20171127-中国银河国际证券-China_Cement_Weekly_Cement_Prices_Remained_Strong_Last_Week__CNBM__SINOMA_Merger_Entered_the_Final_Stage_12页_891kb

China Cement Weekly Summary - November 27, 2017

Core Content Overview

This report provides an analysis of the cement sector in China, focusing on price trends, market conditions, and the CNBM/SINOMA merger. It also includes valuation metrics and market share data across different regions.

Cement Price Trends

• National Cement Prices: Remained strong, with an average increase of 2.4% week-on-week to RMB 366/tonne.
• Regional Price Increases:
  • Prices in parts of Hebei, Shanxi, Shanghai, Jiangsu, Anhui, Henan, Shandong, Chongqing, and Gansu rose by RMB 20–70/tonne.
  • In certain areas of Henan, Shandong, and northern Jiangsu, cement prices exceeded RMB 500/tonne.
• Inventory Levels: The national average cement inventory level dropped further to 54.44%, indicating tight supply conditions.

Coal Price Developments

• Bohai-Rim Steam Coal (Q5500K): The comprehensive average price index fell by RMB 1/tonne to RMB 576/tonne.
• Year-on-Year Drop: The index decreased by 4.1% YoY, reflecting a slight downward trend in coal prices.

CNBM/SINOMA Merger

• Approval Status: The merger between CNBM (3323.HK) and SINOMA (1893.HK) was officially approved by SASAC.
• Next Steps: SINOMA will hold an Extraordinary General Meeting (EGM) on December 6 to seek shareholder approval.
• Implied Offer Price: Based on CNBM's latest price, the implied offer price for SINOMA shareholders is HK$5.98, which is close to the market price of HK$5.84, suggesting limited arbitrage opportunity.

Cement Stock Performance

• Sector Stability: The cement stocks under coverage showed relatively stable share price performance.
• Performance Highlights:
  • Conch Cement (914.HK) was the best performer, rising 2.9% week-on-week.
  • CNBM (3323.HK) was the weakest, dropping 3.3% week-on-week.

Valuation Metrics

Simple Average:

• PER: 21.9 / 10.9 / 9.7
• PBR: 11.6 / 8.3 / 7.6
• EV/EBITDA: 11.4 / 8.2 / 7.4

Weighted Average:

• PER: 20.4 / 11.8 / 10.6
• PBR: 11.4 / 8.2 / 7.4
• EV/EBITDA: 11.4 / 8.2 / 7.4

Regional Cement Capacity Breakdown (2016)

• East China:

  • Anhui Conch: 44.9%
  • CNBM: 40.2%
  • CR Cement: 10.9%
  • Shanshui: 51.7%
  • BBMG: 2.2%
  • TCIC: 8.7%
  • Asia Cement: 42.0%
  • WCC: 0.0%
  • Grand Total: 100.0%

• South Central China:

  • Anhui Conch: 26.5%
  • CNBM: 15.4%
  • CR Cement: 73.3%
  • Shanshui: 2.6%
  • BBMG: 5.1%
  • TCIC: 39.1%
  • Asia Cement: 32.9%
  • WCC: 5.1%
  • Grand Total: 100.0%

• North China:

  • Anhui Conch: 0.0%
  • CNBM: 5.2%
  • CR Cement: 7.3%
  • Shanshui: 23.1%
  • BBMG: 12.8%
  • TCIC: 0.8%
  • Asia Cement: 1.8%
  • WCC: 94.9%
  • Grand Total: 100.0%

• Northeast China:

  • Anhui Conch: 0.0%
  • CNBM: 7.3%
  • CR Cement: 0.0%
  • Shanshui: 19.9%
  • BBMG: 6.6%
  • TCIC: 3.4%
  • Asia Cement: 0.0%
  • WCC: 94.9%
  • Grand Total: 100.0%

• Southwest China:

  • Anhui Conch: 20.2%
  • CNBM: 32.0%
  • CR Cement: 8.5%
  • Shanshui: 0.0%
  • BBMG: 5.1%
  • TCIC: 39.1%
  • Asia Cement: 32.9%
  • WCC: 5.1%
  • Grand Total: 100.0%

• Northwest China:

  • Anhui Conch: 8.4%
  • CNBM: 0.0%
  • CR Cement: 0.0%
  • Shanshui: 0.0%
  • BBMG: 12.8%
  • TCIC: 0.0%
  • Asia Cement: 32.9%
  • WCC: 68.8%
  • Grand Total: 100.0%

Market Share by Region (2016)

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• The analyst's views may not reflect the views of the firm or its affiliates.

Conflict of Interest Disclosure

• China Galaxy Securities is the parent company of China Galaxy International.
• China Galaxy International may have financial interests in the companies discussed.
• Potential conflicts include:
  • Ownership or investment in the securities of the companies.
  • Participation in financing transactions.
  • Providing investment services or advice.
  • Receiving compensation from the companies within the past 12 months.
  • Seeking investment banking mandates from the companies.

Analyst Certification

• The analyst certifies that:
  • The views expressed accurately reflect their personal opinion.
  • No compensation is directly or indirectly linked to the views presented in this report.
  • They have not traded the securities covered in this report within 30 days prior to the report's release.