20180917-中国银河国际证券-China_Cement_Weekly__Cement_Production_Volume_Grew_5__in_August__Cement_Prices_Remained_Solid_amid_Market_Concerns_12页_8mb

China Cement Weekly Summary - September 17, 2018

Core Content

The document provides an overview of the Chinese cement sector, focusing on production, pricing, market performance, and valuation metrics for several cement companies. It also includes regional breakdowns of cement production capacity and market share, as well as a disclaimer and disclosure of interests.

Key Information

Cement Production and Pricing

• Cement Production Volume: In August 2018, China's cement production reached 200 million tonnes, representing a 5% year-on-year increase. This is an improvement from the 0.3% decline in the first seven months of 2018.
• Cement Prices: The average cement price nationwide increased by 0.9% to RMB 411/tonne from the previous week. Regional price increases ranged from RMB 10-50/tonne in Shanxi, Shandong, Guizhou, northern Jiangsu, northern Anhui, and the central part of Liaoning.
• Demand and Shipment: Cement demand continued to rise steadily in mid-September, with shipment volume recovering to 80-90% of the normal level.
• Inventory Levels: The average inventory level nationwide decreased from 56.3% to 54.6% week-on-week, indicating a tightening market.

Coal Prices

• Coal Prices: The Bohai-Rim Steam Coal (Q5500K) price increased by 0.18% to RMB 569/tonne last week, but declined 2.4% year-on-year.

Stock Performance

• Cement Stocks Under Coverage: Cement stocks under coverage saw an average 6.9% drop last week, attributed to a rumor about an NDRC investigation into cement prices.
• Best and Worst Performers:
  • CR Cement [1313.HK]: Recorded a 5% loss in share price.
  • CNBM [3323.HK]: Recorded the largest drop of 9.1% week-on-week.

Valuation Table Highlights

Company	Ticker	Rating	Price (HK$)	Market Cap (US$m)	PER (2017)	PER (2018E)	PER (2019E)	EV/EBITDA (2017)	EV/EBITDA (2018E)	EV/EBITDA (2019E)	Net Debt Equity (%)
Conch Cement	914 HK Equity	BUY	43.00	26,517	13.3	7.1	6.8	7.8	4.4	4.3	7.8
ONBM	3323 HK Equity	BUY	6.51	7,040	8.7	4.6	4.5	11.0	6.3	6.0	-
BBMG	2009 HK Equity	BUY	2.54	5,207	8.1	5.7	5.3	10.4	7.7	7.5	82
CR Cement	1313 HK Equity	BUY	8.72	7,807	16.0	7.3	7.1	10.0	5.1	5.2	3
Simple Average	-	-	-	-	10.5	5.9	5.6	9.8	5.9	5.7	27
Weighted Average	-	-	-	-	12.3	6.2	6.0	9.0	5.2	5.0	28

EPS Growth and PEG

• EPS Growth:
  • Conch Cement: 93.5% (2018E), 3.8% (2019E)
  • CNBM: 92.4% (2018E), 2.7% (2019E)
  • CR Cement: 119.8% (2018E), 3.0% (2019E)
  • BBMG: 44.7% (2018E), 8.5% (2019E)
• CAGR:
  • Conch Cement: 41.7%
  • CNBM: 40.6%
  • CR Cement: 50.5%
  • BBMG: 25.3%
• PEG (Price/Earnings Growth):
  • Conch Cement: 0.2
  • CNBM: 0.1
  • CR Cement: 0.1
  • BBMG: 0.3
• ROE:
  • Conch Cement: 17.49% (2017), 23.84% (2018E), 20.48% (2019E)
  • CNBM: 7.86% (2017), 14.65% (2018E), 13.12% (2019E)
• Dividend Yield:
  • Conch Cement: 3.3% (2017), 6.4% (2018E), 7.3% (2019E)
  • CNBM: 1.8% (2017), 3.9% (2018E), 4.4% (2019E)
  • CR Cement: 3.1% (2017), 6.8% (2018E), 7.1% (2019E)
  • BBMG: 2.6% (2017), 3.9% (2018E), 3.9% (2019E)

Regional Cement Price Analysis

• Figure 1: Regional cement price trends are displayed, with the central part of Liaoning and northern Anhui showing the highest price increases.
• Figure 2-5: These figures show cement prices in major cities across different regions, highlighting the seasonal peak in demand and price increases.
• Figure 6: Cement prices in mid-September are shown, indicating continued price strength.
• Figure 7: Cement inventory levels are presented, showing a decline to 54.6% week-on-week.
• Figure 8: Regional cement price changes are detailed, with the central part of Liaoning and Shandong seeing notable increases.

Regional Clinker Capacity and Market Share (2017)

East China

• Anhui: 38.4% of capacity, 57.5% market share
• Fujian: 0.4%, 3.0%
• Jiangsu: 6.1%, 35.3%
• Jiangxi: 4.4%, 27.4%
• Shandong: 9.2%, 30.2%
• Zhejiang: 55.7%, 20.0%
• Shanghai: 0.0%, 0.0%
• Total: 46.2%, 26.8%

South Central China

• Guangdong: 7.3%, 14.4%
• Guangxi: 1.7%, 21.5%
• Hainan: 0.0%, 0.0%
• Hunan: 6.9%, 25.4%
• Hubei: 0.0%, 0.0%
• Henan: 1.5%, 17.0%
• Total: 15.4%, 11.6%

North China

• Hebei: 0.9%, 3.3%
• Shanxi: 0.6%, 3.5%
• Inner Mongolia: 3.9%, 22.7%
• Total: 5.4%, 8.7%

Northeast China

• Heilongjiang: 3.5%, 61.2%
• Jilin: 1.7%, 24.6%
• Liaoning: 0.7%, 4.8%
• Total: 5.9%, 22.3%

Southwest China

• Chongqing: 9.0%, 11.7%
• Sichuan: 8.7%, 7.8%
• Guizhou: 7.4%, 20.4%
• Yunnan: 4.5%, 8.4%
• Tibet: 0.0%, 0.0%
• Total: 15.3%, 11.7%

Northwest China

• Gansu: 5.1%, 14.2%
• Shaanxi: 0.4%, 16.3%
• Qinghai: 0.8%, 14.2%
• Ningxia: 2.2%, 41.9%
• Xinjiang: 6.8%, 31.7%
• Total: 15.3%, 7.5%

Analyst Certification

• The analyst certifies that the views expressed in the report accurately reflect their personal views.
• No part of the analyst's compensation is related to the specific views in the report.
• The analyst and their associates have not traded in the securities covered in the report within 30 days prior to its release and will not do so for three business days after release.

Disclaimer and Disclosure

• The report is not intended for distribution in jurisdictions where it would be illegal.
• The information is believed to be reliable but not guaranteed.
• China Galaxy International Securities may have financial interests in the companies discussed.
• The report does not constitute an offer or invitation to buy or sell securities.
• The report is subject to change and should be read in conjunction with the disclaimer.

Conclusion

The cement sector in China showed moderate growth in production and solid price increases, with strong demand in mid-September. The market sentiment was influenced by rumors of price investigations, leading to declines in stock prices. The valuation metrics indicated varying performance across companies, with CR Cement and CNBM showing the most significant share price drops. Regional price trends highlighted the central part of Liaoning and Shandong as key areas with price increases. The market share and capacity data provided a regional breakdown, with Anhui Conch and Shanshui leading in East China, and CNBM and CR Cement in South Central China.