20180806-中国银河国际证券-China_Cement_Weekly__Cement_Price_Weakness_Distorted_by_Lacklustre_Demand_in_Northeast_China__12页_1mb

China Cement Weekly Summary - August 6, 2018

Core Content Overview

The report provides an analysis of the cement sector in China, focusing on price trends, regional demand, inventory levels, and company valuations as of early August 2018. It highlights the impact of regional economic conditions on cement prices, regulatory changes affecting production, and stock performance of key players in the sector.

Cement Price Trends

• National Average Cement Price: Dropped by 1.45% to RMB401/tonne from the previous week.
• Regional Variations:
  • Northeast China: Cement prices plummeted by RMB40-50/tonne, primarily due to weak regional economic performance.
  • Central Jiangsu and Chongqing: Packed cement prices increased by RMB20-30/tonne.
  • Early August: Cement prices remained relatively stable, except in the northeast.
• Prediction: The report suggests that cement demand is likely to recover gradually after mid-August, leading to a potential rebound in cement prices.

Inventory Levels

• National Average Inventory: Increased slightly to 57.4% from 56.6% week on week.

Coal Price Trends

• Bohai-Rim Steam Coal (Q5500K): The average price index decreased by RMB1/tonne to RMB567/tonne last week.
• Year-on-Year (YoY) Drop: 2.7% in coal prices.

Regulatory and Production Impact

• Closure of Clinker Production Lines: Authorities in Beijing, Tianjin, and Hebei are accelerating the closure of clinker production lines with daily output below 2,000 tonnes.
• Hebei's Impact: Since clinker production capacity in Beijing and Tianjin is limited, the closure will mainly affect Hebei, where total annual clinker production capacity is approximately 100 million tonnes.
• Estimated Closure: At least 3% of Hebei’s clinker capacity is expected to be closed.
• Emissions Regulations: Starting from October 1, 2018, stricter emissions regulations will be implemented in Beijing, Tianjin, and Hebei, likely leading to more production suspensions.

Stock Performance

• Cement Stocks: On average, cement stocks under coverage dropped by 6.3% last week.
• Performance Highlights:
  • Conch Cement [0914.HK]: Decreased by 4.4%.
  • CR Cement [1313.HK]: The weakest performer, fell by 8.2%.
• BBMG [2009.HK]: Benefited from the closure of clinker production lines, as it is the leading player in North China.

Valuation Table (2017-2019E)

Peer Comparison

Regional Cement Market Share (2017)

Key Insights

• The cement price decline is largely due to weak demand in Northeast China, while other regions like Jiangsu and Chongqing showed some price increases.
• BBMG is expected to benefit from the clinker production line closures in Hebei.
• Emissions regulations starting in October 2018 may further impact production in Beijing, Tianjin, and Hebei.
• The stock market experienced profit-taking following a previous rebound, with CR Cement being the weakest performer.
• The report provides valuation metrics and market share data for major cement companies, indicating varying levels of performance and regional exposure.

Disclaimer and Disclosure

• The report is issued by China Galaxy International Securities (Hong Kong) Co., Limited and is not intended for distribution in jurisdictions where it may be illegal.
• The company may have financial interests in the subject companies, and investment advisors should be consulted before making investment decisions.
• The analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation or trading activities.