China Cement Weekly Summary - November 9, 2015
Core Content
This report provides an overview of the Chinese cement sector, focusing on price trends, inventory levels, and the financial situation of key companies, particularly Shanshui Cement, which is at risk of defaulting on its debt obligations.
Key Highlights
Cement Price Trends
- National Cement Price: Decreased by 1.2% week-on-week (WoW) to RMB 253.33 per tonne.
- Regional Variations:
- North China: Prices dropped by RMB 10–30/tonne as companies sought to drive cash collection.
- Sichuan and Guizhou: Prices increased by RMB 10–30/tonne.
- National Inventory Level: Rose to 74.24%, indicating a surplus in the market.
Coal Prices
- Bohai-Rim Steam Coal (Q5500K): Comprehensive average price index fell by RMB 1/tonne to RMB 379/tonne.
- Year-on-Year (YoY) Decline: 25.1% lower compared to the previous year.
Shanshui Cement Default Risk
- Debt Due: Shanshui Cement has a RMB 2bn onshore debt due on November 12.
- Uncertainty: The company is uncertain about its ability to repay the debt.
- Potential Support: Tianrui Group is considering supporting Shanshui, but only if it can appoint directors to the board.
- Review Status: Shanshui is still reviewing the proposal.
- Market Impact: A default by Shanshui would be a major concern for the cement sector, as it is a top 10 producer in China.
- Potential Assistance: CNBM is likely to offer support if Tianrui's proposal is rejected.
Cement Stock Performance
- Average Weekly Gain: Cement stocks under coverage increased by 1.0% on average.
- Best Performer: BBMG rose by 7.8% to HK$5.91 per share after clarifying its Q3 results.
- Weakest Performer: CNBM fell by 4.5% last week.
Valuation Table
| Company |
Ticker |
Rating |
Price (HK$) |
Market Cap (US$m) |
PER(x) 2014 |
PER(x) 2015E |
PER(x) 2016E |
PBR(x) 2014 |
PBR(x) 2015E |
PBR(x) 2016E |
EV/EBITDA(x) 2014 |
EV/EBITDA(x) 2015E |
EV/EBITDA(x) 2016E |
Net Debt/Equity (%) |
| Anhui Conch |
914 HK Equity |
HOLD |
24.25 |
15,627 |
9.2 |
16.5 |
16.2 |
1.61 |
1.51 |
1.42 |
6.0 |
8.6 |
8.0 |
9 |
| ONBM |
3323 HK Equity |
HOLD |
4.63 |
3,205 |
3.6 |
12.5 |
6.3 |
0.51 |
0.50 |
0.46 |
7.5 |
9.6 |
8.8 |
249 |
| BBMG |
2009 HK Equity |
BUY |
5.91 |
5,998 |
11.5 |
11.9 |
8.3 |
0.72 |
0.71 |
0.67 |
8.9 |
9.0 |
7.2 |
65 |
| CR Cement |
1313 HK Equity |
BUY |
3.09 |
2,588 |
4.7 |
8.1 |
8.4 |
0.72 |
0.70 |
0.65 |
4.6 |
7.3 |
6.3 |
56 |
| Shanshui Cement |
691 HK Equity |
SELL |
6.29 |
2,725 |
45.9 |
42.2 |
34.7 |
1.58 |
1.52 |
1.47 |
10.6 |
10.3 |
9.4 |
134 |
| Simple Average |
|
|
|
|
15.0 |
18.2 |
14.8 |
1.03 |
0.99 |
0.93 |
7.5 |
9.0 |
7.9 |
103 |
| Weighted Average |
|
|
|
|
12.0 |
16.8 |
14.6 |
1.24 |
1.18 |
1.11 |
7.0 |
8.9 |
7.9 |
61 |
Peer Comparison
| Company |
Ticker |
Market Cap (US$m) |
PER(x) 2014 |
PER(x) 2015E |
PER(x) 2016E |
PBR(x) 2014 |
PBR(x) 2015E |
PBR(x) 2016E |
EV/EBITDA(x) 2014 |
EV/EBITDA(x) 2015E |
EV/EBITDA(x) 2016E |
| Anhui Conch |
914 HK Equity |
15,627 |
9.2 |
16.5 |
16.2 |
1.61 |
1.51 |
1.42 |
6.0 |
8.6 |
8.0 |
| CNBM |
3323 HK Equity |
3,205 |
3.6 |
12.5 |
6.3 |
0.51 |
0.50 |
0.46 |
7.5 |
9.6 |
8.8 |
| BBMG |
2009 HK Equity |
5,998 |
11.5 |
11.9 |
8.3 |
0.72 |
0.71 |
0.67 |
8.9 |
9.0 |
7.2 |
| CR Cement |
1313 HK Equity |
2,588 |
4.7 |
8.1 |
8.4 |
0.72 |
0.70 |
0.65 |
4.6 |
7.3 |
6.3 |
| Shanshui Cement |
691 HK Equity |
2,725 |
45.9 |
42.2 |
34.7 |
1.58 |
1.52 |
1.47 |
10.6 |
10.3 |
9.4 |
| TCC International |
1136 HK Equity |
976 |
5.2 |
15.0 |
9.4 |
0.43 |
