20181203-中国银河国际证券-9M2018_Sector_Profit_Jumped_139__YoY__Cement_Prices_Rose_at_a_Slower_Pace_12页_1021kb

China Cement Sector Summary

Core Content

The China cement sector experienced significant growth in profits during the first nine months of 2018, with a year-on-year increase of 139%, reaching RMB109.4bn. This growth was slightly slower than the 150% increase in the first eight months of the year, attributed to a relatively high base in Q4 2017.

Cement prices showed a 0.2% weekly increase nationwide, with notable increases in key regions such as Beijing, Tianjin, Hebei, Shandong, Henan, and Yunnan. However, the pace of price increases slowed in late November, and it is expected that cement prices in the Pearl River Delta will continue to rise in early December, while prices in other regions are likely to remain stable. The average inventory level decreased slightly from 46.31% to 46.06% week on week.

Key Market Insights

• Cement Stock Performance: Cement stocks rebounded on average by 4.21% last week, with CR Cement being the best performer at 7.76%, and BBMG the weakest at 1.20%.
• Valuation Metrics:
  • Conch Cement: Price (HK$) 40.85, Market Cap (US$m) 25,178, PER (2017-2019E) 12.7, 6.4, 6.0, EV/EBITDA (2017-2019E) 7.4, 4.1, 3.8, Net Debt/Equity (%) 7.4.
  • CNBM: Price (HK$) 6.09, Market Cap (US$m) 6,586, PER (2017-2019E) 8.1, 4.3, 4.2, EV/EBITDA (2017-2019E) 10.8, 6.2, 5.9, Net Debt/Equity (%) 123.
  • BBMG: Price (HK$) 2.52, Market Cap (US$m) 4,910, PER (2017-2019E) 8.0, 5.8, 5.3, EV/EBITDA (2017-2019E) 10.4, 7.6, 7.4, Net Debt/Equity (%) 82.
  • CR Cement: Price (HK$) 7.64, Market Cap (US$m) 6,840, PER (2017-2019E) 14.0, 6.4, 6.2, EV/EBITDA (2017-2019E) 9.0, 4.6, 4.6, Net Debt/Equity (%) 3.
  • Simple Average: PER (2017-2019E) 10.7, 5.7, 5.4; EV/EBITDA (2017-2019E) 9.4, 5.6, 5.4; Net Debt/Equity (%) 69.
  • Weighted Average: PER (2017-2019E) 11.7, 6.0, 5.7; EV/EBITDA (2017-2019E) 8.5, 4.9, 4.7; Net Debt/Equity (%) 28.

Peer Comparison

Regional Cement Price Analysis

• East China:
  • Anhui: 38.4% of clinker capacity
  • Jiangsu: 6.1%
  • Shandong: 9.2%
  • Jiangxi: 4.4%
  • Total: 46.2% of clinker capacity
• South Central China:
  • Guangdong: 7.3%
  • Guangxi: 7.9%
  • Hunan: 10.4%
  • Total: 25.7% of clinker capacity
• North China:
  • Hebei: 0.9%
  • Inner Mongolia: 3.9%
  • Total: 5.4% of clinker capacity
• Northeast China:
  • Heilongjiang: 3.5%
  • Jilin: 1.7%
  • Liaoning: 0.7%
  • Total: 5.9% of clinker capacity
• Southwest China:
  • Sichuan: 4.2%
  • Guizhou: 9.0%
  • Yunnan: 3.8%
  • Total: 20.0% of clinker capacity
• Northwest China:
  • Gansu: 2.8%
  • Shaanxi: 4.9%
  • Total: 8.1% of clinker capacity

Market Share by Clinker Capacity (2017)

• East China:
  • Anhui: 57.5%
  • Fujian: 3.0%
  • Jiangsu: 55.3%
  • Jiangxi: 27.4%
  • Shandong: 30.2%
  • Zhejiang: 55.7%
  • Total: 18.9%, 26.8%, 10.9%, 5.2%, 0.5%, 1.8%, 0.0%, 0.0%
• South Central China:
  • Guangdong: 14.4%
  • Guangxi: 21.5%
  • Hainan: 23.3%
  • Hunan: 25.4%
  • Hubei: 7.8%
  • Henan: 17.0%
  • Total: 11.6%, 12.9%, 10.9%, 0.3%, 0.7%, 1.2%, 0.0%, 7.8%
• North China:
  • Beijing: 100.0%
  • Tianjin: 100.0%
  • Hebei: 48.0%
  • Total: 0.0%, 8.7%, 2.0%, 5.9%, 30.7%, 0.0%, 0.0%, 0.0%
• Northeast China:
  • Heilongjiang: 61.2%
  • Jilin: 24.6%
  • Liaoning: 4.8%
  • Total: 0.0%, 22.3%, 0.0%, 9.4%, 6.7%, 0.0%, 0.0%, 0.0%
• Southwest China:
  • Chongqing: 11.7%
  • Sichuan: 7.8%
  • Guizhou: 20.4%
  • Yunnan: 8.4%
  • Tibet: 47.8%
  • Total: 11.7%, 25.1%, 1.6%, 0.0%, 1.5%, 2.0%, 0.3%, 4.8%
• Northwest China:
  • Gansu: 14.2%
  • Shaanxi: 16.3%
  • Qinghai: 20.0%
  • Ningxia: 41.9%
  • Xinjiang: 31.7%
  • Total: 7.5%, 26.6%, 0.0%, 0.7%, 6.0%, 0.0%, 8.2%, 0.0%

Analysts and Contact Information

• Wong Chi Man – Head of Research

  • Phone: (852) 3698-6317
  • Email: cmwong@chinastock.com.hk

• Mark Lau – Research Analyst

  • Phone: (852) 3698-6393
  • Email: marklau@chinastock.com.hk

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; downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to SELL.

Disclaimer

This report is not directed at, or intended for distribution to, any person or entity in a jurisdiction where such distribution would be contrary to applicable law. The information is based on sources believed to be reliable, but no warranty or guarantee is made regarding accuracy or completeness. This report is for institutional clients only and is not an offer or solicitation to buy or sell securities.

Disclosure of Interests

China Galaxy International Securities may have financial interests in the companies mentioned in this report, potentially equal to or exceeding 1% of the company's market capitalization. Analysts and their associates may be associated with the mentioned companies and may have participated in financing transactions or provided investment services.

Analyst Certification

Analysts certify that their views accurately reflect their personal opinions and that no compensation is directly or indirectly related to the views expressed in this report. They also confirm that they have not traded in the securities covered in the report within 30 days prior to its release and will not do so within three business days after its release.

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.