Guotai Haitong: First Rating Upgrade for WESTCHINACEMENT (02233) to "Buy", Target Price of 3.73 Hong Kong Dollars.

Guotai Haitong released a research report, stating that it is covering WESTCHINACEMENT (02233) for the first time, giving it a "hold" rating. It is estimated that the company's net profit attributable to the parent company for the years 2025-2027 will be 1.143/1.422/2.015 billion yuan respectively, with EPS of 0.21/0.26/0.37 yuan. Given that the company is a leader in overseas markets with strong growth potential, and based on comparable companies, the bank has given the company a PE ratio of 13 times for 2026, with a target price of 3.72 Hong Kong dollars (RMB to HKD = 0.91:1), and a PB ratio of 1.3 times for 2026, with a target price of 3.74 Hong Kong dollars. As a precaution, the target price selected is 3.73 Hong Kong dollars. Guotai Haitong's main points are as follows: Active overseas expansion by the leading cement producer in Shaanxi By the end of 2024, Mr. Zhang, the largest shareholder, directly and indirectly holds approximately 32.3% of the shares, with Conch Cement holding 29.0%. In 2024, the company sold 15.74 million tons of cement domestically (of which 13.2 million tons were in Shaanxi), with revenue of about 5.2 billion yuan and a profit of about 350 million yuan. Overseas sales amounted to 4.03 million tons of cement, with revenue of about 3.2 billion yuan and a profit of about 890 million yuan. The company has a high proportion of overseas profits, making it an active example of overseas expansion. Overseas expansion has become a must in the face of declining domestic demand Since 2022, China's cement production has been declining year by year, and the decline rate is relatively fast. The weak demand has made it difficult to maintain the peak price guarantee on the supply side, leading to a drop in domestic cement prices and making overseas expansion a necessity. The company has been proactive in preparing for this, starting its overseas strategy in 2020 with the first production line in Mozambique. By the end of 2024, the company had expanded into four countries: Mozambique, the Democratic Republic of Congo, Ethiopia, and Uzbekistan, at a pace of entering a new country every year. The bank believes that the company's determination to go overseas is firm, the timing is right, and progress is rapid. Selling assets in Xinjiang, steadfastly advancing overseas strategy In 2024, the company's overseas gross profit per ton reached 288 yuan, far higher than the domestic 42 yuan per ton. The company is steadfast in advancing its overseas expansion strategy to focus on high-profit margins. In June 2025, the company announced plans to sell its Xinjiang cement assets for 1.65 billion yuan. The bank believes that this will help alleviate debt pressure and ensure the progress of overseas expansion (projects in Uganda, acquisitions in the Democratic Republic of Congo, production lines in Zimbabwe, northern Mozambique, and future projects in Angola). Risk factors Exchange rate risk, foreign exchange control risk, and rising cost risk.