0.35 |
0.34 |
4.1 |
9.6 |
|
| China National Materials |
1893 HK Equity |
888 |
9.8 |
9.9 |
9.2 |
0.38 |
0.40 |
0.37 |
6.4 |
7.6 |
|
| Asia Cement |
743 HK Equity |
458 |
3.7 |
47.9 |
11.7 |
0.31 |
0.31 |
0.30 |
4.2 |
9.7 |
|
| West China Cement |
2233 HK Equity |
1,022 |
150.3 |
41.5 |
13.7 |
1.06 |
0.97 |
0.95 |
7.7 |
8.4 |
|
| Tianrui Cement |
1252 HK Equity |
613 |
8.2 |
n.a. |
n.a. |
0.55 |
n.a. |
n.a. |
7.0 |
n.a. |
|
| Simple Average |
|
|
25.2 |
22.8 |
13.1 |
0.79 |
0.77 |
0.74 |
6.7 |
8.9 |
|
| Weighted Average |
|
|
15.7 |
17.4 |
14.0 |
1.16 |
1.09 |
1.03 |
6.9 |
8.7 |
|
Regional Cement Price Breakdown (2014)
| Region |
Anhui Conch |
CNBM |
CR Cement |
Shanshui |
BBMG |
TCCI |
Asia Cement |
WCC |
Sinoma Group |
Jidong |
Huaxin |
| East China |
16.6% |
25.7% |
1.4% |
6.1% |
0.0% |
0.8% |
1.2% |
0.0% |
2.0% |
1.8% |
0.0% |
| South Central China |
11.6% |
11.0% |
3.3% |
3.2% |
1.0% |
2.6% |
1.0% |
0.0% |
0.0% |
4.0% |
2.5% |
| North China |
0.0% |
5.3% |
7.9% |
25.3% |
9.3% |
3.4% |
0.0% |
0.0% |
2.0% |
18.7% |
0.0% |
| Northeast China |
0.0% |
22.7% |
0.0% |
9.7% |
2.5% |
1.6% |
0.0% |
0.0% |
0.0% |
6.1% |
0.0% |
| Southwest China |
7.8% |
27.2% |
0.0% |
0.7% |
0.0% |
0.0% |
0.0% |
8.0% |
0.0% |
6.1% |
0.0% |
| Northwest China |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
28.8% |
0.0% |
0.0% |
| Grand Total |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
Market Share in Terms of Clinker Capacity (2014)
| Region |
Anhui Conch |
CNBM |
CR Cement |
Shanshui |
BBMG |
TCCI |
Asia Cement |
WCC |
Sinoma Group |
Jidong |
Huaxin |
| East China |
16.6% |
25.7% |
3.3% |
6.1% |
0.0% |
0.8% |
1.2% |
0.0% |
2.0% |
1.8% |
0.0% |
| South Central China |
11.6% |
11.0% |
10.5% |
3.2% |
1.0% |
2.6% |
1.2% |
0.0% |
0.0% |
4.0% |
2.5% |
| North China |
0.0% |
5.3% |
7.9% |
25.3% |
9.3% |
3.4% |
0.0% |
0.0% |
2.0% |
18.7% |
0.0% |
| Northeast China |
0.0% |
22.7% |
0.0% |
9.7% |
2.5% |
1.6% |
0.0% |
0.0% |
0.0% |
6.1% |
0.0% |
| Southwest China |
7.8% |
27.2% |
0.0% |
0.7% |
0.0% |
0.0% |
0.0% |
8.0% |
0.0% |
6.1% |
0.0% |
| Northwest China |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
28.8% |
0.0% |
0.0% |
| Grand Total |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
Summary of Key Information
- Cement Prices: National prices fell 1.2%, with North China seeing a drop of RMB 10–30/tonne, while Sichuan and Guizhou saw increases.
- Inventory Levels: National inventory level climbed to 74.24%, signaling a potential oversupply.
- Coal Prices: Continued a slight decline, with the Bohai-Rim Steam Coal index down RMB 1/tonne or 25.1% YoY.
- Shanshui Cement: Faces a RMB 2bn debt due on November 12; Tianrui Group may support the company if it can appoint directors.
- CNBM: Likely to step in if Shanshui fails to fulfill the repayment, given its significant stake in the company.
- Stock Performance: Cement stocks showed mixed results, with BBMG performing best and CNBM worst.
- Valuation Metrics: Multiple valuation indicators show varying performance and expectations for the sector in 2015 and 2016.
Disclaimer
- This report is issued by China Galaxy International Securities (Hong Kong) Co., Limited.
- It is not directed at any person or entity in jurisdictions where it would be illegal to distribute or use.
- No guarantees are made regarding the accuracy or completeness of the data.
- Investment decisions should be made with caution and, where necessary, with the help of independent financial advisers.
