20180514-中国银河国际证券-Cement_Price_Trend_Remained_Favourable_in_East_and_South_China__Potential_Decline_in_Rainy_Season_12页_989kb

China Cement Sector Summary

Core Content

The China cement sector has shown favorable price trends in the East and South regions, with an overall national average increase of 0.4% to RMB415/tonne compared to the previous week. The price increases in these regions range from RMB10 to RMB30 per tonne, while no major region recorded a decline. The stability of cement prices is attributed to strong demand and low inventory levels, which are expected to keep prices high until late May. Some companies have planned production suspensions during the non-peak season, which may influence price movements in June.

Main Views

• Price Trends: Cement prices in East and South China have remained strong, while North China may see a moderate increase due to lukewarm end-user demand.
• Potential Decline in June: The summer rainy season is expected to lead to a potential decline in cement prices starting in late May or June.
• Stock Performance: Cement stocks under coverage increased by 2.0% on average last week, with CR Cement being the best performer, rising 2.6% week on week. CNBM was the weakest, falling 0.2%.
• Valuation Metrics: The valuation table shows PER and EV/EBITDA trends for various cement companies, indicating different levels of valuation across the sector for 2017, 2018E, and 2019E.
• Market Share: The market share in terms of clinker capacity is detailed by region and company, highlighting the dominance of certain firms in specific provinces.

Key Information

• Inventory Levels: The average inventory level nationwide remained at 54%, indicating a tight supply situation.
• Coal Prices: Coal prices were largely stable, with the Bohai-Rim Steam Coal (Q5500K) index remaining at RMB572/tonne, down 4.0% year-on-year.
• Equity Ratings: Companies like Conch Cement, CNBM, and CR Cement are rated "BUY," indicating positive outlooks on their share price performance.
• Analyst Notes: The report was authored by Wong Chi Man (Head of Research) and Mark Lau (Research Analyst), with contact details provided.
• Market Share by Region: The market share of cement companies is broken down by region, with certain companies holding significant shares in specific provinces.
• Investment Risks: The report includes disclaimers regarding the reliability of information and potential conflicts of interest due to financial holdings or advisory roles.

Valuation Table Highlights

Market Share by Region

• East China:
  • Anhui: 46.2% clinker capacity
  • CNBM: 25.7%
  • CR Cement: 10.9%
• South Central China:
  • Guangdong: 11.6%
  • CNBM: 10.3%
  • CR Cement: 10.9%
• North China:
  • CNBM: 6.7%
  • CR Cement: 2.0%
• Northeast China:
  • CNBM: 22.3%
  • CR Cement: 0.0%
• Southwest China:
  • CNBM: 25.1%
  • CR Cement: 1.6%
• Northwest China:
  • BBMG: 7.5%
  • CR Cement: 0.0%

Investment Considerations

• The potential decline in June may be limited, which is favorable for major players in the East and South China regions.
• The report includes disclaimers about the investment risks, potential conflicts of interest, and the fact that the information is not a recommendation to buy or sell any securities.

Analyst Certification

The analyst certifies that:

1. All views expressed accurately reflect his or her personal views.
2. No part of his or her compensation is directly or indirectly related to the specific views in the report.
3. The analyst and his/her associates have not dealt in or traded in the securities covered in the report within 30 days prior to its issuance and will not do so within three business days after issuance.
4. The analyst does not serve as an officer of any Hong Kong-listed company covered in the report.
5. The analyst has no financial interests in the Hong Kong-listed companies covered in the report.

Disclaimer

• This report is not directed at any person or entity in a jurisdiction where distribution would be illegal.
• The report is issued by Galaxy International Securities to institutional clients based on reliable information sources.
• No representation or warranty is made regarding the accuracy, correctness, or completeness of the information.
• The report should not be construed as an offer or invitation to buy or sell securities.
• Past performance is not indicative of future performance.