20170220-中国银河国际证券-Gradual_Pick-up_in_Cement_Demand_Post-CNY__Environmental_Inspections_Unlikely_to_Affect_Operations_of_BBMG_12页_1mb

China Cement Sector Summary

Core Content

The document provides an analysis of the Chinese cement sector, focusing on recent market trends, regional demand dynamics, and company-specific performance metrics. It also includes information on environmental inspections and their potential impact on operations, as well as valuation and performance comparisons among major cement companies.

Key Market Trends

• Cement Demand: Cement demand began to gradually increase after the Chinese New Year (CNY) holiday, particularly in regions like Hunan and Hubei, where prices rose by RMB10-20/tonne.
• Cement Prices: The nationwide average cement price declined by 0.21% week on week to RMB311.92/tonne. However, regional variations were observed, with some areas experiencing price increases.
• Clinker Prices: Clinker prices along the Yangtze River increased by RMB20/tonne.
• Shipment Volumes: National daily shipment volume of lower-grade bagged cement reached 50%-80% of the normal level, while bulk cement shipments recovered to only 30%-40% due to limited major project resumption.
• Inventory Levels: The average national cement inventory level climbed slightly to 60.94%.

Coal Prices

• Coal Prices: The comprehensive average price index for Bohai-Rim Steam Coal (Q5500K) decreased by RMB1/tonne to RMB587/tonne last week.
• Year-on-Year Increase: Despite the weekly decline, coal prices are still up 54% YoY.

Environmental Inspections

• Impact on BBMG: Environmental inspections conducted from Feb 15 to Mar 13 are expected to have limited impact on BBMG's operations.
• Reasons for Limited Impact:
  • It is still winter in northern China, resulting in low cement production.
  • Cement production is largely suspended or cut back during the National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC) meetings in late February and early March.

Stock Performance

• Sector Performance: Cement stocks experienced a decline of 2.1% on average last week, following a rally of nearly 30% year to date (YTD).
• Individual Performance:
  • CNBM [3323.HK]: The weakest performer, down 4.9% after a 40% YTD rally.
  • BBMG [2009.HK]: The best performer, down only 0.6%.
• Ratings:
  • BBMG: BUY
  • CNBM: SELL
  • Anhui Conch: HOLD
  • CR Cement: BUY

Valuation Table

EPS Growth and PEG Table

Peer Comparison

Regional Cement Price and Inventory Breakdown

• Cement Price Trends: Regional cement price variations are detailed in Figures 1 to 4, showing a gradual recovery in demand after the Lantern Festival, particularly in Hunan and Hubei.
• Inventory Level: The national cement inventory level reached 60.94%, indicating a moderate build-up in stock levels.
• Clinker Capacity Breakdown: The clinker capacity distribution across different regions is outlined in the table, highlighting the dominance of certain companies in key regions.
• Market Share in Clinker Capacity (2015): Anhui Conch, CNBM, and CR Cement hold significant market shares in various regions, with Anhui Conch being the market leader in East China.

Disclaimer and Interests Disclosure

• Disclaimer: The report is not intended for distribution in jurisdictions where it would be illegal or violate regulations. It is issued to institutional clients and is not an offer to buy or sell securities.
• Disclosure of Interests: China Galaxy International may have financial interests in the companies mentioned, including direct or indirect holdings, compensation from investment banking services, and involvement in financing transactions.

Analyst Certification

• The analyst certifies that the views expressed in the report reflect their personal opinions and that their compensation is not directly or indirectly related to the specific views in the report.