20181022-中国银河国际证券-华润水泥控股-01313.HK-Q3_Recurring_Net_Profit_Surged_118_on_Track_to_Reach_Our_Full-Year_Forecast_6页_1mb

Summary of CR Cement (1313.HK) Q3 2018 Performance and Outlook

Core Content

CR Cement (1313.HK) reported a recurring net profit of HK$2.02bn in Q3 2018, representing a 118% YoY increase, indicating strong performance. The company is on track to meet its full-year forecast of HK$2.38bn for Q4 2018, with the expectation that the peak season will drive higher sales volume and average selling price (ASP).

Key Financial Highlights

• Blended ASP rose 27.8% YoY to HK$363, though it slightly declined from HK$392 in Q2 due to currency translation.
• Sales volume of cement and clinker was largely flat YoY at 20.66m tonnes.
• Cost per tonne dropped from HK$216 to HK$202 in Q3, driven by RMB depreciation.
• Blended gross profit per tonne decreased from HK$176 to HK$161 YoY.
• Recurring EPS was HK$1.20, up 120% YoY, and the company's recurring net profit reached HK$8.383bn for the year ended 2018.
• Net margin increased to 21% in 2018E from 12% in 2017.
• Dividend yield reached 7.3% based on 2018E DPS, which is attractive and could support the share price.

Performance by Region

• Guangdong and Guangxi showed significant ASP increases (34.4% and 28.6%, respectively) and revenue growth (35.9% and 44.6%).
• Clinker volume declined 55.7% YoY, while cement volume increased 6.0%.
• Concrete volume grew by 2.5%, with ASP rising 17.8% and gross profit per m³ increasing 5.3%.

Valuation and Market Performance

• Target Price is set at HK$11.40, a +39.7% increase from the closing price of HK$8.16 on October 19, 2018.
• PBR (Price to Book Ratio) is 1.42x, slightly above the historical average of 1.27x.
• PER (Price to Earnings Ratio) is 6.8x, with a dividend yield of 7.3%.
• EV/EBITDA is 4.8x, reflecting a decrease from previous years, indicating potential undervaluation.

Financial Metrics

• Recurring net profit for 2018E is forecasted at HK$8.383bn, up from HK$2.02bn in Q3.
• EBIT increased 116.2% YoY to HK$2.871bn.
• Operating profit rose 122.8% to HK$2.729bn.
• Gross margin improved to 40.6% in Q3, up from 29.7% in Q3 2017.
• Net profit margin reached 21%, up from 12% in 2017.
• Core ROE is expected to be 23.8% in 2018E, showing strong profitability.

Investment Outlook

• The company is expected to comfortably meet the consensus forecast of HK$2.1bn for Q4.
• Earnings risk is considered low, with strong demand in the south China region.
• No production suspension is planned in Q4 for south China, which supports the outlook for continued strong performance.
• The BUY rating is maintained, and the dividend yield is seen as a key factor supporting the share price.

Risk and Considerations

• Currency translation had a moderate impact on blended ASP.
• Clinker volume declined significantly YoY, which may affect future revenue.
• The dividend yield is attractive but should be viewed in context of the company's financial performance and market conditions.

Additional Information

• Market Cap is US$7,268m, with 6,983m shares outstanding.
• Auditor: Deloitte.
• Free Float: 31.3%.
• 52-week range: HK$4.68-10.38.
• 3-month average daily turnover: US$25.7m.

Analyst Notes

• Wong Chi Man is the head of research.
• Mark Lau is the research analyst.
• Contact Information:
  • Wong Chi Man: (852) 3698-6317, cmwong@chinastock.com.hk
  • Mark Lau: (852) 3698-6393, marklau@chinastock.com.hk

Disclaimer

This report is not intended for distribution to individuals or entities in jurisdictions where it may be illegal. It is based on company data and CGIS Research estimates, and no guarantees are made regarding accuracy or completeness. Investors are advised to consult their own financial advisers before making any investment decisions.