20140630-中国银河国际证券-China_Cement_Weekly_Companies_Most_Likely_to_Release_Positive_Profit_Alerts_or_Profit_Warnings__12页_979kb

China Cement Sector Summary

Core Content

The document provides an analysis of the Chinese cement sector, focusing on recent price trends, company performance, and valuation metrics. It highlights the impact of regional pricing pressures on companies and discusses the potential for profit alerts or warnings based on their exposure and performance.

Key Price Trends

• National Average Cement Price: RMB324/tonne, down by $1.34% last week.
• Regional Variations:
  • Northeast China: A significant 6% drop in cement prices, influenced by capital constraints in Jilin and cheaper cement from Liaoning.
  • Guangdong, Hefei (Anhui), Chongqing: Prices fell by RMB10-40/tonne.
  • Zunyi (Guizhou): Prices rose by RMB10-20/tonne.
• Cement Price Outlook: Further downside is expected in coming weeks.

Companies Likely to Issue Positive Profit Alerts

• Anhui Conch (0914.HK): Expected to report strong earnings due to its heavy exposure to south China. Q1 2014 earnings growth was 155% YoY, and 1H14 is projected to show over 50% profit growth. However, the stock is rated HOLD due to high valuation and expected slower growth in 2H14.
• TCCI (1136.HK): Likely to issue a positive profit alert due to its exposure to south China, similar to CR Cement.
• Asia Cement (0743.HK): Q1 2014 net profit surged 13.7x YoY to RMB126m, attributed to a low base effect last year.

Companies at Risk of Profit Warning

• West China Cement (2233.HK): Potentially at risk due to the unfavorable cement price trend in Shaanxi.

Stock Performance

• Cement Stocks: Fell by 0.4% overall.
• CR Cement (1313.HK): Released a positive profit alert but saw only a 2.1% share price increase, indicating investor caution.
• BBMG (2009.HK): The worst performer, down 2.4%, aligned with the weak China property sector.

Valuation Metrics

EPS Growth and PEG

Regional Clinker Capacity Breakdown (2013)

Key Points

• Price Declines: Cement prices have declined in several regions, particularly in the northeast, with a 6% weekly drop.
• Profit Alerts: Anhui Conch, TCCI, and Asia Cement are likely to issue positive profit alerts due to strong Q1 performance and regional exposure.
• Profit Warnings: West China Cement may face a profit warning due to declining prices in Shaanxi.
• Stock Performance: Cement stocks fell by 0.4% last week, with BBMG being the worst performer.
• Valuation: Anhui Conch is overvalued compared to peers, hence the HOLD rating, while CNBM and CR Cement are rated BUY.
• Regional Exposure: Companies have varying levels of exposure to different regions, with some heavily reliant on areas experiencing price drops or growth.

Conclusion

The Chinese cement sector is currently facing mixed price trends, with significant declines in the northeast and some increases in southwest regions. Companies with strong Q1 performance and exposure to regions with price stability are more likely to issue positive profit alerts, while those in regions with declining prices may face profit warnings. Valuation and future growth expectations play a key role in the stock ratings, with some companies showing potential for further earnings growth despite current challenges.