China Cement Sector Summary
Core Content
The China cement sector has shown positive trends in both price and profitability, with continued demand recovery post-National Holiday and a tightening supply environment. The report also includes a detailed analysis of company valuations, stock performance, and regional market share.
Cement Price Trends
- The average cement price nationwide increased by 0.5% to RMB 416/tonne from the previous week.
- Regional price movements were mixed:
- Price increases of RMB 10–30/tonne were observed in Tianjin, Shanxi, Jiangsu, Shandong, Anhui, Guangxi, and Hunan.
- Price decreases of RMB 20/tonne were reported in some regions of Guizhou (Guiyang and Zunyi).
- Inventory levels fell significantly to 50.8% week on week, indicating a tightening supply.
- Off-peak production plans were released in Northern China in October, with most to be implemented in November, expected to support moderate price increases in the coming months.
- Coal prices increased slightly, with the Bohai-Rim Steam Coal (Q5500K) index rising to RMB 570/tonne, but year-on-year it decreased by 2.6%.
Profit Alerts
- Multiple cement companies released positive profit alerts for Q3 2018, indicating strong earnings momentum.
- Examples include:
- Jiangxi Wannianqing (000789.CH): Expected Q3 2018 net profit to surge 116%–164% YoY.
- Sichuan Shuangma (000935.CH): Projected Q3 2018 net profit increase of 346%–392% YoY.
- Gansu Shangfeng (000672.CH): Anticipated Q3 2018 net profit growth of 107%–122% YoY.
- Jidong Cement (000401.CH): Expected Q3 2018 net profit growth of 8%–16.7% on a pro-forma basis.
Stock Performance
- Cement stocks under coverage fell on average by 5.16% last week, with a mixed sector performance due to a volatile market.
- Best performer: Conch Cement [0914.HK; BUY], with a 0.22% drop.
- Weakest performer: BBMG [2009.HK; BUY], with an 8.30% decline week on week.
Valuation Table
| 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 |
44.85 |
27,988 |
13.9 |
7.8 |
7.5 |
8.2 |
4.9 |
4.7 |
8.2 |
| ONBM |
3323 HK Equity |
BUY |
6.15 |
6,650 |
8.2 |
5.0 |
4.8 |
11.1 |
6.3 |
6.0 |
123 |
| BBMIG |
2009 HK Equity |
BUY |
2.32 |
4,640 |
7.4 |
6.0 |
5.6 |
10.2 |
7.6 |
7.3 |
82 |
| CR Cement |
1313 HK Equity |
BUY |
8.32 |
7,448 |
15.2 |
7.6 |
7.4 |
9.7 |
5.3 |
5.4 |
3 |
| Simple Average |
|
|
|
|
11.2 |
6.6 |
6.3 |
1.31 |
1.17 |
1.04 |
9.9 |
| Weighted Average |
|
|
|
|
12.7 |
7.2 |
6.9 |
1.79 |
1.57 |
1.38 |
26 |
EPS Growth and PEG
| Company |
Ticker |
EPS Growth 2018E (%) |
EPS Growth 2019E (%) |
CAGR (%) |
PEG (2018E) |
PEG (2019E) |
ROE (%) |
Dividend Yield (%) |
| Conch Cement |
914 HK Equity |
93.5 |
3.8 |
41.7 |
0.2 |
17.49 |
28.01 |
3.2 |
| CNBM |
3323 HK Equity |
92.4 |
2.7 |
40.6 |
0.1 |
7.86 |
14.65 |
1.9 |
| CR Cement |
1313 HK Equity |
119.8 |
3.0 |
50.5 |
0.1 |
12.67 |
23.84 |
3.2 |
| BBMG |
2009 HK Equity |
44.7 |
8.5 |
25.3 |
0.3 |
5.97 |
7.61 |
2.9 |
| Simple Average |
|
87.6 |
4.5 |
39.5 |
0.2 |
11.00 |
18.53 |
2.8 |
