20180910-中国银河国际证券-China_Cement_Weekly__Cement_Prices_Continued_to_Rise__NDRC_to_Investigate_Cement_Prices_12页_1mb

China Cement Weekly Summary - September 10, 2018

Core Content

This report provides an overview of the cement sector in China, highlighting price trends, shipment volumes, and the potential regulatory response from the National Development and Reform Commission (NDRC). It also includes financial and valuation data for major cement companies in the Hong Kong stock market.

Cement Price Trends

• National Average: The average cement price increased by 1.2% to RMB 408/tonne from the previous week.
• Regional Price Changes:
  • Increased: Jiangsu, Zhejiang, Anhui, Shanghai, Jiangxi, Hunan, Sichuan, and Liaoning saw price increases of RMB 10–40/tonne.
  • Decreased: Lanzhou (Gansu) experienced a RMB 10/tonne decrease.
• Peak Season Impact: As the peak season approached, cement prices continued to rise, and shipment volumes showed recovery.
• Shipment Volume:
  • The Beijing-Tianjin-Hebei region saw a significant increase in shipment volume compared to 1H18 due to environmental production suspensions and increased construction activity.
  • East and South China shipment volumes recovered to normal levels.
  • Southwest China had mostly normal shipment volumes, except for Guizhou, which was slightly weaker.
  • Northeast and Northwest China shipment volumes remained relatively weak, at 50–70% of the normal level.
• Inventory Levels: The national average cement inventory level decreased slightly from 57.2% to 56.3% week on week.

Coal Prices

• The Bohai-Rim Steam Coal (Q5500K) comprehensive average price index remained at RMB 568/tonne last week.
• It decreased by 2.1% on a year-on-year basis.

Regulatory Response

• The NDRC is planning to investigate cement and other building material prices due to recent price increases.
• However, the report notes that the current cement prices are still within the range of the peak level in Q4 2017 and not significantly higher than the level during the previous investigation in late 2017.
• The price increase is justified by supply-side reforms and environmental protection inspections.

Cement Stock Performance

• Stocks under coverage fell on average by 3.1% last week.
• Performance:
  • CR Cement (1313.HK) was the best performer, with a 0.2% gain.
  • BBMG (2009.HK) was the weakest, with a 7.9% drop.
• Valuation Metrics:
  • Simple Average: PER (2017–2019E) = 12.4, 6.6, 6.3; EV/EBITDA (2017–2019E) = 10.2, 6.1, 5.9; Net Debt/Equity = 69%.
  • Weighted Average: PER (2017–2019E) = 13.5, 7.1, 6.8; EV/EBITDA (2017–2019E) = 9.5, 5.5, 5.3; Net Debt/Equity = 28%.

Regional Clinker Capacity Breakdown (2017)

• East China: Anhui Conch (57.5%), CNBM (26.8%), CR Cement (10.9%), Shanshui (5.2%), BBMG (0.5%), Asia Cement (1.8%), WCC (0.0%), Huaxin-Lafarge (0.0%).
• South Central China: Guangdong (14.4%), Guangxi (21.5%), Hainan (0.0%), Hunan (25.4%), Hubei (0.0%), Henan (0.0%).
• North China: Beijing (0.0%), Tianjin (0.0%), Hebei (3.3%), Shanxi (3.5%), Inner Mongolia (22.7%).
• Northeast China: Heilongjiang (61.2%), Jilin (24.6%), Liaoning (4.8%).
• Southwest China: Chongqing (11.7%), Sichuan (7.8%), Guizhou (20.4%), Yunnan (8.4%), Tibet (0.0%).
• Northwest China: Gansu (14.2%), Shaanxi (16.3%), Qinghai (20.0%), Ningxia (41.9%), Xinjiang (31.7%).

Market Share in Terms of Clinker Capacity (2017)

• East China: Anhui (57.5%), CNBM (26.8%), CR Cement (10.9%), Shanshui (5.2%), BBMG (0.5%), Asia Cement (1.8%), WCC (0.0%), Huaxin-Lafarge (0.0%).
• South Central China: Guangdong (14.4%), Guangxi (21.5%), Hainan (0.0%), Hunan (25.4%), Hubei (0.0%), Henan (0.0%).
• North China: Beijing (0.0%), Tianjin (0.0%), Hebei (3.3%), Shanxi (3.5%), Inner Mongolia (22.7%).
• Northeast China: Heilongjiang (61.2%), Jilin (24.6%), Liaoning (4.8%).
• Southwest China: Chongqing (11.7%), Sichuan (7.8%), Guizhou (20.4%), Yunnan (8.4%), Tibet (0.0%).
• Northwest China: Gansu (14.2%), Shaanxi (16.3%), Qinghai (20.0%), Ningxia (41.9%), Xinjiang (31.7%).

Analysts and Contact Information

• Wong Chi Man – Head of Research
  Email: cmwong@chinastock.com.hk
  Phone: (852) 3698-6317
• Mark Lau – Research Analyst
  Email: marklau@chinastock.com.hk
  Phone: (852) 3698-6393

Equity Ratings Explanation

• BUY: Share price is expected to increase by >20% within 12 months.
• SELL: Share price is expected to decrease by >20% within 12 months.
• HOLD: No clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to SELL.

Disclaimer and Disclosure

• The report is issued by China Galaxy International Securities (Hong Kong) Co., Limited and is not directed to any person or entity in jurisdictions where distribution would be illegal.
• The report contains information believed to be reliable, but no warranty is made regarding its accuracy.
• The report is not an offer to buy or sell securities.
• Interests Disclosure: China Galaxy International may have financial interests in the companies mentioned, including holdings of ≥1% of market capitalization.
• Analyst Certification: The analyst certifies that the views expressed reflect personal opinions and that no compensation is linked to the report’s content.

Summary of Key Points

• Cement prices rose nationally and regionally, driven by peak season and supply-side factors.
• Shipment volumes showed recovery in some regions, but remained weak in others.
• The NDRC may investigate cement prices, but current levels are not significantly above previous benchmarks.
• Valuation data shows varying performance across companies.
• Regional market share and capacity data are provided for better industry insight.
• The report includes detailed disclosures and disclaimers regarding the firm’s interests and the analyst's independence.