the company’s asset-liability ratio was only 29.深圳spa会所98%, a record low.The company’s financial expenses for the same period were zero.33 trillion, down 52 a year.2%. Northwest cement investment logic is on the demand side. Infrastructure construction continues to drive the demand for cement. Northwest cement consumption is mainly concentrated in infrastructure construction. Benefiting from improved liquidity and infrastructure shortcomings, the overall cement demand in Northwest China has picked up.Performance is eye-catching.The “Master Plan for the New Land, Sea and Sea Western Passage” issued by the Development and Reform Commission in August 2019 also attempts to boost cement demand in the Northwest. Actively deploy the “cement +” business, which is expected to contribute new profit growth points. The company still has capacity growth in the long term. Gansu Tianshui 合肥夜网 eliminated the backward and relocated 4500t / d clinker production line. The Sinoma Qilian Mountain in Tibet has an annual output of 120 tons.The clinker production line and the Lhasa City invested in the Qilian Mountains will have an annual output of 120, which is expected to start production this year and next.In addition, the company reorganized other related businesses for common development, and adopted a cement kiln to co-process urban domestic waste. It strived to transform and complete 2-3 cement kiln co-processing hazardous waste production lines during the “13th Five-Year Plan” period, and vigorously developed aggregates.Wall and other industries, profit growth space is expected to open. Earnings forecast We expect net profit for 2019-2021 to be 11.700 million, 13.600 million, 15.100 million, EPS is 1.51 yuan, 1.75 yuan, 1.94 yuan, corresponding to the current expected PE is 7X, 6X, 5X, maintaining the “overweight” level. Risks suggest that cement production limit is weaker than expected, and regional demand is significantly reduced