20180823-中国银河国际证券-海螺水泥-600585.SH-Reported_impressive_results_again_in_Q2__Reiterate_BUY_5页_791kb

Conch Cement Summary

Core Content

Conch Cement (0914.HK; 600585.CH) reported strong financial results for Q2 2018, with a recurring net profit of RMB8.2bn, a 123% increase YoY. This result exceeded the high end of the positive profit alert guidance and suggests that the Street may revise its full-year forecast upward, based on historical seasonality patterns. The company also demonstrated impressive revenue growth, reaching RMB27.3bn in Q2 2018, a 47% YoY increase, driven by both volume growth and a rise in blended ASP (average selling price) for cement and clinker.

Main Points

• Q2 2018 Performance:

  • Recurring net profit: RMB8.2bn (+123% YoY)
  • Revenue: RMB27.3bn (+47% YoY)
  • Blended ASP: RMB316/tonne (up from RMB297/tonne in Q1 2018)
  • Gross profit per tonne: RMB146 (up from RMB124 in Q1 2018)

• Operating Efficiency:

  • Operating costs increased by 21% YoY to RMB1.8bn, significantly slower than revenue growth.
  • The company's balance sheet strengthened, with net cash rising from RMB10.5bn at the end of 2017 to RMB14.2bn at the end of June 2018.

• Overseas Revenue:

  • Overseas revenue reached RMB482m in 1H18, a 44.96% YoY increase, though it accounted for only 1% of total revenue.

• Price Correction:

  • The price correction during the summer season in east and south China was moderate, allowing for potential price hikes during the upcoming peak season, which is expected to be a key catalyst for the share price.

• Investment Recommendations:

  • The analyst reiterates a BUY rating.
  • H-share target price raised to HK$65 (+33.8% from previous) and A-share target price to RMB53.10 (+41.8%).
  • The company is currently trading at 8x 2018E PER and 2.02x 2018E PBR.

Key Financials

Income Statement Highlights (RMB'000)

Growth Rates

Margins and Ratios

Valuation Metrics

Operational Metrics

Investment Highlights

• Target Prices:

  • H-share: HK$65 (+33.8%)
  • A-share: RMB53.10 (+41.8%)

• Market Data:

  • Market Cap: US$29,930m
  • Shares Outstanding: 5,299.3m
  • Free Float: 55.0%
  • 52-Week Range: HK$27.85–51.55
  • 3-Month Average Daily T/O: US$83.5m

• Major Shareholder:

  • Conch Holdings (36.78%)

Disclaimer

• The report is not directed at, or intended for distribution to, any person or entity in jurisdictions where it would be illegal or subject to registration requirements.
• The information is believed to be reliable but not guaranteed.
• The report is for informational purposes only and does not constitute an offer or invitation to buy or sell securities.

Analyst Certification

• The analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation.
• No trading or dealing in the securities covered in the report was conducted within 30 days prior to the report's issue.
• The analyst does not serve as an officer of any Hong Kong-listed companies covered in the report.
• No financial interests in the Hong Kong-listed companies covered in the report.

Equity Rating Explanation

• 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 signal.

Copyright

• No part of this material may be reproduced or redistributed without prior written consent from China Galaxy International Securities (Hong Kong) Co., Limited.