20160314-中国银河国际证券-China_Cement_Weekly_Prices_Recovered_Last_Week__Mixed_Picture_for_Feb_2016_Eco-nomic_Data_12页_1mb

China Cement Weekly Summary - March 14, 2016

Core Content

The China Cement Weekly report for March 14, 2016, provides an overview of the cement sector's performance, economic data, and stock valuations. It highlights the recovery in cement prices, mixed economic indicators, and the performance of cement stocks in the Hong Kong market.

Key Market Developments

• Cement Prices: Cement prices rose for the first time on a nationwide average in 2016, increasing by 0.84% week-on-week to RMB 238.92/tonne.
  • Prices in Jiangsu, Zhejiang, Shanxi, and Gansu increased by RMB 10-20/tonne.
  • Prices in Guangxi and Guizhou declined by around RMB 20/tonne, due to fierce regional competition.
• Market Demand: Demand continued to recover in mid-March, driven by rural and urban infrastructure projects.
  • Demand from the property sector remained weak, with a utilization rate of 50% for cement grinding stations.
• Inventory Levels: The average inventory level (nationwide) declined slightly to 71.77%.

Economic Data (2M2016)

• Fixed Assets Investment (FAI): Grew by 10.2% YoY, slightly better than the 10% growth in 2015.
• Property Development Investment: Increased by 3% YoY, recovering from 1% YoY growth in 2015.
• New Housing Starts: Rose by 13.7% YoY in terms of area.
• Land Purchased by Developers: Declined by 19.4% YoY.
• Cement Production: Dropped by 8.2% YoY to 238.8 million tonnes.
• Outlook: Overall, the outlook remains mixed, with BBMG [2009.HK; BUY] preferred due to strong property sales performance.

Cement Stock Performance

• Cement Stocks Under Coverage: Declined on average by 5.1%.
  • CNBM [3323.HK; SELL] was the best performer, declining by 1.8%.
  • CR Cement [1313.HK; HOLD] was the weakest, plunging by 7%.
• Valuation Table:
  • Anhui Conch [914 HK Equity]: Rating HOLD, Price HK$18.36, Market Cap US$12,332m.
  • ONBM [3323 HK Equity]: Rating SELL, Price HK$3.83, Market Cap US$2,651m.
  • BBMG [2009 HK Equity]: Rating BUY, Price HK$4.86, Market Cap US$5,996m.
  • CR Cement [1313 HK Equity]: Rating HOLD, Price HK$2.26, Market Cap US$1,893m.
  • Shanshui Cement [691 HK Equity]: Rating SELL, Price HK$6.29, Market Cap US$2,725m.
• PER (x):
  • Simple Average: 13.7
  • Weighted Average: 11.0
• PBR (x):
  • Simple Average: 6.9
  • Weighted Average: 6.4
• EV/EBITDA (x):
  • Simple Average: 8.6
  • Weighted Average: 8.0
• Net Debt/Equity (%):
  • Simple Average: 104
  • Weighted Average: 64

EPS Growth and ROE

• EPS Growth (%):
  • Anhui Conch [914 HK Equity]: -45.4 (2015E), -8.3 (2016E), CAGR -29.2.
  • CNBM [3323 HK Equity]: -85.2 (2015E), +12.4 (2016E), CAGR -59.2.
  • CR Cement [1313 HK Equity]: -52.2 (2015E), -43.3 (2016E), CAGR -47.9.
  • BBM/G [2009 HK Equity]: +1.3 (2015E), +46.6 (2016E), CAGR +21.8.
  • Shanshui Cement [691 HK Equity]: +10.4 (2015E), +21.8 (2016E), CAGR +15.9.
• ROE (%):
  • Anhui Conch [914 HK Equity]: 18.2 (2015E), 18.0 (2014), 8.8 (2016E).
  • CNBM [3323 HK Equity]: 17.5 (2015E), 14.4 (2014), 2.0 (2016E).
  • CR Cement [1313 HK Equity]: 16.2 (2015E), 7.5 (2014), 4.4 (2016E).
  • BBM/G [2009 HK Equity]: 6.8 (2015E), 6.1 (2014), 8.4 (2016E).
  • Shanshui Cement [691 HK Equity]: 3.7 (2015E), 3.7 (2014), 4.4 (2016E).
• Dividend Yield (%):
  • Anhui Conch [914 HK Equity]: 1.7 (2015E), 2.4 (2014), 2.7 (2016E).
  • CNBM [3323 HK Equity]: 1.0 (2015E), 5.3 (2014), 5.5 (2016E).
  • CR Cement [1313 HK Equity]: 1.5 (2015E), 7.5 (2014), 3.5 (2016E).
  • BBM/G [2009 HK Equity]: 2.0 (2015E), 1.7 (2014), 1.4 (2016E).
  • Shanshui Cement [691 HK Equity]: 0.6 (2015E), 0.5 (2014), 0.5 (2016E).

Regional Cement Price Trends

• Figure 1: Regional cement price trends show a mixed picture.
• Figure 2: Cement prices in major cities indicate recovery in some areas, while others still show declines.
• Figure 3: Further breakdown of cement prices in major cities highlights regional differences.
• Figure 4: Cement prices in major cities reflect varying levels of recovery.
• Figure 5: Cement prices in major cities show mixed trends across different regions.

Regional Clinker Capacity Breakdown (2015)

• East China:
  • Anhui: 44.8% (2015), 100.0% (2016).
  • Jiangsu: 1.9% (2015), 5.8% (2016).
  • Zhejiang: 1.6% (2015), 11.4% (2016).
• South Central China:
  • Guangxi: 8.2% (2015), 2.0% (2016).
  • Guizhou: 9.6% (2015), 8.8% (2016).
• North China:
  • Shanxi: 0.0% (2015), 0.8% (2016).
  • Hebei: 0.0% (2015), 0.9% (2016).
• Northeast China:
  • Heilongjiang: 0.0% (2015), 4.1% (2016).
  • Liaoning: 0.0% (2015), 0.8% (2016).
• Southwest China:
  • Sichuan: 4.4% (2015), 12.6% (2016).
  • Yunnan: 3.0% (2015), 6.6% (2016).
• Northwest China:
  • Gansu: 3.2% (2015), 0.0% (2016).
  • Shaanxi: 5.1% (2015), 0.0% (2016).
  • Xinjiang: 0.4% (2015), 0.0% (2016).

Market Share in Terms of Clinker Capacity (2015)

• East China:
  • Anhui Conch: 53.0%.
  • CNBM: 11.3%.
  • Jiangsu: 5.6%.
  • Fujian: 3.1%.
  • Jiangxi: 12.3%.
  • Shandong: 1.3%.
  • Zhejiang: 5.1%.
  • Shanghai: 0.0%.
• South Central China:
  • Guangdong: 16.2%.
  • Guangxi: 22.0%.
  • Hainan: 0.0%.
  • Hunan: 26.4%.
  • Hubei: 0.0%.
  • Henan: 0.0%.

Summary

The cement sector in China showed mixed performance in February 2016, with price recovery in some regions and declines in others. BBMG was recommended as a BUY, while CNBM and Shanshui Cement were SELL, and CR Cement was HOLD. The property sector remains a weak demand driver, although infrastructure projects are showing positive signs. Economic data for the first two months of 2016 was lacklustre, with FAI and property investment showing modest growth. The valuation table highlights the mixed performance of cement stocks, with BBMG showing stronger fundamentals. Regional price trends and capacity distribution are also discussed, showing variations in performance across different regions.