20140822-DBS_Group-Value_is_emerging_11页_327kb

报告摘要

Anhui Conch Summary

Core Content

Anhui Conch is a leading cement producer in China, with significant business exposure in East China (34%), Central China (25%), South China (19%), and West China (20%). The company owns a cement production capacity of 245mt.p.a. by end-1H14.

The report highlights a strong performance in the first half of 2014, with a 90% year-over-year increase in net profit to Rmb5.8bn, exceeding expectations. This was driven by a 22% rise in sales revenue, supported by a 10% increase in average selling price (ASP) to Rmb252/t and an 11% growth in sales volume to 114mt. The unit gross profit increased to Rmb89/t from Rmb65/t in the same period of 2013. Unit production cost declined by 3% to Rmb156/t due to weaker coal prices. Operating cash flow reached Rmb8.2bn, while capital expenditure was Rmb4.9bn.

The company's SG&A as a percentage of sales revenue dropped to 8.4% from 10.1% in 1H13, contributing to improved margins. The gross margin rose to 35.4%, and operating margin reached 27.0%, both above previous levels. Net profit margin was 20.2%, up from 13.0% in 1H13. The report also notes that the company's net gearing improved to 22% at the end of 1H14.

The report reiterates a BUY recommendation with a 12-month price target of HK$35.00, up from the previous target of HK$33.70. This is based on an earnings upgrade, with the target PE at 12.5x, slightly below the historical average of 13.2x since 2008. The report believes the positive catalyst of cement price recovery in Q4 will outweigh concerns about property demand and the H-A market connectivity overhang.

Key Financials

Sales Revenue (1H14): Rmb28,784m (up 22% YoY)
Cost of Sales (1H14): Rmb18,599m (up 9% YoY)
Gross Profit (1H14): Rmb10,185m (up 55% YoY)
Operating Income (1H14): Rmb7,781m (up 86% YoY)
Net Profit (1H14): Rmb5,811m (up 90% YoY)
EPS (Rmb/sh): Rmb1.097 (up 90% YoY)
Sales Volume (1H14): 114mt (up 11% YoY)
ASP (1H14): Rmb245/t (up 9% YoY)
Unit Production Cost (1H14): Rmb156/t (down 3% YoY)
Net Profit Margin (1H14): 20.2%
ROAE (1H14): 13.6%
Net Debt/Equity (1H14): 22%

Financial Forecasts

Metric	FY14F	FY15F
Turnover (RMB m)	61,311	66,216
EBITDA (RMB m)	21,106	23,794
Pre-tax Profit (RMB m)	15,932	18,374
Net Profit (RMB m)	11,777	13,615
EPS (HK$)	2.80	3.24
DPS (HK$)	0.55	0.64
BV Per Share (HK$)	15.92	19.00
PE (X)	10.2	8.8
P/Cash Flow (X)	7.6	6.8
P/Free CF (X)	17.1	11.5
EV/EBITDA (X)	6.3	5.3
Net Div Yield (%)	1.9	2.2
P/Book Value (X)	1.8	1.5
Net Debt/Equity (X)	0.1	0.0
ROAE (%)	19.2	18.5
Earnings Rev (%)	3.9	3.6

Key Assumptions

Sales Volume (FY14): 158.0mt, expected to increase to 270.0mt by FY15
ASP (FY14): Rmb307.9/t, expected to increase to Rmb245.2/t by FY15
Gross Profit per Tonne (FY14): Rmb121.4/t, expected to increase to Rmb89.2/t by FY15
Unit Production Cost (FY14): Rmb186.6/t, expected to remain at Rmb156.0/t by FY15

Peer Comparison

Company	Price (HK$)	Market Cap (US$m)	PE (x)	P/B (x)	EV/EBITDA (x)
BBMG 'H'	6.1	3,766	5.8	0.7	5.6
China National Mats.'H'	1.87	862	8.0	0.4	5.8
Asia Cement (China) Hdg.	5.3	1,064	5.9	0.6	5.7
Anhui Conch Cement 'H'	28.65	19,555	10.2	1.8	6.3
West China Cement	0.83	484	8.5	0.6	5.6
CR Cement	5.61	4,729	8.0	1.2	6.6

Key Catalysts

Faster-than-expected recovery in property demand
Better-than-expected closure of inefficient capacity due to stricter environmental policies
Expected cement price hikes in Q4 due to strong seasonality and infrastructure demand
Positive outlook on price cooperation in the East and South regions

Analyst Comments

The report emphasizes strong operations and financials, with impressive performance in 1H14.
The price target is raised to HK$35.00, reflecting the earnings upgrade.
The current valuation (10.2x FY14F PE) is considered a good entry point for long-term investment.
The analyst believes the positive catalyst of cement price recovery in Q4 will outweigh property demand uncertainty and market connectivity overhang.

Summary

The report highlights Anhui Conch's strong financial performance in the first half of 2014, with a 90% increase in net profit and improved margins. The company is positioned to benefit from cement price recovery in Q4, driven by strong infrastructure demand and better price cooperation in the East and South regions. The BUY recommendation is reiterated with a price target of HK$35.00, reflecting earnings upgrades and improved financial metrics. The current valuation is viewed as favorable, with the analyst suggesting it is a good entry point for long-term investment.