20180507-中国银河国际证券-China_Cement_Weekly__Cement_Price_Trend_Remained_Strong_in_East_China__Sector_Profit_Jumped_1.9x_in_Q1__12页_1mb

China Cement Weekly Summary - May 7, 2018

Core Content Overview

The document presents a detailed analysis of the China cement sector as of May 7, 2018, focusing on price trends, profit performance, and stock market dynamics. It also includes valuation data and market share information for key cement companies and regions.

Cement Price Trends

• National Average Cement Price: Increased by 0.16% to RMB 414/tonne compared to the previous week.
• East China: Demonstrated the strongest price trend, with an increase of RMB 20-30/tonne.
• Hebei, Henan, and Chongqing: Experiencing price declines of RMB 20-40/tonne.
• Reasons for East China Price Increase:
  1. Strong downstream demand, driven by pent-up demand during the NPC meeting in March.
  2. Low cement and clinker inventory levels.
  3. Supply restrictions in Anhui and Jiangsu due to environmental protection measures.
• National Cement Inventory Level: Dropped slightly to 54%.

Sector Profit and Outlook

• Q1 2018 Profit: Reached RMB 19 billion, a 192% increase YoY, setting a historical high for the quarter.
• Previous Record: Q1 2011 with RMB 14.2 billion.
• Q2 2017 Profit: RMB 26.8 billion.
• Profit Growth Expectation: Strong profit growth is expected in Q2 2018, unless rainfall is much heavier than usual.

Stock Performance and Valuation

• Cement Stocks Under Coverage: Average decline of 1.9% last week.
• Best Performer: CNBM (3323.HK) increased by 0.1%.
• Weakest Performer: BBMG (2009.HK) fell by 3.1%.
• Valuation Table Highlights:
  • Conch Cement (914 HK Equity): Rating BUY, price HK$46.60, market cap US$29,769 million.
  • CNBM (3323 HK Equity): Rating BUY, price HK$8.88, market cap US$7,273 million.
  • BBMG (2009 HK Equity): Rating BUY, price HK$3.48, market cap US$6,613 million.
  • CR Cement (1313 HK Equity): Rating BUY, price HK$7.96, market cap US$6,667 million.
  • Simple Average: PER 13.3x, EV/EBITDA 9.4x, Net debt/equity 94%.
  • Weighted Average: PER 13.8x, EV/EBITDA 8.8x, Net debt/equity 39%.
• EPS Growth and ROE:
  • Conch Cement: EPS growth 54.0% (2018E), 87.4% (2019E), ROE 22.94% (2018E).
  • CNBM: EPS growth 69.3% (2018E), 87.4% (2019E), ROE 12.10% (2018E).
  • BBMG: EPS growth 44.2% (2018E), 87.4% (2019E), ROE 6.93% (2018E).
  • CR Cement: EPS growth 87.4% (2018E), 87.4% (2019E), ROE 20.70% (2018E).
  • Simple Average: EPS growth 63.7%, ROE 10.83%, Dividend yield 4.2%.
  • Weighted Average: EPS growth 59.3%, ROE 13.86%, Dividend yield 4.5%.

Peer Comparison

Regional Cement Price Breakdown (Early May)

• East China: Strongest price increase, driven by demand, low inventory, and supply constraints.
• Hebei, Henan, Chongqing: Experiencing price declines.
• Clinker Production Restrictions: Occurred in Anhui and Jiangsu in April and May due to environmental measures.

Market Share in Clinker Capacity (2017)

• East China:
  • Anhui Conch: 46.2%.
  • CNBM: 41.3%.
  • CR Cement: 10.6%.
  • BBMG: 0.5%.
• South Central China:
  • CNBM: 25.7%.
  • CR Cement: 74.1%.
• North China:
  • CNBM: 6.7%.
  • BBMG: 30.4%.
• Northeast China:
  • CNBM: 22.3%.
• Southwest China:
  • CNBM: 25.1%.
• Northwest China:
  • CNBM: 0.0%.
  • BBMG: 6.0%.

Equity Ratings Explanation

• BUY: Indicates that the share price is expected to increase by more than 20% within 12 months.
• SELL: Indicates that the share price is expected to decrease by more than 20% within 12 months.
• HOLD: Indicates no clear catalyst for price movement and may be downgraded if no improvement is seen.

Disclaimer and Disclosure

• The report is not for distribution in jurisdictions where it would be illegal.
• Information is sourced from reliable entities, but no guarantees are made regarding its accuracy or completeness.
• The report is not an offer or solicitation to buy or sell securities.
• China Galaxy International may have financial interests in the companies discussed, and directors may be involved with them.
• The analyst certifies that the views expressed are personal and not necessarily aligned with China Galaxy International's views.

Analyst Certification

• The analyst certifies that:
  1. All views accurately reflect their personal opinions.
  2. No compensation is directly or indirectly tied to the views expressed.
• The analyst did not trade in the securities covered within 30 days prior to the report.
• They will not trade in the securities three business days after the report is issued.
• They do not serve as an officer of any Hong Kong-listed company covered.
• They have no financial interest in any Hong Kong-listed company covered.

Conclusion

The China cement sector experienced a strong price trend in East China, leading to a significant increase in sector profit. CNBM and BBMG were key performers in terms of price movement and rating. The valuation table and peer comparison provide insights into market expectations, earnings growth, and dividend yields. The market share analysis shows CNBM's dominance in several regions. The analyst's certification and disclaimer emphasize the independent nature of the report and the potential conflicts of interest.