20180625-中国银河国际证券-Cement_Production_Growth_Remained_Solid_in_Key_Regions_NW_and_SW_China_Still_Weak_12页_609kb

China Cement Weekly Summary - June 25, 2018

Core Content Overview

This report provides an analysis of the cement sector in China, focusing on production growth, price trends, inventory levels, and stock performance. It also includes valuation data and market share analysis for major cement companies.

Cement Price Trends

• The average cement price nationwide rose slightly by 0.08% to RMB 415/tonne.
• Shaanxi saw a significant increase in cement prices of RMB 30-50/tonne.
• Fujian, Shandong, and Yiyang (Hunan) experienced a decline in cement prices of RMB 10-20/tonne.
• Cement demand weakened in late June due to rainy weather, leading to a shipment volume drop to 80–90% of normal.
• Inventory levels increased in most regions to 50–60%, with some reaching 70%.
• Short-term cement prices are expected to remain resilient due to coordinated efforts among major producers, but volatility is anticipated during the rainy season.
• The average inventory level nationwide remained at 56%.

Cement Production Growth

• Cement production growth in May was 1.9% YoY.
• Key regions showed stronger growth:
  • Southwest China: 8.79% YoY
  • East China: 2.09% YoY
  • Guangdong: 7.57% YoY
• North China had a decline of 7.87% YoY in the 5-month period of 2018, but improved to 3.09% YoY in May.
• Northwest China reported a decline of 7.52% YoY in May, while Southwest China saw a decline of 11.93% YoY.

Stock Performance

• Cement stocks under coverage dropped 4.4% on average last week.
• CR Cement was the best performer, with a week-on-week increase of 1.1%.
• CNBM was the weakest performer, falling 7.2% YoW, due to its high beta nature.

Valuation Table

EPS Growth and PEG

Peer Comparison

Market Share in Terms of Clinker Capacity (2017)

• East China:
  • Anhui Conch: 57.5%
  • CNBM: 11.4%
  • CR Cement: 1.5%
  • Shanshui: 5.5%
  • BBMG: 0.5%
  • Asia Cement: 0.0%
  • WCC: 0.0%
  • Huaxin-Lafarge: 0.0%
  • Sinoma Group: 2.7%
• South Central China:
  • Guangdong: 14.4%
  • CNBM: 0.0%
  • CR Cement: 20.0%
  • BBMG: 0.7%
  • Asia Cement: 0.3%
  • WCC: 0.0%
  • Huaxin-Lafarge: 7.8%
  • Sinoma Group: 2.4%
• North China:
  • CNBM: 6.7%
  • CR Cement: 2.0%
  • BBMG: 5.8%
  • Sinoma Group: 1.9%
• Northeast China:
  • CNBM: 22.3%
  • CR Cement: 0.0%
  • BBMG: 9.4%
  • Sinoma Group: 6.7%
• Southwest China:
  • Anhui Conch: 11.7%
  • CNBM: 25.1%
  • CR Cement: 1.6%
  • BBMG: 0.0%
  • Sinoma Group: 2.8%
• Northwest China:
  • Anhui Conch: 7.5%
  • CNBM: 0.0%
  • CR Cement: 0.0%
  • BBMG: 0.7%
  • Sinoma Group: 26.6%

Key Points

• The cement sector showed resilient production growth in major regions, but weaker performance in northwest and southwest China.
• Shaanxi had a notable price increase, while Fujian, Shandong, and Yiyang (Hunan) saw price declines.
• Inventory levels increased across most regions, indicating potential oversupply.
• Stocks under coverage experienced a week-on-week drop, with CNBM being the weakest performer.
• CR Cement was rated HOLD, while Conch Cement and CNBM were rated BUY.
• The valuation metrics (PER, PBR, EV/EBITDA) indicate mixed performance across the sector, with BBMG showing stronger EPS growth.

Disclaimer and Disclosure

• The report is issued by Galaxy International Securities and is not for public distribution in certain jurisdictions.
• China Galaxy International may have financial interests in the companies mentioned.
• The analyst certifies that the views expressed reflect personal opinions and are not binding on the firm or its subsidiaries.
• The analyst has no financial interest in the companies covered and has not traded in the securities in the 30 days prior to the report's release.