China Cement Sector Summary
Core Content
The China cement sector has shown signs of recovery, with national cement prices increasing by 1% last week to an average of RMB386 per tonne. The price rebound was driven by improved weather conditions and a return of construction workers post the Chinese New Year (CNY). Regional variations were observed, with northern and northwestern areas experiencing the most significant price increases, while some parts of southern China saw declines. The average cement inventory level nationwide dropped to 57.5%, indicating strong demand recovery.
Key Price Movements
- Price Increase Regions:
- North China: Xinjiang, Inner Mongolia, Chongqing (RMB50-90/tonne)
- East and South Central China: Gansu, Shaanxi, Henan (RMB20-30/tonne)
- Price Decline Regions:
- Luzhou, Anqing, Tongling (northern Anhui)
- Xiangfan, Shiyan (Hubei)
Market Performance
- Cement Stocks:
- CR Cement (1313.HK): Best performer, up 16.1% week-on-week due to encouraging Q1 2018 guidance.
- BBMG (2009.HK): Weakest performer, up 1.0% week-on-week.
- Average Performance:
- Cement stocks under coverage increased by 8.5% on average.
- The weighted average showed a more modest increase of 8.5%.
Valuation Metrics
| Company |
Ticker |
Rating |
Price (HK$) |
Market Cap (US$m) |
PER(x) 2016 |
PER(x) 2017E |
PER(x) 2018E |
EV/EBITDA(x) 2016 |
EV/EBITDA(x) 2017E |
EV/EBITDA(x) 2018E |
Net Debt/Equity (%) |
| Conch Cement |
914 HK Equity |
BUY |
44.40 |
29,154 |
24.3 |
14.3 |
12.0 |
12.8 |
8.7 |
7.4 |
Net cash |
| ONBM |
3323 HK Equity |
BUY |
8.38 |
5,800 |
42.3 |
12.0 |
9.1 |
11.3 |
8.8 |
7.8 |
210 |
| BBMG |
2009 HK Equity |
BUY |
3.89 |
8,019 |
15.6 |
11.9 |
9.9 |
15.4 |
10.1 |
8.6 |
84 |
| CR Cement |
1313 HK Equity |
BUY |
6.85 |
5,737 |
23.8 |
12.5 |
7.9 |
10.9 |
7.8 |
5.6 |
39 |
EPS Growth and PEG
| Company |
EPS Growth 2017E (%) |
EPS Growth 2018E (%) |
PEG 2017E |
PEG 2018E |
| Conch Cement |
66.3 |
21.5 |
42.2 |
0.3 |
| ONBM |
243.8 |
35.7 |
116.0 |
0.1 |
| CR Cement |
90.0 |
59.3 |
73.9 |
0.2 |
| BBMG |
27.2 |
23.7 |
25.5 |
0.5 |
| Simple Average |
106.8 |
35.1 |
64.4 |
0.3 |
| Weighted Average |
83.8 |
28.0 |
52.0 |
0.3 |
Regional Cement Capacity and Market Share
Clinker Capacity Breakdown (2017)
| Region |
Anhui Conch |
CNBM |
CR Cement |
Shanshui |
BBMG |
Asia Cement |
WCC |
Huaxin-Lafarge |
Sinoma Group |
| East China |
46.2% |
41.3% |
10.6% |
49.6% |
2.2% |
0.0% |
0.0% |
0.0% |
5.3% |
| South Central China |
25.7% |
16.0% |
1.5% |
5.5% |
0.5% |
0.0% |
0.0% |
0.0% |
2.7% |
| North China |
0.0% |
5.4% |
7.1% |
26.6% |
0.7% |
0.0% |
0.0% |
0.0% |
1.9% |
| Northeast China |
0.0% |
7.6% |
0.0% |
18.1% |
6.6% |
0.0% |
0.0% |
0.0% |
0.0% |
| Southwest China |
20.0% |
29.8% |
8.2% |
100.0% |
12.7% |
0.0% |
0.0% |
0.0% |
5.3% |
| Northwest China |
8.1% |
0.0% |
0.0% |
3.0% |
12.7% |
0.0% |
0.0% |
0.0% |
67.6% |
| Grand Total |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
Market Share in Terms of Clinker Capacity (2017)
| Region |
Anhui Conch |
CNBM |
CR Cement |
Shanshui |
BBMG |
Asia Cement |
WCC |
Huaxin-Lafarge |
Sinoma Group |
| East China |
20.0% |
25.7% |
1.5% |
5.5% |
0.5% |
0.0% |
0.0% |
0.0% |
2.7% |
| South Central China |
11.6% |
10.3% |
10.9% |
0.3% |
0.7% |
2.2% |
0.0% |
7.8% |
2.4% |
| North China |
0.0% |
6.7% |
2.0% |
5.8% |
30.4% |
0.0% |
0.0% |
0.0% |
1.9% |
| Northeast China |
0.0% |
22.3% |
0.0% |
9.4% |
6.7% |
0.0% |
0.0% |
0.0% |
0.0% |
| Southwest China |
11.7% |
25.1% |
3.6% |
2.9% |
5.6% |
0.9% |
1.0% |
2.8% |
4.7% |
| Northwest China |
7.5% |
0.0% |
0.0% |
0.7% |
6.0% |
0.0% |
8.2% |
2.8% |
26.6% |
| Grand Total |
11.1% |
16.0% |
3.6% |
2.9% |
5.6% |
0.9% |
1.0% |
2.8% |
4.7% |
Key Insights
- Cement prices are expected to continue rising in the next two weeks, particularly in the south China market.
- Regional demand and production levels vary significantly, with the east and south central regions showing stronger recovery.
- Inventory levels have dropped significantly, indicating improved demand.
- Coal prices have slightly declined, which may affect production costs.
- Cement stocks have shown strong performance, with CR Cement leading the pack.
- The valuation table highlights varying price-to-earnings and enterprise value-to-EBITDA ratios, suggesting potential investment opportunities.
Disclaimer and Disclosure
- The report is issued by Galaxy International Securities and is not intended for distribution in jurisdictions where it may be unlawful.
- The report is based on information from reliable sources but does not guarantee accuracy or completeness.
- The analyst certifies that the views expressed are their own and not necessarily those of the company or its affiliates.
- There may be financial interests in the companies discussed, and the firm may have provided investment services or advice to these companies.
