20180703-中国银河国际证券-China_Cement_Weekly__Industry_Profit_Surged_76__YoY_in_May__Continued_Moderate_Decline_in_Cement_Prices_12页_986kb

China Cement Sector Summary

Core Industry Performance

• Cement Price Trends:

  • The average cement price nationwide dropped slightly by 0.28% week-over-week (WoW) to RMB415/tonne.
  • In Zunyi (Guizhou), cement prices increased by RMB30/tonne.
  • Prices declined by RMB10-30/tonne in Anhui, Fujian, and Henan.
  • The national average cement price (P.O. 42.5) in May was RMB430/tonne, up RMB7/tonne from April and RMB76/tonne from May 2017.

• Profitability:

  • The cement sector's profit in May 2018 reached RMB17.74bn, a 75.92% YoY increase.
  • For the first five months of 2018 (5M2018), the sector's profit was RMB51.49bn, a 163.86% YoY jump.
  • This surge was driven by persistently high cement prices.
  • The gross margin in May was 24.87%, up from 22.59% in March.

• Shipment Volume:

  • Cement shipment volume in late June remained stable WoW, at 70-90% of the normal level.

• Inventory Levels:

  • The national average inventory level in late June was 57%, contributing to price resilience in many regions.

Stock Performance

• Stock Price Movements:

  • Cement stocks under coverage dropped 7.1% on average last week.
  • BBMG (2009.HK) had the best performance, with a 1.7% WoW drop.
  • CNBM (3323.HK), the weakest performer, fell 11.9% WoW, partly due to its high beta nature.

• Valuation Metrics:

  • Conch Cement (914 HK Equity):
    • Rating: BUY
    • Price: HK$45.00
    • Market Cap: US$27,855m
    • PER (2017-2019E): 14.0, 8.9, 8.9
    • PBR (2017-2019E): 2.27, 1.89, 1.69
    • EV/EBITDA (2017-2019E): 7.9, 5.3, 5.4
    • Net Debt/Equity: Net cash
  • CNBM (3323 HK Equity):
    • Rating: BUY
    • Price: HK$7.77
    • Market Cap: US$6,364m
    • PER (2017-2019E): 10.4, 6.0, 6.0
    • PBR (2017-2019E): 0.79, 0.69, 0.63
    • EV/EBITDA (2017-2019E): 8.9, 7.3, 7.3
    • Net Debt/Equity: 169
  • BBMG (2009 HK Equity):
    • Rating: BUY
    • Price: HK$2.90
    • Market Cap: US$5,028m
    • PER (2017-2019E): 10.3, 7.1, 6.6
    • PBR (2017-2019E): 0.54, 0.48, 0.45
    • EV/EBITDA (2017-2019E): 10.9, 8.9, 8.2
    • Net Debt/Equity: 95
  • CR Cement (1313 HK Equity):
    • Rating: HOLD
    • Price: HK$7.95
    • Market Cap: US$7,117m
    • PER (2017-2019E): 14.6, 6.7, 6.6
    • PBR (2017-2019E): 1.71, 1.47, 1.33
    • EV/EBITDA (2017-2019E): 8.8, 4.9, 4.9

• Average Metrics:

  • Simple Average:
    • PER: 12.3, 7.2, 7.0
    • PBR: 1.33, 1.13, 1.02
    • EV/EBITDA: 9.1, 6.6, 6.5
    • Net Debt/Equity: 93
  • Weighted Average:
    • PER: 13.2, 8.0, 7.9
    • PBR: 1.79, 1.51, 1.36
    • EV/EBITDA: 8.5, 5.9, 5.9
    • Net Debt/Equity: 36

Regional Cement Price Trends

• Figure 1: Shows regional cement price changes, highlighting Zunyi (Guizhou) as a price increase region and Anhui, Fujian, and Henan as price decline regions.
• Figure 2-5: Display cement price performance in major cities over the past year, indicating price fluctuations and market sentiment.

Regional Clinker Capacity Breakdown (2017)

• East China:
  • Anhui Conch (0914.HK) and CNBM (3323.HK) dominate the market.
  • Anhui accounts for 38.4% of clinker capacity, CNBM for 5.3%, and CR Cement for 0.0%.
• South Central China:
  • CR Cement (1313.HK) has the largest share, at 31.1% in Guangdong.
• North China:
  • CNBM (3323.HK) has a significant presence in Hebei and Inner Mongolia.
• Northeast China:
  • CNBM (3323.HK) is the market leader in Heilongjiang with 61.2% of clinker capacity.
• Southwest China:
  • CNBM (3323.HK) dominates in Guizhou with 31.4%.
• Northwest China:
  • Sinoma Group (601881.CH) has a major share in Gansu and Xinjiang.

Market Share in Terms of Clinker Capacity (2017)

• East China:
  • Anhui Conch (0914.HK) has the largest market share, with 57.5% in Anhui.
  • CNBM (3323.HK) has 11.4% in Anhui.
• South Central China:
  • CR Cement (1313.HK) holds 20.0% in Guangdong.
• North China:
  • CNBM (3323.HK) is the market leader in Hebei and Inner Mongolia.
• Northeast China:
  • CNBM (3323.HK) has the highest share in Heilongjiang at 61.2%.
• Southwest China:
  • CNBM (3323.HK) leads in Guizhou with 31.4%.
• Northwest China:
  • Sinoma Group (601881.CH) dominates in Gansu and Xinjiang.

Equity Rating Explanation

• BUY: Indicates the share price is expected to increase by more than 20% within 12 months.
• SELL: Indicates the share price is expected to decrease by more than 20% within 12 months.
• HOLD: Suggests no clear catalyst and downgraded from BUY pending further signals.

Disclaimer

• This report is not directed at individuals or entities in jurisdictions where distribution would be illegal.
• The report is based on reliable sources but no warranties are given regarding accuracy or completeness.
• It is not an offer or invitation to buy or sell securities.
• Past performance does not guarantee future results.

Disclosure of Interests

• China Galaxy International Securities may have financial interests in the companies mentioned.
• The group may have held or be seeking investment banking mandates from the subject companies.
• Some directors, officers, or employees may have interests in the listed companies.

Analyst Certification

• The analyst certifies that the views expressed accurately reflect their personal opinions.
• No compensation is directly or indirectly related to the specific views in the report.
• The analyst has not traded in the securities covered within 30 days prior to the report's issuance and will not trade within three business days after.
• The analyst does not serve as an officer of any Hong Kong-listed company covered.
• No financial interests are held in the Hong Kong-listed companies.