Exchange: HKSE | Sector: Basic Materials | Industry: Construction Materials
Q2 2024
Published: Jun 30, 2024
Earnings Highlights
Revenue of $46.45B down 9.3% year-over-year
EPS of $-0.08 decreased by 195.2% from previous year
Gross margin of 15.6%
Net income of -397.95M
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China National Building Material Company Limited (3323.HK) QQ2 2024 Results Analysis – Basic Materials Sector, Construction Materials: Revenue Recovery QoQ Amid Earnings Pressures and High Leverage
Executive Summary
China National Building Material Company Limited (CNBM) reported Q2 2024 results that show a mixed trajectory: quarterly revenue rose 25.5% QoQ to 46.45 billion CNY, driven by seasonality and higher volumes, but net income remained negative at -397.9 million CNY. The quarter delivered an EBITDA of 3.89 billion CNY with an EBITDA margin of 8.4% and an operating margin of 1.59%, underscored by heavy depreciation and a sizable cost base. Net income declined on a YoY basis by 156.7%, though QoQ net income improved meaningfully from a loss path in the prior year period. Free cash flow generation was robust in the quarter at 4.06 billion CNY, aided by strong operating cash flow (8.98 billion) and moderate capex (4.92 billion). The balance sheet remains leveraged, with net debt of approximately 176.6 billion CNY and a debt-to-capitalization ratio of about 0.633, signaling elevated financial risk even as liquidity indicators (cash and short-term investments around 31.3 billion CNY; current ratio near 0.83) remain fragile. Management commentary is not provided in the transcript excerpt, limiting explicit forward guidance. Investors should weigh CNBM’s near-term cash generation and deleveraging needs against its high leverage and ongoing sector headwinds from China’s property downturn. In summary, CNBM exhibits positive near-term cash flow and revenue seasonality-driven upside but carries material earnings risk and leverage that require monitoring as macro policy and property market dynamics evolve.
Net Income: -397,947,455 CNY; Net Margin -0.86%; YoY -156.68%, QoQ +70.51%
EBITDA: 3,885,073,374 CNY; EBITDA Margin 8.36%
EPS: -0.0792 CNY; YoY -195.19%, QoQ +50.50%
Financial Highlights
Revenue: 46,449,439,528 CNY in Q2 2024; YoY -9.26%, QoQ +25.47%
- Gross Profit: 7,233,567,181 CNY; Gross Margin 15.57%; YoY -17.82%, QoQ +20.16%
- Operating Income: 740,054,790 CNY; Operating Margin 1.59%; YoY -75.55%, QoQ +11.09%
- Net Income: -397,947,455 CNY; Net Margin -0.86%; YoY -156.68%, QoQ +70.51%
- EBITDA: 3,885,073,374 CNY; EBITDA Margin 8.36%
- EPS: -0.0792 CNY; YoY -195.19%, QoQ +50.50%
- Cash Flow: Operating Cash Flow 8,984,751,391 CNY; Capex 4,924,406,316 CNY; Free Cash Flow 4,060,345,075 CNY
- Balance Sheet: Total Assets 499.67B CNY; Total Liabilities 309.91B CNY; Total Equity 116.75B CNY
- Liquidity & Leverage: Cash & Equivalents 24.81B CNY; Short-term investments 6.51B CNY; Net Debt 176.65B CNY; Current ratio 0.831; Quick ratio 0.708; Debt to Capitalization 0.633; Debt to Equity 1.725; P/B 0.194; P/E -14.19 (negative earnings)
- Efficiency: Days Sales Outstanding 179.2; Inventory Days 51.31; Cash Conversion Cycle 86.85 days
- Dividend/Share Metrics: Payout ratio -0.78 (negative); Dividend yield 1.37% (peer context varies)
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
46.45B
-9.26%
25.47%
Gross Profit
7.23B
-17.82%
20.16%
Operating Income
740.05M
-75.55%
11.09%
Net Income
-397.95M
-156.68%
70.51%
EPS
-0.08
-195.19%
50.50%
Key Financial Ratios
currentRatio
0.83
grossProfitMargin
15.6%
operatingProfitMargin
1.59%
netProfitMargin
-0.86%
returnOnAssets
-0.08%
returnOnEquity
-0.34%
debtEquityRatio
1.73
operatingCashFlowPerShare
$1.07
freeCashFlowPerShare
$0.48
dividendPayoutRatio
-78%
priceToBookRatio
0.19
priceEarningsRatio
-14.19
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Note: No earnings call transcript was provided in the data set. As a result, management quotes and thematic quotes from CNBM’s QQ2 2024 earnings call are not available. If a transcript is supplied, we will extract management themes on strategy, operations, and market conditions with attributed quotes.
