Qilian Mountain (600720): Demand continues to pick up and performance slightly exceeds expectations

Qilian Mountain (600720): Demand continues to pick up and performance slightly exceeds expectations
Event: On October 22, 2019, Qilianshan released the 2019 third quarter report, which reported that the company realized operating 北京会所体验网 income of 52.19 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. Opinion: Regional cement demand continues to be strong, and the company’s performance continues to improve.In the third quarter of 2019, military reconstruction and new construction projects in Gansu Province are still under construction, and regional cement demand is still hot.On January 9, 2019, the fixed asset investment quota in Gansu Province increased by 5.5%, an increase of 3% over the first half of 2019.1 unit; 3329 cement output in Gansu Province.07 for the first time, growing by 14.45%.As a leading cement company in Gansu Province, Qilian Mountain has a market share of 42% and continues to benefit from the improvement of the environment. Cash flow from operating activities increased significantly, and the asset-liability ratio continued to decline.The report summary, starting from 2016, the beneficiary company’s performance has improved, and its operating cash flow has continued to improve. The company’s net cash flow from operating activities in 2018 was 12.77 ppm, an increase of 25 per year.44%; 19 in the third quarter of 2019.25 ppm, an increase of 88 in ten years.37%, the best level in history.In addition, the company’s asset and liability structure continued to be optimized, and financial expenses were reduced accordingly, which increased the company’s profits.As of September 30, 2019, the company’s asset-liability ratio was only 29.98%, also a historical low. Follow-up demand is still guaranteed.According to the report’s baseline, the infrastructure sector, as the main force of cement consumption in the Gansu-Qingdao region, has driven the rapid growth of cement demand in the region.The infrastructure in the Gansu-Qinghai region has always been weak. With the introduction of the “Struggling to Fight the Poverty Alleviation Campaign” and “Infrastructural Weaknesses” at the 19th National Congress of the Communist Party of China, we believe that the government’s investment in infrastructure construction will continue.In August 2019, the National Development and Reform Commission formally issued the “Master Plan for the New Western Land, Sea and Sea Passage”, which is also expected to boost regional demand. Earnings forecast and rating: Based on the company’s existing share capital, we expect the company’s diluted earnings for 2019-2021 to be 1.53 yuan, 1.64 yuan, 1.72 yuan, calculated based on the closing price of 2019-10-29, corresponding PE is 7 times, 6 times, 6 times, maintaining the “Buy” rating. Risk factors: Infrastructure investment rebounds less than expected; downside risks in real estate investment; market competition risks; regional supply exceeds expected release risks; risks of rising raw material costs; risk of off-peak production falls short of expectations; environmental and safety risks;Local cement demand is less than expected