20171113-中国银河国际证券-China_Cement_Weekly__TCCI_to_Complete_Privatization_Soon__North_China_to_Start_Large_Scale_Production_Suspension_12页_1mb

China Cement Sector Summary

Core Content

The China cement sector is currently experiencing a mix of price trends, production adjustments, and M&A activity. The following key points summarize the latest developments and insights:

Cement Price Trends

• The national cement price continued its upward trend, increasing by 0.9% week-on-week to RMB 348/tonne.
• Regional price increases were reported in Hebei, Henan, Jiangxi, Hubei, Guangdong, Yunnan, and Guizhou, with prices rising RMB 15–30/tonne in some areas.
• No major regions recorded a decline in prices.
• The average inventory level nationwide dropped to 58.31%, indicating a healthy demand-supply balance in early November.

Production Suspension

• Many regions in North China will begin off-peak production suspension in mid-November, which may impact supply and potentially influence prices.

M&A and Privatization

• TCCI (1136.HK) is set to be delisted from the HKEx on November 20, suggesting the privatization plan is close to completion.
• SINOMA (1893.HK) is expected to be merged with CNBM soon, reducing the number of potential M&A targets on the main board.
• Asia Cement (0743.HK) is trading at a very low valuation of 0.37x PBR, while West China Cement (2233.HK) is at 0.86x PBR.
• Despite the current price of HK$1.18 being below the previous offer price of HK$1.69 from Conch Cement (0914.HK), investors are expected to monitor the company closely.

Cement Stock Performance

• Cement stocks under coverage dropped 0.9% on average last week.
• CNBM (3323.HK) was the best performer, rising 2.2%.
• CR Cement (1313.HK) was the weakest performer, falling 2.2%.

Key Financial Metrics

Peer Comparison

Market Share by Clinker Capacity (2016)

Regional Breakdown

• East China:
  • Anhui Conch: 44.9%
  • CNBM: 40.2%
  • CR Cement: 13.9%
• South Central China:
  • Guangdong: 26.5%
  • Guangxi: 32.0%
  • Guizhou: 8.5%
• North China:
  • Hebei: 70.2%
  • Inner Mongolia: 12.8%
• Northeast China:
  • Heilongjiang: 57.9%
  • Jilin: 23.5%
  • Liaoning: 4.5%
• Southwest China:
  • Sichuan: 33.8%
  • Guizhou: 30.7%
  • Yunnan: 20.5%
• Northwest China:
  • Gansu: 54.3%
  • Shaanxi: 20.7%
  • Qinghai: 19.8%
  • Ningxia: 41.9%
  • Xinjiang: 32.1%

Key Points

• The cement price trend remains positive with regional price increases.
• North China is expected to implement large-scale production suspension in mid-November.
• TCCI is set for delisting, signaling the completion of its privatization plan.
• M&A activity is limited due to the upcoming merger of SINOMA and CNBM.
• Asia Cement is undervalued at 0.37x PBR, while West China Cement is still below the Conch Cement offer price.
• The sector is relatively stable, with CNBM being the best performer and CR Cement the weakest.
• Financial metrics suggest that some companies are undervalued or have strong growth potential.
• The market share of key players is distributed across regions, with Anhui Conch, CNBM, and Sichuan dominating in certain areas.

Disclaimer

• This report is not intended for distribution to or use by any person or entity in jurisdictions where it would be illegal.
• The report is based on information believed to be reliable but not guaranteed for accuracy.
• No representation or warranty is made regarding future performance.
• The report should be read in conjunction with the disclaimer.

Disclosure of Interests

• China Galaxy Securities may have financial interests in the companies discussed.
• The company may have served as a manager or co-manager for public offerings or provided investment services.
• The analyst certifies that the views expressed are personal and not necessarily aligned with the firm's official stance.