20160405-中国银河国际证券-China_Cement_Weekly_12页_1mb

China Cement Sector Summary

Core Content

The China cement sector experienced a continued price rebound in the last week, with the nationwide average cement price rising by 1.63% week-on-week to RMB 244.17/tonne. Prices in parts of East, Central, and North China increased by RMB10-30/tonne, while prices in the Pearl River Delta declined by up to RMB10/tonne. The price increase is attributed to three main factors: 1) reduced clinker supply due to industry coordination after the Spring Festival; 2) better-than-expected market demand recovery and favorable weather conditions in March; and 3) price hikes initiated by large producers as cement prices had fallen below cash costs. However, the onset of the rainy season in April may delay further price increases. Nationally, average inventory levels dropped to 68.23%, with East China inventory levels falling below 60%.

Key Information

• Cement Price Trends:

  • National average price: RMB244.17/tonne (+1.63% week-on-week).
  • East China: Prices rose by RMB10-30/tonne.
  • Central and North China: Prices also increased.
  • Pearl River Delta: Prices declined by up to RMB10/tonne.
  • Rainy season in April may affect price hikes.

• Inventory Levels:

  • National average inventory level: 68.23%.
  • East China: Below 60%.

• Coal Price Stability:

  • Comprehensive average price index for Bohai-Rim Steam Coal (Q5500K) stabilized at RMB389/tonne since early March.
  • YoY decline: 18%.

Main Points

• Anhui Conch:

  • Strongest price rebound momentum in East China.
  • High exposure to the region and solid balance sheet.
  • Expected to benefit from price increases.
  • Earnings sensitivity is high due to a low base in 2015.
  • If 2016E gross profit per tonne exceeds forecast by RMB5, there is about a 15% upside in 2016E EPS.

• Shanshui Cement:

  • Stuck in the middle due to the lack of official acquisition offers from CNBM and Asia Cement.
  • New management is trying to increase the free float to 25% to resume trading, but cannot issue new shares at this time.

• Market Performance:

  • Cement stocks under coverage rose by an average of 4.6%.
  • Anhui Conch was the best performer, up 8.2%.
  • CNBM was the weakest, down 2.7%.

Stock Ratings and Financial Metrics

Peer Comparison

• Market Cap:

  • Anhui Conch: 13,856 (US$m).
  • CNBM: 2,520 (US$m).
  • BBMG: 6,671 (US$m).
  • CR Cement: 2,069 (US$m).
  • Simple Average: 4.2.
  • Weighted Average: 13.7.

• PER (2015):

  • Anhui Conch: 14.9.
  • CNBM: 26.4.
  • BBMG: 13.9.
  • CR Cement: 7.9.
  • Simple Average: 4.2.
  • Weighted Average: 13.7.

• PBR (2015):

  • Anhui Conch: 1.36.
  • CNBM: 0.41.
  • BBMG: 0.69.
  • CR Cement: 0.61.
  • Simple Average: 0.51.
  • Weighted Average: 0.97.

• EV/EBITDA (2015):

  • Anhui Conch: 7.9.
  • CNBM: 9.9.
  • BBMG: 9.5.
  • CR Cement: 7.6.
  • Simple Average: 6.1.
  • Weighted Average: 8.3.

Regional Clinker Capacity Breakdown (2015)

• East China:

  • Anhui: 53.0%.
  • Jiangsu: 5.6%.
  • Zhejiang: 5.1%.
  • Total: 17.7%.

• South Central China:

  • Guangdong: 16.2%.
  • Hunan: 26.4%.
  • Total: 12.1%.

• North China:

  • Hebei: 2.8%.
  • Inner Mongolia: 14.3%.
  • Total: 6.3%.

• Northeast China:

  • Heilongjiang: 4.1%.
  • Jilin: 2.1%.
  • Total: 7.1%.

• Southwest China:

  • Chongqing: 3.2%.
  • Sichuan: 4.4%.
  • Total: 20.2%.

