China Cement Weekly Summary - July 23, 2018
Core Content Overview
This report provides an analysis of the cement sector in China for the week ending July 23, 2018, covering production trends, pricing changes, inventory levels, and valuation metrics. It also includes a breakdown of clinker capacity by region and market share distribution.
Key Market Trends
Cement Prices
- The national average cement price dropped by 0.67% to RMB409/tonne from the previous week.
- Regional price changes:
- Heilongjiang, Jiangxi, and Fujian saw a decline of RMB20-40/tonne.
- The Yangtze River Delta region experienced an increase in clinker prices of about RMB10/tonne.
- Cement demand was weak during the low season due to high temperatures and rainfall in mid-July.
- Cement shipment volume remained at 80% of the normal level.
- National cement inventory dropped from 57.8% to 56.4% week on week.
Coal Prices
- The comprehensive average price index for Bohai-Rim Steam Coal (Q5500K) decreased to RMB569/tonne.
- This represents a 2.2% year-on-year decline.
Cement Production by Region
| Region |
Production Growth (YoY) |
| South China |
+0.03% (total 200m tonnes) |
| - Guangdong |
+4.9% |
| - Guangxi |
+4.3% |
| Southwest China |
+3.9% |
| East China |
-0.92% |
| Northeast China |
-15.7% |
| Northwest China |
-9.3% |
Share Price Performance
- Cement stocks under coverage decreased by 2.2% on average.
- Best performer: BBMG (2009.HK) saw a 1.1% rebound in share price.
- Weakest performer: CR Cement (1313.HK) decreased by 4.9% week on week.
Valuation Metrics (2017-2019E)
| Company |
Ticker |
Rating |
Price (HK$) |
Market Cap (US$m) |
PER (2017) |
PER (2018E) |
PER (2019E) |
PBR (2017) |
PBR (2018E) |
PBR (2019E) |
EV/EBITDA (2018E) |
EV/EBITDA (2019E) |
Net Debt/Equity (%) |
| Conch Cement |
914 HK Equity |
BUY |
43.75 |
27,956 |
13.6 |
8.7 |
8.6 |
2.20 |
1.84 |
1.65 |
7.6 |
5.2 |
5.2 |
| ONBM |
3323 HK Equity |
BUY |
7.51 |
6,151 |
10.0 |
5.8 |
5.8 |
0.76 |
0.67 |
0.61 |
8.8 |
7.2 |
7.3 |
| BBMG |
2009 HK Equity |
BUY |
2.71 |
5,018 |
9.7 |
6.6 |
6.2 |
0.50 |
0.44 |
0.42 |
16.2 |
10.8 |
90 |
| CR Cement |
1313 HK Equity |
BUY |
7.78 |
6,965 |
14.2 |
6.9 |
6.9 |
1.79 |
1.38 |
1.25 |
9.1 |
5.1 |
5.1 |
Simple Average
- PER: 11.9 (2017) → 10.8 (2018E) → 9.8 (2019E)
- PBR: 10.4 (2017) → 7.1 (2018E) → 6.6 (2019E)
- EV/EBITDA: 10.4 (2017) → 7.1 (2018E) → 6.0 (2019E)
- Net Debt/Equity: 108%
Weighted Average
- PER: 12.8 (2017) → 7.8 (2018E) → 7.7 (2019E)
- PBR: 8.8 (2017) → 6.0 (2018E) → 5.9 (2019E)
- EV/EBITDA: 9.0 (2017) → 6.0 (2018E) → 5.9 (2019E)
- Net Debt/Equity: 42%
EPS Growth and PEG
| Company |
EPS Growth (2018E) |
EPS Growth (2019E) |
PEG (2017) |
PEG (2018E) |
| Conch Cement |
54.0% |
0.5% |
11.48 |
11.48 |
| ONBM |
69.3% |
1.2% |
2.22 |
2.22 |
| CR Cement |
105.7% |
1.0% |
7.14 |
7.14 |
| BBMG |
44.2% |
7.1% |
5.64 |
5.64 |
| Simple Average |
68.3% |
2.4% |
6.62 |
6.62 |
| Weighted Average |
62.8% |
1.4% |
8.95 |
8.95 |
ROE and Dividend Yield
| Company |
ROE (2018E) |
ROE (2019E) |
Dividend Yield (2017) |
Dividend Yield (2018E) |
Dividend Yield (2019E) |
| Conch Cement |
17.49% |
22.94% |
1.3% |
3.2% |
5.2% |
| ONBM |
7.86% |
12.10% |
0.7% |
1.6% |
3.4% |
| CR Cement |
12.67% |
22.48% |
1.2% |
3.5% |
7.3% |
| BBMG |
5.32% |
6.93% |
2.2% |
2.5% |
3.3% |
| Simple Average |
10.83% |
16.12% |
1.3% |
2.7% |
4.8% |
| Weighted Average |
14.15% |
19.68% |
1.3% |
3.0% |
5.1% |
Clinker Capacity Breakdown by Region (2017)
| Region |
Clinker Capacity (%) |
| East China |
20.0% |
| - Anhui |
46.2% |
| - Jiangsu |
25.7% |
| - Shandong |
16.0% |
| - Zhejiang |
10.9% |
| - Shanghai |
1.5% |
| South Central China |
74.1% |
| - Guangdong |
25.7% |
| - Guangxi |
33.8% |
| - Hunan |
10.9% |
| - Hubei |
2.0% |
| - Henan |
2.2% |
| North China |
3.6% |
| - Hebei |
7.1% |
| - Shanxi |
10.6% |
| - Inner Mongolia |
5.8% |
| Northeast China |
8.2% |
| - Heilongjiang |
7.6% |
| - Jilin |
2.0% |
| - Liaoning |
0.0% |
| Northwest China |
1.0% |
| - Gansu |
0.0% |
| - Shaanxi |
21.1% |
| - Qinghai |
0.0% |
| - Ningxia |
0.0% |
| - Xinjiang |
6.0% |
Market Share in Terms of Clinker Capacity (2017)
| Region |
Market Share (%) |
| East China |
20.0% |
| - Anhui |
57.5% |
| - Jiangsu |
45.1% |
| - Shandong |
30.2% |
| - Zhejiang |
55.7% |
| - Shanghai |
0.0% |
| South Central China |
11.6% |
| - Guangdong |
14.4% |
| - Guangxi |
21.5% |
| - Hainan |
23.3% |
| - Hunan |
25.4% |
| - Hubei |
0.0% |
| - Henan |
0.0% |
| North China |
6.7% |
| - Hebei |
3.3% |
| - Shanxi |
3.5% |
| - Inner Mongolia |
15.1% |
| Northeast China |
11.7% |
| - Heilongjiang |
61.2% |
| - Jilin |
24.6% |
| - Liaoning |
4.8% |
| Northwest China |
7.5% |
| - Gansu |
14.2% |
| - Shaanxi |
16.3% |
| - Qinghai |
0.0% |
| - Ningxia |
0.0% |
| - Xinjiang |
1.0% |
Key Takeaways
- Cement production in South China and Southwest China remained strong in June, while East, Northeast, and Northwest China saw declines.
- Clinker prices increased in the Yangtze River Delta due to supply constraints.
- Cement demand was weak during the low season, with inventory levels decreasing.
- BBMG was the best-performing stock, while CR Cement was the weakest.
- The cement sector is expected to see price rebounds in certain regions in August as demand recovers.
- Valuation metrics indicate mixed performance, with PER and PBR declining across the board.
