20170403-中国银河国际证券-China_Cement_Weekly_12页_922kb

China Cement Sector Summary

Core Content

The China cement sector has shown a mixed performance in recent weeks, with cement prices continuing to rise moderately on a national level, but regional variations persist. The overall average cement price increased by 0.49% week on week to RMB324.92/tonne. In certain regions like Jiangxi, Fujian, and Gansu, prices rose by RMB10-30/tonne, while in Guangxi, prices fell due to rainfall. Market demand has also shown regional differences, with the Beijing-Tianjin-Hebei area recovering to 80%-90% of normal levels in late March, whereas demand in northwest and northeast China remains at 60%-70% and 30%, respectively. The national average inventory level slightly increased to 59.25%.

Coal prices, on the other hand, experienced a slight drop, with the Bohai-Rim Steam Coal (Q5500K) index declining by RMB1/tonne to RMB605/tonne, marking the first decline since mid-February. However, the index is still up 55.5% year-on-year.

Main Views

• Regional Price Trends:

  • North China: Cement prices in Hebei province, including cities like Shijiangzhuang, Xingtai, Lingshou, Shenzhen, and Hengshui, rose RMB50/tonne on April 1. Companies in this region, such as BBMG, are benefiting from the strong cement price trend, especially due to the development of the Xiongan New Area.
  • South China: In Guangxi, cement prices dropped RMB30/tonne due to rainy weather. However, the underlying demand is still strong, and share prices may experience volatility in the near term.
  • East China: A second round of price hikes was executed smoothly, with potential for further increases due to rising demand from infrastructure and property development. Anhui Conch is expected to become attractive again if its share price drops below HK$26.

• Stock Performance:

  • Cement stocks under coverage dropped 6.1% in simple average.
  • The stock prices of the covered companies were under pressure, with a 31% average YTD performance increase.
  • CR Cement was the best performer, but it fell 3.1% last week.
  • BBMG was the weakest, declining 8.5%, partly due to disappointing property business guidance for 2017.

Key Information

Valuation Table

Peer Comparison

Conclusion

The cement sector in China shows a diversified performance across regions, with price trends and demand levels varying significantly. While the national average price increased, some regions saw declines due to weather and supply-demand imbalances. Investors should monitor regional performance closely. Anhui Conch is highlighted as a leading player in East China, and BBMG remains a key stock with strong regional exposure in the Beijing-Tianjin-Hebei area. The valuation metrics suggest mixed performance, with some companies showing potential for growth and others under pressure.