20180827-中国银河国际证券-China_Cement_Weekly__Cement_Prices_Continued_to_Rebound__Guangdong_to_adopt_tighter_emission_standards_12页_8mb

China Cement Weekly Summary - August 27, 2018

Core Content

This report provides an overview of the cement sector in China, focusing on price trends, inventory levels, and the impact of new emission standards. It also includes stock performance data and market share analysis.

Cement Price Trends

• National Average: The average cement price increased by 0.45% to RMB 402/tonne from the previous week.
• Regional Variations:
  • Heilongjiang, Henan, and northern Anhui: Prices increased by RMB 20–40/tonne.
  • Coastal Zhejiang and Guizhou: Prices decreased by RMB 20–30/tonne.
• Demand Recovery: Cement demand saw a moderate recovery in late August due to improved weather conditions, with shipment volumes increasing by 5%–10%.
• Price Outlook: It is expected that cement demand and prices will continue to rise in early September.
• Inventory Level: The average inventory level decreased slightly from 58.6% to 58.4% week on week.

Coal Price and Emission Standards

• Coal Prices: Coal prices remained flat, with the comprehensive average price index for Bohai-Rim Steam Coal (Q5500K) at RMB 568/tonne.
• New Emission Standards: Guangdong province will implement tighter emission standards starting on September 1, 2018. This follows amendments in 2013, where nine cities in the Pearl River Delta had already adopted stricter standards.
• Impact on Companies: Companies that fail to comply with the new standards may face production suspension. CR Cement and Conch Cement are expected to be less affected due to prior investments in environmental standards, while smaller players may face challenges.

Stock Performance

• Cement Stocks: Cement stocks under coverage increased by 7.0% on average last week.
• Best Performer: CR Cement recorded a 8.6% gain in its share price.
• Weakest Performer: BBMG rose by 3.6% week on week.
• Valuation Metrics:
  • PER (x):
    • Conch Cement: 15.1 (2017), 8.0 (2018E), 7.7 (2019E)
    • ONBM: 10.9 (2017), 6.3 (2018E), 6.3 (2019E)
    • BBMG: 10.3 (2017), 7.1 (2018E), 6.6 (2019E)
    • CR Cement: 17.0 (2017), 7.7 (2018E), 7.5 (2019E)
  • EV/EBITDA (x):
    • Conch Cement: 8.9 (2017), 5.1 (2018E), 4.8 (2019E)
    • ONBM: 8.9 (2017), 7.3 (2018E), 7.4 (2019E)
    • BBMG: 10.9 (2017), 8.9 (2018E), 8.2 (2019E)
    • CR Cement: 10.6 (2017), 5.4 (2018E), 5.5 (2019E)
  • Net Debt Equity (%):
    • Conch Cement: Net cash
    • ONBM: 169
    • BBMG: 95
    • CR Cement: 3

Market Share by Clinker Capacity (2017)

• East China:
  • Anhui Conch: 57.5%
  • CNBM: 26.8%
  • CR Cement: 1.4%
  • Shanshui: 5.2%
  • BBMG: 0.5%
  • Asia Cement: 1.2%
  • WCC: 0.0%
  • Huaxin-Lafarge: 0.0%
• South Central China:
  • Guangdong: 14.4%
  • Guangxi: 21.5%
  • Hainan: 23.3%
  • Hunan: 25.4%
  • Hubei: 0.0%
  • Henan: 0.0%
• North China:
  • Beijing: 0.0%
  • Tianjin: 0.0%
  • Hebei: 0.0%
  • Shanxi: 0.0%
  • Inner Mongolia: 0.0%
• Northeast China:
  • Heilongjiang: 0.0%
  • Jilin: 0.0%
  • Liaoning: 0.0%
• Southwest China:
  • Chongqing: 11.7%
  • Sichuan: 7.8%
  • Guizhou: 20.4%
  • Yunnan: 8.4%
  • Tibet: 0.0%
• Northwest China:
  • Gansu: 14.2%
  • Shaanxi: 16.3%
  • Qinghai: 0.0%
  • Ningxia: 0.0%
  • Xinjiang: 1.0%

Key Figures and Notes

• Market Share by Region (2017):
  • East China: Anhui Conch (46.2%), CNBM (35.1%), CR Cement (10.6%), BBMG (2.2%), Asia Cement (24.42%), WCC (94.7%)
  • South Central China: Guangdong (25.7%), Guangxi (12.9%), Hainan (10.9%), Hunan (12.9%), Hubei (7.8%), Henan (10.9%)
  • North China: Beijing (0.0%), Tianjin (0.0%), Hebei (3.3%), Shanxi (3.5%), Inner Mongolia (22.7%)
  • Northeast China: Heilongjiang (61.2%), Jilin (24.6%), Liaoning (4.8%)
  • Southwest China: Chongqing (11.7%), Sichuan (7.8%), Guizhou (25.1%), Yunnan (8.4%), Tibet (47.8%)
  • Northwest China: Gansu (48.6%), Shaanxi (2.5%), Qinghai (20.0%), Ningxia (41.9%), Xinjiang (31.7%)

Analyst Notes

• Wong Chi Man – Head of Research
• Mark Lau – Research Analyst

Equity Ratings Explanation

• BUY: Share price is expected to increase by >20% within 12 months.
• SELL: Share price is expected to decrease by >20% within 12 months.
• HOLD: No clear catalyst; downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to SELL.

Disclaimer

• This report is not directed at any person or entity in jurisdictions where distribution or use would be illegal.
• The information is based on reliable sources but not guaranteed for accuracy.
• The report is not an offer or solicitation to buy or sell securities.
• Past performance is not indicative of future results.
• The report must be read with the provided disclaimer.

Disclosure of Interests

• China Galaxy Securities Co., Ltd. (6881.HK; 601881.CH) is the holding company of the group.
• China Galaxy International may have financial interests in the companies mentioned, potentially equal to or exceeding 1% of their market capitalization.
• Some directors, officers, and employees of China Galaxy International may be associated with the companies mentioned.
• China Galaxy International may participate in financing transactions, provide services, or have holdings in the securities of the companies discussed.

Analyst Certification

• The analyst certifies that all views expressed in the report reflect personal opinions.
• The analyst has not engaged in trading the securities covered in the report within 30 days prior to its issuance.
• The analyst will not trade the securities within three business days after the report is issued.
• The analyst is not an officer of any Hong Kong-listed company covered in the report.
• The analyst has no financial interests in the companies discussed.