© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. So good morning. So I'm [ Bruce Wang ] from [ Partner Securities ]. So we are honored to host the BBMG first quarter results conference call today. The management of BBMG attending today's conference call, including the managers from the property division, the cement sales department and the finance department and IR department.
[Foreign Language]
[Interpreted] Okay. Firstly, Mr. Liu from IR Department will briefly introduce the major operation and financial indicators of the first quarter.
[Foreign Language]
[Interpreted] Okay. The company's operational performance continued its pleasant momentum since the last year and achieved very strong financial performance in the first quarter compared to the first quarter of last year. The revenue increased by about 67% year-on-year. And the net profit increased by 62% year-on-year in first quarter.
[Foreign Language]
[Interpreted] Okay. In terms of the revenue and profit before taxation, contribution from different segments for revenue the 27% is from cement segment and the 75% is from property development segment, and 35% is from property investment management and the remaining 5% is from the property -- sorry, the 27% is from cement segment, 35% is from the modern building materials segment and the 35% is from property development segment, and the remaining 5% is from property investment segment. In terms of the proportion of profit before taxation, 13% is from cement business and 85% is from property development segment and 10% is from the property investment segment. But the modern building materials contribute minus 8% of the profit before taxation.
[Foreign Language]
[Interpreted] Okay. Regarding the performance of the cement segment, the revenue increased by 66% to -- sorry, the revenue increased by 62% year-on-year. And the gross profit margin -- let me -- the gross profit margin declined moderately, mainly due to the rising coupons and also the slight decline in the cement ASP. The profit before taxation reached RMB 82 million. The sales volume increased largely to 15 million tonnes in the first quarter.
[Foreign Language]
[Interpreted] Okay. For the performance of the concrete -- ready-mix concrete segment, the gross margin is 9.7%, and the net loss from this segment is also largely narrowed in the first quarter of this year. And the gross profit per cubic meters is roughly RMB 40 and net profit per square -- per cubic meter is roughly minus RMB 34, largely improved from a very big loss from last year.
[Foreign Language]
[Interpreted] Okay. In terms of the net profit per tonne for cement and clinker, in this year, first quarter of this year is minus RMB 2.2 per tonne, improving from minus RMB 38.3 per tonne in first quarter of last year.
[Foreign Language]
[Interpreted] In terms of the performance of environmental protection business and also aggregate business. For aggregate business, the sales volume is roughly 4.9 million tonnes. And the net profit per tonne is minus RMB 5.6, but improved largely from last year -- of same period of last year. And for the environmental protection business, the revenue increased by 5% year-on-year in the first quarter of this year.
[Foreign Language]
[Interpreted] Okay. For the property development segment, the book revenue in the first quarter of this year is RMB 7.7 billion, increasing by 52% year-on-year. And that booked GFA in first quarter of this year is 299,000 square meters, down about 12% year-on-year. For the presale conditions, the presale revenue increased by 320% year-on-year to RMB 11.6 billion and the presale GFA increased by -- increased strongly as well to 430,000 square meters. And the land bank by the end of the first quarter of this year is roughly 7.16 million square meters.
[Foreign Language]
[Interpreted] Okay. Regarding the modern building materials segment, the revenue increased by 75% year-on-year to RMB 7.8 billion, in which, almost 90% of the revenue is from the trading business -- commerce and trading business. So the total net profit from this segment is a loss of RMB 53 million and the gross profit margin is roughly 3.7%.
[Foreign Language]
[Interpreted] Okay. The last segment is the property investment and the management business. And revenue increased by 38% year-on-year to RMB 1.2 billion. And the margin -- the gross profit margin is 30.3% in first quarter of this year. The profit before tax reached RMB 666 million. And by the end of the first quarter of this year, the company owns 1.75 million square meters of the investment property and occupancy rates reached 76%. And the rental rate is roughly RMB 6 per square meter per day. [Foreign Language]
[Foreign Language]
[Interpreted] Okay. So the above is the introduction from the management regarding the first quarter results. And right now, we'll kick off the Q&A session. [Foreign Language]
[Foreign Language]
[Foreign Language] I have -- this is [indiscernible] and I have 3 questions. The first 2 is regarding the finance business. We have seen that the company has achieved very strong sales volume growth in the past 3 quarters. And our sales volume growth was stronger than the national average. I'm wondering what's the reason behind the strong sales volume for the company? And what do you expect for the pace of gaining market share for this year? And what's the supply/demand outlook for the major regional markets for our cement business. The second question is regarding is the ongoing deal with Jidong Cement. And we are wondering, what's the time line -- what's the roughly time line of this deal can complete? And what kind of synergy we can expect after the deal is completed? The third question is regarding this property development business. Considering the high land pricing and the restricted ASP, our gross margin has been lower from the peak. And we're wondering what's our strategy for the property business in the coming periods and what's our target of land acquisition this year?
