20151102-中国银河国际证券-China_Cement_Weekly_12页_1mb

China Cement Sector Summary

Core Content

The China cement sector experienced a decline in profit during the first nine months of 2015, but there was a slight improvement in September compared to August. Cement prices showed a mild recovery, particularly in the eastern and southern regions of China, though the pace slowed after late October. Inventory levels remained high, indicating weak demand, especially in the northern regions. Coal prices also continued to decline, which is a key input cost for cement production.

Main Points

• Cement Prices:

  • Nationwide cement prices increased by 0.25% week-on-week to RMB258.35 per tonne.
  • Prices rose in parts of Hangzhou, Zunyi, and Shangrao by RMB10~30 per tonne.
  • The recovery in prices continued in eastern and southern China, but at a slower pace since late October.
  • Downstream demand in northern China shrank due to seasonality.

• Profit Decline:

  • The cement industry's profit dropped 60% YoY in September, improving from an 83% drop in August.
  • For the first nine months of 2015, the industry's realized profit was RMB18.4bn, down 65% YoY.
  • East China remained the most profitable region with a profit of RMB10.7bn, but still a 51% YoY decline.
  • South China had a 44% YoY profit drop.
  • Northeast China returned to profitability with RMB150m profit, while North China reported losses of RMB3.1bn.
  • Provinces like Shanxi and Hebei were the worst performers, with losses of RMB1.48bn and RMB1.08bn respectively.
  • Henan, Guangxi, Shandong, Jiangxi, and Anhui had relatively better performance, with profits no less than RMB2bn.

• Stock Performance:

  • Cement stocks under coverage fell by an average of 5.7% last week.
  • CNBM [3323.HK] was the best performer, down 1.4% to HK$4.85/share.
  • CR Cement [1313.HK] and BBMG [2009.HK] were the weakest, both falling by 9.3%.
  • The overall outlook for Q4 is moderate improvement, as current prices have reached the cost level of many market players, reducing the incentive for further price cuts.

Key Information

• Valuation Table:

  • The table provides PER and EV/EBITDA multiples for various cement companies, along with their market cap and stock prices.
  • Anhui Conch, CNBM, BBMG, CR Cement, and Shanshui Cement are listed with their respective financial metrics.
  • The simple and weighted average PER and EV/EBITDA are also provided for comparison.

• Peer Comparison:

  • This table includes market cap, PER, PBR, and EV/EBITDA data for several cement companies.
  • It provides insights into the relative performance and valuation of different companies in the sector.

• Regional Cement Price Trends:

  • Multiple figures (Figures 1 to 5) illustrate cement price trends in major cities across China, highlighting regional variations and changes over time.

• Clinker Capacity Breakdown:

  • The table shows the distribution of clinker capacity among different regions and companies.
  • Anhui Conch and CNBM have significant exposure in the eastern region, while CR Cement and BBMG have substantial shares in the southern and central regions.

• Market Share in Terms of Clinker Capacity (2014):

  • This table details the market share of each company in various regions.
  • Anhui Conch and CNBM dominate the eastern region, while CR Cement and BBMG have significant shares in the southern and central regions.

Outlook

• The overall outlook for the cement sector is moderate improvement in Q4, as prices have reached a level that covers many market players' costs, reducing the pressure for further price reductions.
• Continued monitoring of regional demand and inventory levels is necessary for a more accurate assessment of the sector's performance.

Disclaimer

• This report is not directed at, or intended for distribution to, any person or entity who is a citizen or resident of, or located in, any jurisdiction where such distribution, publication, availability, or use would be contrary to applicable law or regulation.
• The report is issued by Galaxy International Securities, based on reliable information sources, but no representation or warranty is made regarding the accuracy, correctness, or completeness of the information.
• The report is not an offer, invitation, or solicitation to buy or sell any securities.
• Past performance is not indicative of future results, and no representation or warranty is made regarding future performance.
• Recipients should understand the investment objectives and related risks and consult independent financial advisers if necessary.

Disclosure of Interests

• China Galaxy Securities (6881.HK) is the direct and/or indirect holding company of the group of companies under China Galaxy International.