20150727-中国银河国际证券-China_Cement_Weekly_13页_982kb

China Cement Sector Summary

Core Content

The document provides an analysis of the Chinese cement sector, focusing on price trends, production volume changes, and stock performance. It highlights the regional differences in demand and supply dynamics and evaluates the potential for recovery in key areas.

Key Findings

Cement Prices

• National Average: Cement prices rose slightly by 0.13% week-on-week (WoW) to RMB253.08/tonne.
• Regional Variations: Prices increased in parts of Anhui, Hunan, Guizhou, and Shannxi by RMB10~30/tonne.
• Demand Outlook: Weak demand in low-season areas remains a challenge, but there is a possibility of an early price increase in August due to better supply-demand balance in certain regions.
• Inventory Levels: National average cement inventory level rose slightly to 78.82%.

Production Volume Growth

• National Trend: The national cement production volume growth improved since March, with a 1H15 YoY growth of -5.3%.
• Regional Performance:
  • East China: 1H15 YoY growth of -4.7%.
  • South Central China: 1H15 YoY growth of -2.3%.
  • Southwest China: 1H15 YoY growth of 0.4%.
  • North China: 1H15 YoY growth of -14.2%.
  • Northeast China: 1H15 YoY growth of -20.5%.
  • Northwest China: 1H15 YoY growth of -10.8%.

Stock Performance

• Overall: Cement stocks under coverage fell by 0.8% last week.
• Top Performer: Anhui Conch [914 HK Equity] was the best performer, rising by 2.0%.
• Weakest Performer: BBMG [2009 HK Equity] fell by 4.2%.

Key Players and Market Share

Clinker Capacity Breakdown by Region (2014)

• East China: Dominated by Anhui Conch (51.7%), CNBM (26.5%), and Jiangsu (32.0%).
• South Central China: Guangdong (13.2%), Guangxi (23.1%), and Hunan (26.1%) are major contributors.
• North China: Hebei (3.2%), Inner Mongolia (16.1%), and Shanxi (3.7%) have notable shares.
• Northeast China: Liaoning (14.4%) and Jilin (8.5%) show some growth.
• Southwest China: Sichuan (4.8%), Guizhou (7.9%), and Yunnan (3.3%) are key areas.

Market Share in Terms of Clinker Capacity (2014)

• East China: Anhui Conch (51.7%), CNBM (26.5%), and Jiangsu (32.0%) dominate.
• South Central China: Guangdong (13.2%), Guangxi (23.1%), and Hunan (26.1%) have significant shares.
• North China: Hebei (3.2%), Inner Mongolia (16.1%), and Shanxi (3.7%) are major contributors.
• Northeast China: Liaoning (14.4%) and Jilin (8.5%) have notable shares.
• Southwest China: Sichuan (4.8%), Guizhou (7.9%), and Yunnan (3.3%) are key areas.

Valuation and Performance

Valuation Table

• Anhui Conch: HOLD, Price (HK$) 25.90, Market Cap (US$m) 17,290.
• CNBM: BUY, Price (HK$) 6.30, Market Cap (US$m) 4,361.
• BBMG: BUY, Price (HK$) 6.34, Market Cap (US$m) 6,539.
• CR Cement: BUY, Price (HK$) 4.34, Market Cap (US$m) 3,635.
• Shanshui Cement: SELL, Price (HK$) 6.29, Market Cap (US$m) 2,725.
• Simple Average: PER 15.9, PBR 7.5, EV/EBITDA 7.8.
• Weighted Average: PER 12.2, PBR 7.0, EV/EBITDA 7.3.

Regional Cement Price Trends

• Figure 1: Shows regional cement price changes, with a slight increase in some areas.
• Figure 2: Highlights cement prices in major cities, indicating regional variations.
• Figure 3: Further details on price movements in key cities.
• Figure 4: Additional insights into cement price trends.
• Figure 5: Late July cement prices, showing a slight increase.
• Figure 6: 1-Year Relative Performance, with Anhui Conch leading.

Conclusion

The Chinese cement sector is experiencing a slight recovery in prices, particularly in the southern and eastern regions, which show better volume growth and more favorable supply-demand conditions. Companies with significant market share in these regions are expected to benefit more from the potential demand recovery during the peak season. Valuation metrics indicate that some stocks are undervalued, while others face challenges. The analysis suggests that firms with strong regional exposure and better performance in demand growth are more likely to see positive outcomes in the coming months.