• Northwest China:

  • Gansu: 3.2%.
  • Shaanxi: 5.1%.
  • Total: 8.7%.

Market Share in Terms of Clinker Capacity (2015)

• East China:

  • Anhui Conch: 53.0%.
  • CNBM: 11.3%.
  • CR Cement: 0.0%.
  • Shanshui: 0.0%.
  • BBMG: 0.0%.
  • TCCI: 0.0%.
  • Asia Cement: 0.0%.
  • WCC: 0.0%.
  • Sinoma Group: 6.3%.
  • Jidong: 0.0%.
  • Huaxin: 0.0%.

• South Central China:

  • Guangdong: 16.2%.
  • Guangxi: 22.0%.
  • Hainan: 0.0%.
  • Hunan: 26.4%.
  • Hubei: 0.0%.
  • Henan: 0.0%.
  • Total: 12.1%.

• North China:

  • Beijing: 0.0%.
  • Tianjin: 0.0%.
  • Hebei: 0.0%.
  • Shanxi: 0.0%.
  • Inner Mongolia: 14.3%.
  • Total: 6.3%.

Summary of Key Financial Metrics

• EPS Growth:

  • Anhui Conch: 12.6% (2016E), 6.7% (2017E).
  • CNBM: 129.5% (2016E), 30.4% (2017E).
  • CR Cement: -34.5% (2016E), 0.0% (2017E).
  • BBMG: 48.2% (2016E), 9.8% (2017E).
  • Simple Average: 39.0% (2016E), 11.7% (2017E).
  • Weighted Average: 29.9% (2016E), 9.4% (2017E).

• 2015-2017E CAGR:

  • Anhui Conch: 9.6%.
  • CNBM: 73.0%.
  • CR Cement: -19.0%.
  • BBMG: 27.6%.
  • Simple Average: 22.8%.
  • Weighted Average: 18.4%.

• PEG:

  • Anhui Conch: 1.4 (2016E), 0.4 (2015).
  • CNBM: 0.2 (2016E), -0.5 (2015).
  • CR Cement: -0.5 (2016E), -0.5 (2015).
  • BBMG: 0.4 (2016E), 0.4 (2015).
  • Simple Average: 0.4 (2016E), 0.4 (2015).
  • Weighted Average: 0.9 (2016E), 0.9 (2015).

• ROE:

  • Anhui Conch: 9.44% (2016E), 9.44% (2017E).
  • CNBM: 4.20% (2016E), 4.89% (2017E).
  • CR Cement: 5.01% (2016E), 4.89% (2017E).
  • BBMG: 7.06% (2016E), 7.27% (2017E).
  • Simple Average: 6.21% (2016E), 6.45% (2017E).
  • Weighted Average: 7.83% (2016E), 7.96% (2017E).

• Dividend Yield:

  • Anhui Conch: 2.2% (2016E), 2.2% (2017E).
  • CNBM: 1.2% (2016E), 1.5% (2017E).
  • CR Cement: 1.7% (2016E), 1.5% (2017E).
  • BBMG: 1.2% (2016E), 1.2% (2017E).
  • Simple Average: 1.6% (2016E), 1.6% (2017E).
  • Weighted Average: 1.8% (2016E), 1.8% (2017E).

Figures and Notes

• Figure 1: Regional Cement Price.
• Figure 2: Cement Prices in Major Cities (1).
• Figure 3: Cement Prices in Major Cities (2).
• Figure 4: Cement Prices in Major Cities (3).
• Figure 5: Cement Prices in Major Cities (4).
• Figure 6: Cement Prices (End-March) (RMB/Tonne).
• Figure 7: Cement Inventory Level (%).
• Figure 8: Clinker Capacity Breakdown by Region (2015).
• Figure 9: Market Share in Terms of Clinker Capacity (2015).

Note: The largest regional exposure of each company is highlighted in yellow. Sources include Digital Cement, China Cement Association, and CGIS Research.