[Foreign Language]
[Foreign Language]
Okay. [Foreign Language] [Interpreted] So the reasons behind the strong sales growth for first quarter is mainly coming from 2 aspects, 2 factors. The first one is elevation of the COVID-19 impact in first quarter compared to the first quarter of last year. Secondly, the market share came in its core markets for Jidong Cement. And also, in terms of the market performance for the Jidong, so for the regions outside Hebei, Tianjin area, the ASP has increased year-on-year, especially for Northeast region and also Chongqing region. So for North China, so the -- we have seen the sequential improvement in ASP, starting from this March. And also, the sales volume is also increasing year-on-year.
[Foreign Language]
[Interpreted] Okay. So regarding the T Jidong Cement integration, we have held the first time of board meeting. And -- so we expect that this deal can be completed by the end of this year. This is the integration part. For the following new shares insurance parts, we will decide whether to do it upon the market conditions. So before the completion -- before the end of this year, we still have second time of board meeting and also the general shareholders' meetings to be held. And this is a progress regarding the further integration of the T Jidong Cement. So the benefits from this deal includes 2 aspects. The first one, we can further reduce the management layers and improve the management efficiency after this deal. And secondly, we will achieve the true integration of the cement business and all the businesses will be operated under 1 platform, that is the Jidong Cement platform. And also, we will benefit from some taxation burden elevation after this deal. [Foreign Language]
[Foreign Language]
[Foreign Language]
[Interpreted] So the reasons behind the margin decline of the property development business is mainly due to the first one, we have experienced a very strict pricing control from the local government. Secondly, because the book revenue is mainly from the projects we procured in 2016 to 2017. However, the land procurement price is quite high at that time. So based on -- so as a combined result of controlled price and also high land price, the margin has declined since last year. So for the rest of this year, we expect the margin -- gross margin to be maintained at roughly 10%, which is the same as gross margin in first quarter of this year because we still need some time to digest the land procured in 2016 to 2017. But going forward, we expect the gross margin to recover gradually starting from next year because after the digestion of this high cost inventory. And for the development strategy, we will continue to secure more land and to allow to controlling the risks. So we will focus on several regions. The first 1 is Yangtze River Delta, the second one is Beijing area, and the third one is Chengdu area. We are also closely watching the Guangdong and Guangxi area in this year. Meanwhile, we will speed up the conversion of the own -- self-owned industrial land to be converted into the -- our projects and also new projects. [Foreign Language]
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. This question is from Mr. Wong Chi Man, Galaxy Securities International. So could you give us some colors on the coal price trend in the rest of this year?
[Foreign Language]
[Interpreted] Okay. So the coal cost has pushed up our production cost in first quarter of this year. The coal price in first quarter increased by RMB 140 per tonne year-on-year to RMB 687 per tonne. And -- however, we expect the coal price should trend down going forward.
[Foreign Language]
[Foreign Language]
Okay. Yes, we agree that the coal cost is a big -- is a large component of the total cost for the cement production. However, the most important determinant for the profitability of the large SKU cement producers is pricing power and also on the supply side. We do think that the coal cost will decide the profitability of the cement producers, so. [Foreign Language]
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. The next question is from [indiscernible]. The 2 questions related to the carbon neutral. The first one, do you have any target for the carbon neutral of the property and cement segments in the next 5-year period? And also the second question is, do you have any thoughts on the carbon trading and -- for the cement business in the following years?
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. So in terms of the carbon peak and the carbon neutral, so BBMG has not promulgated very detailed plan yet. However, the company is very seriously focusing and carrying researching about this issue. So we have built up a team to research this topic, and we view -- we are sure to meet the industry peers in this aspect going forward because we have done other things meeting the industry peers in other aspects. So we will step up according to the related regulation from the government. And -- but right now, we don't have any details yet. [Foreign Language]
[Foreign Language]
[Foreign Language] Okay. Two questions from me. The first one is integration of Northeast regions. So we know that BBMG has very competitive production lines in [ Heilongjiang. ] So do you have any ideas or any thoughts to lead the integration of Northeast region in China? And also, whether the other leading cement producers in China will be involved into the integration of the whole Northeast region? The second question is regarding the North China markets. So we have seen very strong and very frequent cement price rises in East China and also South China in this year. However, we -- although we have seen the sequential improvement in cement price in North China, we -- the cement price rise magnitude is not as strong as that in East China and South China. So whether we can see the same magnitude of the cement price increase in North China in the rest of this year? And if not, what the difficulties facing -- we are facing?
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. So as for the Northeast region, the BBMG target is, firstly, to maintain its market share. And also, in the meantime, to do more integration works with other -- along with other cement producers. So we have seen that cement prices has increased largely year-on-year and also seeing sequential cement price improvement year-to-date. So as for the North China market, so because you know that the Tianjin, Hebei, Henan and Shandong market is very closely related to each other. So within this region, the performance of the Hebei market has been much better than Shandong and Henan. So we have seen the very big volatility of cement prices in Shandong province and a very big drop of cement price in Henan province. However, the cement price in Hebei province is relatively stable and even rise further from the beginning of this March. So we do have some cement price lifting up targets and plans for the following months. And we expect cement price to continue to rise in the rest of this year for North China. [Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. So thanks, everybody. So today's conference will conclude now. And also, we thank the management of BBMG as well. So have a good day, everyone. [Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language] [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]