| Weighted Average |
|
92.7 |
4.0 |
41.3 |
0.2 |
14.21 |
23.42 |
3.0 |
Peer Comparison
| Company |
Market Cap (US$m) |
PER (2017) |
PER (2018E) |
PER (2019E) |
PBR (2017) |
PBR (2018E) |
PBR (2019E) |
EV/EBITDA (2017) |
EV/EBITDA (2018E) |
EV/EBITDA (2019E) |
| Conch Cement |
27,988 |
13.9 |
7.8 |
7.5 |
2.26 |
1.97 |
1.71 |
8.2 |
4.9 |
4.7 |
| CNBM |
6,650 |
8.2 |
5.0 |
4.8 |
0.62 |
0.67 |
0.60 |
11.1 |
6.3 |
6.0 |
| BBMG |
4,640 |
7.4 |
6.0 |
5.6 |
0.43 |
0.44 |
0.41 |
10.2 |
7.6 |
7.3 |
| CR Cement |
7,448 |
15.2 |
7.6 |
7.4 |
1.92 |
1.59 |
1.44 |
9.7 |
5.3 |
5.4 |
| Asia Cement |
1,597 |
7.4 |
4.8 |
4.5 |
1.04 |
0.91 |
0.80 |
6.9 |
3.3 |
3.3 |
| West China Cement |
892 |
5.4 |
4.2 |
4.1 |
0.87 |
0.75 |
0.65 |
4.6 |
2.9 |
2.9 |
| Tianrui Cement |
2,520 |
14.9 |
n.a. |
n.a. |
1.67 |
n.a. |
n.a. |
8.6 |
n.a. |
n.a. |
| Simple Average |
|
10.4 |
5.9 |
5.6 |
1.26 |
1.05 |
0.93 |
8.5 |
5.1 |
5.1 |
| Weighted Average |
|
12.5 |
6.7 |
6.4 |
1.75 |
1.46 |
1.28 |
8.9 |
5.1 |
5.1 |
Regional Market Share
| Region |
Market Share (%) |
| East China |
18.9% |
| Anhui Conch |
57.5% |
| CNBM |
26.8% |
| CR Cement |
1.4% |
| Shanshui |
5.2% |
| BBMG |
0.5% |
| Asia Cement |
1.8% |
| WCC |
0.0% |
| South Central China |
11.6% |
| Guangdong |
14.4% |
| Guangxi |
21.5% |
| Hainan |
0.0% |
| Hunan |
25.4% |
| Hubei |
0.0% |
| Henan |
0.0% |
| North China |
0.0% |
| Beijing |
0.0% |
| Tianjin |
0.0% |
| Hebei |
0.0% |
| Shanxi |
3.5% |
| Inner Mongolia |
22.7% |
| Northeast China |
0.0% |
| Heilongjiang |
0.0% |
| Jilin |
0.0% |
| Liaoning |
0.0% |
| Southwest China |
11.7% |
| Chongqing |
11.7% |
| Sichuan |
7.8% |
| Guizhou |
20.4% |
| Yunnan |
8.4% |
| Tibet |
0.0% |
| Northwest China |
7.5% |
| Gansu |
14.2% |
| Shaanxi |
16.3% |
| Qinghai |
0.0% |
| Ningxia |
0.0% |
| Xinjiang |
1.0% |
Key Notes
- The market leader in each region is highlighted in red, with darker red indicating larger regional exposure.
- Equity ratings are defined as:
- BUY: Share price is expected to increase by >20% within 12 months.
- SELL: Share price is expected to decrease by >20% within 12 months.
- HOLD: No clear catalyst, and downgraded from BUY pending clearer signals.
Disclaimer
- This report is not intended for citizens or residents in jurisdictions where its distribution or use would be illegal.
- No warranties or guarantees are made regarding the accuracy or completeness of the information.
- Past performance does not guarantee future results.
- The analyst's views may differ from those of China Galaxy International.
Analyst Certification
- The analyst certifies that the views in the report accurately reflect their personal opinions.
- 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 trade for 3 business days after release.
- The analyst does not have financial interests in the covered companies.
Copyright
- No part of this material may be reproduced or redistributed without the prior written consent of China Galaxy International Securities (Hong Kong) Co., Limited.
