20150921-中国银河国际证券-China_Cement_Weekly_Details_of_Cooperation_between_CR_Cement_and_KISC_Disclosed__Cement_Prices_Maintained_Mild_Uptrend_in_South_and_East_China_12页_923kb

China Cement Sector Summary

Core Content

The document provides an analysis of the China cement sector, focusing on recent price trends, strategic cooperation among companies, and market share distribution. It also includes financial valuations and performance metrics for key cement stocks.

Main Points

Cement Price Trends

• National Cement Price: The average cement price increased by 0.29% week-on-week (WoW) to RMB254.08/tonne last week.
• Regional Performance:
  • Cement prices in parts of Jiangxi, Fujian, and Guangxi rose by RMB10~25/tonne.
  • The Southern region showed better performance due to stronger demand and balanced production and sales by companies in Guangdong, Jiangxi, and Hubei.
  • A price hike is expected to continue in the next month due to improved supply discipline.
  • National average inventory level dropped to 77.07% last week.

Strategic Cooperation

• CR Cement and KISC have reached a strategic cooperation agreement.
  • KISC (Kunming Iron & Steel Holding Co. Ltd.) is a trans-regional SOE involved in steel, resources, new materials, and modern services.
  • CR Cement will contribute RMB1.51bn (~1x net asset after capital injection) in cash to Target Company, a subsidiary of KISC.
  • Upon completion, CR Cement will own 40% of the Target Company, while KISC will own 60%.
  • This cooperation will result in a combined market share of ~22.76% in Yunnan, surpassing CNBM and increasing CR4 in Yunnan from 52% to 58%.
  • CR Cement plans to increase its equity interest in the Target Company in the future.
  • A strategic framework was also reached between CBMA (China Building Material Academy) and CR Cement to deepen innovation in the cement & concrete industry.

Stock Performance

• Cement stocks under coverage increased by 3.11% last week.
• Market sentiment continues to recover after a strong rebound.
• Best Performer: Anhui Conch (914.HK) rose 4.85%.
• Weakest Performer: CNBM (3323.HK) increased 1.04%.

Key Financial Metrics

Company	Ticker	Rating	Price (HK)	Market Cap (US$m)	PER (x)	PBR (x)	EV/EBITDA (x)	Net Debt/Equity (%)
Anhui Conch	914 HK Equity	BUY	24.85	15,737	9.5	1.65	6.1	6
CNBM	3323 HK Equity	BUY	4.86	3,364	3.8	0.53	7.5	239
BBMG	2009 HK Equity	BUY	5.79	5,418	11.2	0.70	8.8	65
CR Cement	1313 HK Equity	BUY	3.82	3,199	5.8	0.89	5.2	51
Shanshui Cement	691 HK Equity	SELL	6.29	2,725	45.9	1.58	10.6	134

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	51.7%	11.4%	1.4%	6.1%	0.0%	0.8%	1.8%	0.0%	2.5%	0.4%	0.0%
South Central China	15.8%	11.0%	10.5%	0.4%	0.4%	5.6%	2.1%	0.0%	2.7%	0.4%	8.9%
North China	2.0%	7.0%	2.0%	6.3%	13.3%	0.0%	0.0%	0.0%	2.0%	18.7%	0.0%
Northeast China	0.0%	22.7%	0.0%	0.0%	0.8%	1.6%	0.0%	0.0%	0.0%	6.1%	0.0%
Southwest China	1.6%	17.1%	3.3%	3.2%	1.8%	2.6%	1.2%	1.0%	5.0%	4.0%	2.5%
Northwest China	0.0%	0.0%	0.0%	0.7%	0.0%	0.0%	0.0%	8.0%	28.8%	6.1%	0.0%

Key Insights

• The cement sector in South and East China is experiencing a mild uptrend in prices, with Southern regions performing better due to strong demand and balanced production-sales.
• CR Cement is expanding its market share in Yunnan through strategic cooperation with KISC, which is expected to surpass CNBM.
• Anhui Conch has shown the best stock performance, while CNBM has been the weakest.
• Market sentiment is recovering, and cement stocks are up.
• Inventory levels are declining, indicating improved supply discipline.

Conclusion

The cement sector in China is showing signs of recovery and growth, with price increases and strategic partnerships playing a significant role. The market share of companies is shifting due to these strategic moves, and stock performance reflects the market sentiment. The document highlights the potential for further growth in the sector, especially for CR Cement and Anhui Conch.