20151012-中国银河国际证券-China_Cement_Weekly_12页_1mb

China Cement Sector Summary

Core Content

The document provides an analysis of the performance and outlook of the Chinese cement sector, focusing on price trends, profit changes, and stock valuations for key players. It also includes a breakdown of regional cement production capacity and market share.

Key Market Trends

• Cement Prices:

  • Cement prices saw a slight increase of 0.1% week-on-week (WoW) to RMB255.92/tonne.
  • Prices in parts of Anhui and Zhejiang rose by RMB10~20/tonne.
  • Prices stabilized despite short-term demand weakness caused by the National Day holidays, typhoons, and other weather-related factors.
  • The document suggests that prices could recover as weather improves and construction activity accelerates.

• Inventory Levels:

  • The national average cement inventory level increased to 74.73% last week.

• Coal Prices:

  • Bohai-Rim Steam Coal (Q5500K) prices dropped by RMB2/tonne to RMB396/tonne.
  • The index was 18% lower YoY.

Sector Profitability

• Overall Profit:

  • The cement sector's realized profit in 8M2015 was RMB15.7bn, down 66% YoY.
  • The YoY decline widened by 2.4ppt compared to 7M2015.
  • August 2015 saw a 83% YoY drop in profit.

• Regional Performance:

  • South Central China was the most profitable region with RMB9.3bn in profit, but still down 45% YoY.
  • East China recorded a 53% YoY drop.
  • North China was the weakest, reporting RMB2.8bn loss in 8M2015.
  • Shanxi had the largest loss at RMB1.36bn, while Hebei and Xinjiang also reported significant losses.
  • Henan, Guangxi, Shandong, Jiangxi, and Anhui showed relatively better performance, with profits of at least RMB2bn each.

• Outlook:

  • The overall outlook is expected to improve moderately in Q4 as cement prices have reached the cost level for many market players, reducing the incentive to cut prices further.

Stock Performance

• Stocks Under Coverage:

  • On average, cement stocks rose 5.9% over the last two weeks.
  • Market sentiment improved with the Hang Seng Index rising 6.0% during the same period.
  • CNBM [3323.HK] was the best performer, rising 9.0% to HK$5.09.
  • CR Cement [1313.HK] was the weakest, only climbing 2.5%.

• Valuation Metrics:

  • The table provides PER, PBR, and EV/EBITDA for 2014, 2015E, and 2016E.
  • Simple average and weighted average values are provided for each metric.
  • EPS Growth and ROE are also detailed, with Anhui Conch and ONBM showing significant declines or growth in earnings per share.

Peer Comparison

• The peer comparison table includes market cap, PER, PBR, and EV/EBITDA for various cement companies.
• Simple average and weighted average values are presented to provide an overview of the sector's valuation trends.

Regional Capacity Breakdown

• Clinker Capacity Breakdown by Region (2014):
  • The table details the capacity distribution across different regions.
  • East China is the largest contributor, with Anhui Conch and CNBM having significant market shares.
  • South Central China also has a strong presence, with CR Cement and Asia Cement leading in some provinces.
  • North China has a smaller share, with Shanxi and Hebei contributing to the overall capacity.

Market Share in Terms of Clinker Capacity (2014)

• The market share table outlines the clinker capacity of each company in different regions.
• Anhui Conch is the market leader in Anhui, while CNBM leads in Zhejiang.
• CR Cement has a significant share in Guangxi and Hunan.
• Asia Cement is the market leader in Guangdong and Yunnan.
• Shanshui Cement and BBMG have notable shares in various provinces.

Key Information

• Analyst: Wong Chi Man – Head of Research
• Contact: (852) 3698-6317, cmwong@chinastock.com.hk
• Research Assistant: Livy Lyu – (852) 3698-6393, liverylyu@chinastock.com.hk
• Sources: Company, Bloomberg, CGIHK Research

Summary

The Chinese cement sector experienced minimal price changes last week, with prices stabilizing at around RMB255/tonne. Despite short-term demand weakness due to National Day holidays and weather factors, the potential for price recovery is noted as the season progresses. Sector profits were significantly down, with an 83% YoY drop in August, and inventory levels rose to 74.73%. The coal price continued to weaken, impacting the sector's cost structure.

Regional performance varied, with South Central China being the most profitable and North China the weakest. Stock performance improved, with an average rise of 5.9% over the last two weeks, driven by market sentiment and Hang Seng Index gains. CNBM outperformed, while CR Cement was the weakest performer.

The valuation table provides PER, PBR, and EV/EBITDA metrics for key cement companies, highlighting Anhui Conch, CNBM, BBMG, and CR Cement as BUY recommendations, with Shanshui Cement as a SELL. The peer comparison table offers insights into market cap, valuation ratios, and performance trends.

Regional capacity breakdown and market share data show the dominant players in each region, with Anhui Conch and CNBM leading in East China, and CR Cement and Asia Cement having significant shares in South Central China. The market share table provides a detailed view of each company's clinker capacity in various provinces, emphasizing market leadership and regional exposure.

Overall, the cement sector is expected to moderately improve in Q4 as prices stabilize and construction activity increases.