20180820-中国银河国际证券-China_Cement_Weekly__Cement_Prices_Began_to_Rebound_in_Some_Regions__Strong_Production_Volume_in_South_China_in_July_12页_8mb

China Cement Sector Summary

Core Content

The document provides an analysis of the China cement sector, focusing on price trends, production volumes, inventory levels, and stock performance in the Hong Kong market. It also includes a valuation table, peer comparison, and market share data based on clinker capacity.

Key Market Trends

• Cement Prices:

  • The national average cement price increased by 0.85% week-on-week to RMB400/tonne.
  • Prices rose by RMB20–50/tonne in Anhui, Jiangxi, Hubei, Henan, and the north part of Jiangsu.
  • Prices fell by RMB10–20/tonne in Harbin and Kunming.
  • Despite unfavorable weather in mid-August, some regions saw price rebounds due to low inventory levels and good production coordination.
  • Cement demand is expected to recover during the upcoming peak season, leading to steady price increases.
  • Low-priced imports from north China may pressure prices in coastal regions, but not the overall price trend.

• Inventory Levels:

  • The national average inventory level decreased slightly from 58.9% to 58.6% week-on-week.
  • Cement stocks under coverage dropped by 7.4% on average last week.

Production Volumes

• July 2017 Production:
  • National production: 196 million tonnes, up 1.61% YoY.
  • East China: 4.6% growth.
  • South Central China: 6% growth.
  • Guangdong: 9% growth.
  • Guangxi: 12.5% growth.
  • Southwest China: 5.7% growth.
  • Northeast and Northwest China: weak production, with declines of 10.8% and 13.9%, respectively.

Stock Performance

• Share Price Changes:

  • CR Cement (1313.HK): -5.9% week-on-week.
  • CNBM (3323.HK): -9.4% week-on-week.
  • Other stocks in the coverage range showed mixed performance.

• Valuation Table:

  • PER (Price to Earnings Ratio):
    • 2017: 12.4–13.4.
    • 2018E: 7.2–8.0.
    • 2019E: 7.0–7.9.
  • EV/EBITDA:
    • 2017: 9.4–10.9.
    • 2018E: 5.9–8.7.
    • 2019E: 6.5–9.6.
  • Net Debt/Equity (%):
    • 2018E: 33–95%.

Peer Comparison

• Market Cap (US$m):

  • Conch Cement (914 HK Equity): 28,141.
  • CNBM (3323 HK Equity): 6,159.
  • CR Cement (1313 HK Equity): 7,663.
  • BBMG (2009 HK Equity): 5,035.
  • Simple Average: 14,831.
  • Weighted Average: 13,420.

• PER (x):

  • Simple Average: 11.3–13.2.
  • Weighted Average: 13.2–13.4.

• EV/EBITDA (x):

  • Simple Average: 8.4–9.4.
  • Weighted Average: 8.6–8.7.

Market Share by Region (2017)

• East China:

  • Anhui Conch: 46.2%.
  • CNBM: 35.1%.
  • CR Cement: 10.6%.
  • Shanshui: 24.4%.
  • BBMG: 2.2%.
  • Asia Cement: 32.9%.
  • WCC: 0.0%.
  • Huaxin-Lafarge: 0.0%.
  • Grand Total: 100.0%.

• South Central China:

  • Anhui Conch: 11.6%.
  • CNBM: 12.9%.
  • CR Cement: 10.9%.
  • Shanshui: 0.3%.
  • BBMG: 0.7%.
  • Asia Cement: 1.2%.
  • WCC: 0.0%.
  • Huaxin-Lafarge: 7.8%.
  • Grand Total: 100.0%.

• North China:

  • Anhui Conch: 0.0%.
  • CNBM: 8.7%.
  • CR Cement: 2.0%.
  • Shanshui: 5.9%.
  • BBMG: 30.7%.
  • Asia Cement: 0.0%.
  • WCC: 0.0%.
  • Huaxin-Lafarge: 0.0%.
  • Grand Total: 100.0%.

• Northeast China:

  • Anhui Conch: 0.0%.
  • CNBM: 22.3%.
  • CR Cement: 0.0%.
  • Shanshui: 9.4%.
  • BBMG: 6.7%.
  • Asia Cement: 0.0%.
  • WCC: 0.0%.
  • Huaxin-Lafarge: 0.0%.
  • Grand Total: 100.0%.

• Northwest China:

  • Anhui Conch: 7.5%.
  • CNBM: 26.6%.
  • CR Cement: 3.6%.
  • Shanshui: 2.8%.
  • BBMG: 5.5%.
  • Asia Cement: 1.2%.
  • WCC: 1.0%.
  • Huaxin-Lafarge: 2.8%.
  • Grand Total: 100.0%.

Analyst Information

• Wong Chi Man: Head of Research, contact: (852) 3698-6317, email: cmwong@chinastock.com.hk.
• Mark Lau: Research Analyst, contact: (852) 3698-6393, email: marklau@chinastock.com.hk.

Equity Ratings

• BUY: Indicates that the share price is expected to increase by >20% within 12 months.
• SELL: Indicates that the share price is expected to decrease by >20% within 12 months.
• HOLD: No clear catalyst, and downgraded from BUY pending clearer signals.

Disclaimer and Disclosure

• The report is issued by China Galaxy International Securities (Hong Kong) Co., Limited.
• It is not directed at individuals or entities in jurisdictions where distribution would be illegal.
• No warranties are made regarding the accuracy or completeness of the report.
• Financial interests may exist in the subjected companies, and conflicts of interest are disclosed.
• The analyst confirms that they do not hold positions in the covered companies and that their compensation is not tied to the views expressed in the report.

Summary

The China cement sector shows mixed price trends with rebound in some regions due to low inventory levels and production coordination, despite unfavorable weather. Production volume in east and south China increased significantly in July, with Guangdong and Guangxi leading the growth. Inventory levels have slightly declined nationally. The stock performance of cement companies in Hong Kong is diverse, with CR Cement and CNBM showing declines. Valuation metrics such as PER and EV/EBITDA indicate lower valuations for 2018E compared to 2017. Market share analysis by clinker capacity highlights the dominance of certain companies in different regions. The analyst has provided ratings and certifications to ensure independence and objectivity.