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Forward Guidance
CNBM did not publish explicit forward-looking targets in the QQ2 2024 data snapshot. Given the sector headwinds from China’s property downturn and a high-debt balance sheet, the likely near-term emphasis would be on deleveraging, cost containment, and improving cash flow conversion. Key factors to monitor include: (1) trajectory of Chinese infrastructure and housing demand and any policy stimulus; (2) capex intensity for new materials and expansion in international markets; (3) working capital dynamics given the long DSO and relatively tight liquidity; (4) maturity profile of debt and debt financing costs as policy rates evolve. Our assessment is that CNBM’s ability to sustain improving QoQ revenue with continued FCF generation could soften leverage pressures if operating cash flow remains robust, but sustained profitability and deleveraging will depend on sector stabilization and efficiency gains.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
3323.HK Focus
15.57%
1.59%
-0.34%
-14.19%
0914.HK
20.00%
9.57%
0.99%
12.77%
1313.HK
16.00%
5.07%
0.44%
11.96%
1088.HK
32.00%
24.60%
3.43%
12.58%
1898.HK
21.40%
17.50%
3.27%
6.01%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
CNBM presents a cautious near-term investment case. The QQ2 2024 results show revenue stabilization with a QoQ rebound but earnings remain negative on a YoY basis, underscored by a high debt burden and thin operating margins. The company generated solid free cash flow (FCF ~4.06B CNY) and healthy operating cash flow (OCF ~8.98B CNY), which supports deleveraging potential and continued investment in higher-margin segments or international expansion. However, the balance sheet remains heavily levered (net debt ~176.6B CNY; debt-to-capitalization ~0.63) and liquidity is tight (current ratio ~0.83). Valuation metrics reflect the earnings fragility (P/E negative; P/B ~0.19), signaling that investors are pricing in significant earnings risk and leverage exposure relative to peers.
Against peers in the Chinese construction materials and cement space, CNBM trades at a material discount on book value, but profitability and balance sheet strength lag some competitors that display higher margins and lower leverage. The favorable cash flow profile could translate into deleveraging progress if the company sustains operating strength and optimizes capex. Key catalysts to watch include: (1) stabilization or recovery in China’s property market and related infrastructure spending; (2) execution of deleveraging and efficiency programs; (3) value realization from the “New Materials” segment and any margin expansion from value-added products; (4) debt maturity management and financing costs as macro rates evolve.
Investment stance: Neutral to cautious. If CNBM can maintain positive FCF and gradually reduce leverage without sacrificing growth investments, the stock could re-rate closer to its long-run asset base. In the near term, investors should prioritize liquidity improvement, earnings stabilization, and clearer forward guidance from management on deleveraging timelines and segment-level profitability. Compare CNBM with peers exhibiting stronger profitability and balance-sheet resilience before taking a more constructive view.
Key Investment Factors
Growth Potential
Diversified product lines (cement, concrete, new materials, engineering services) provide multiple growth vectors beyond traditional cement volumes; international footprint supports non-domestic demand channels and potential premium on higher-margin new materials.
Profitability Risk
High financial leverage (net debt to capitalization ~63%), weak net profitability, and a fragile liquidity cushion (current ratio ~0.83). Ongoing property sector weakness and commodity price volatility could pressure volumes and margins. Negative earnings complicate near-term valuation.
Financial Position
Positive free cash flow in QQ2 2024 (FCF ~4.06B) supports optionality for deleveraging and potential investment in higher-margin segments, but debt burden remains a key constraint for financial flexibility.
SWOT Analysis
Strengths
Diversified product portfolio across cement, concrete, new materials, and services; global footprint in five segments and international diversification.
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