20160530-中国银河国际证券-China_Cement_Weekly_Cement_Stocks_Better_than_Steel_Stocks_If_Market_Sentiment_Continues_12页_1mb

China Cement Sector Summary

Core Content

The document provides an analysis of the Chinese cement sector, highlighting recent price trends, stock performance, valuation metrics, and regional market share distribution. It also compares cement stocks with steel stocks and discusses the impact of market sentiment on the sector.

Key Trends in Cement Prices

• National Average Cement Price: Increased by 0.69% week-on-week to RMB255.33/tonne last week.
• Regional Variations:
  • Jilin and Guangdong: Prices rose by RMB15-50/tonne.
  • Anhui and Hunan: Prices declined by RMB10-20/tonne.
  • East China: Continued a mild downward trend due to off-peak season effects.
• Inventory Levels: The average inventory level rose slightly to 68.9% nationwide.

Coal Price Stability

• Bohai-Rim Steam Coal (Q5500K): Comprehensive average price index has stabilized at RMB389/tonne since early March.
• Year-on-Year (YoY) Change: The index was 6.0% lower YoY.

Market Sentiment and Stock Performance

• Market Sentiment: Improved as the HSI increased by 3.6% last week, driven by expectations of the Shenzhen-Hong Kong Stock Connect.
• Cement Stock Performance:
  • CR Cement [1313.HK]: Best performer, up 11.9%.
  • BBMG [2009.HK]: Weakest performer among covered stocks, up only 1.3%.
• Cement vs. Steel: Cement stocks are considered a better investment choice than steel stocks currently, as steel prices have experienced a sharp correction in rebar futures by over 22% since end-April, while cement prices have still shown an upward trend.

Valuation Metrics

Peer Comparison

Regional Cement Price Trends

• East China: Mild downward trend due to off-peak season effects.
• South Central China: Stronger demand led to a comparatively better situation.
• Northeast China: Producers attempted to raise prices again after a previous failure in March.
• Northwest China: Prices remained relatively stable.

Regional Clinker Capacity Breakdown (2015)

• East China:
  • Anhui: 44.8%
  • Jiangsu: 5.8%
  • Shandong: 1.3%
• South Central China:
  • Guangdong: 26.4%
  • Hunan: 10.7%
  • Sichuan: 4.4%
• North China:
  • Beijing: 0.0%
  • Tianjin: 0.0%
  • Hebei: 0.0%
• Northeast China:
  • Jilin: 2.1%
  • Liaoning: 0.8%
• Southwest China:
  • Sichuan: 7.4%
  • Guizhou: 9.6%
  • Yunnan: 3.0%

Market Share in Terms of Clinker Capacity (2015)

• East China:
  • Anhui Conch: 17.7%
  • CNBM: 25.4%
  • CR Cement: 1.4%
• South Central China:
  • Guangdong: 12.1%
  • Hunan: 26.4%
  • Sichuan: 7.4%
• North China:
  • CNBM: 6.3%
  • BBMG: 1.9%
• Northeast China:
  • CNBM: 21.0%
  • BBMG: 5.8%
• Southwest China:
  • CNBM: 26.8%
  • BBMG: 1.5%
• Northwest China:
  • CNBM: 7.8%
  • BBMG: 3.6%

Key Takeaways

• Cement prices have shown a recovery, with some regions experiencing price increases and others declines.
• Cement stocks are currently more attractive than steel stocks due to market sentiment and real demand.
• The absence of a cement futures market in China means price movements are primarily driven by actual demand and industry coordination.
• Regional performance varies, with South China showing better demand and East China facing seasonal challenges.
• Valuation metrics indicate varying levels of investor confidence and future growth expectations across different companies.

Disclaimer

This report is issued by China Galaxy International Securities and is not intended for distribution to any person or entity in jurisdictions where it would be illegal. The report is based on information believed to be reliable but not guaranteed. It does not constitute an offer or solicitation to buy or sell any securities. Investors are advised to consult their own financial advisers before making any investment decisions.