20170424-中国银河国际证券-China_Cement_Weekly_12页_953kb

China Cement Sector Summary

Core Content

The China cement sector experienced a mixed performance in Q1 2017, with production volume slightly declining and regional price movements showing variation. The overall market demand stabilized by late April, and the average cement inventory level dropped slightly. The sector was influenced by both supply-side measures and demand-side growth factors, particularly in infrastructure and property development.

Key Information and Trends

• National Cement Prices: Rose by 1% week-on-week, reaching an average of RMB333.75/tonne.

  • Prices in Inner Mongolia, Jiangxi, and Shanghai increased by RMB10–30/tonne.
  • Prices in Hunan decreased by RMB10/tonne.

• Cement Production:

  • Q1 2017 production dropped 0.28% YoY to 441m tonnes.
  • East, Central, and Southwest China contributed 88% of the national production, with relatively stable demand.
  • North and Northeast China saw declines of 14% and 8% YoY, respectively.

• Fixed Asset Investment:

  • Grew 9.2% YoY, with infrastructure investment being the leading growth driver at 23.5% YoY.
  • Property development and investment also increased by 9.1% YoY.

• Stock Performance:

  • Cement stocks under coverage declined on average by 2%.
  • CR Cement [1313.HK] was the best performer, rising 3% last week.
  • BBMG [2009.HK] was the weakest, falling 7.6% as investors took profits following a rally driven by the Xiongan New Area development announcement.

Valuation Overview

• Simple Average:

  • PER: 19.0 (2016), 11.2 (2017E), 10.5 (2018E)
  • EV/EBITDA: 11.0 (2016), 8.2 (2017E), 7.8 (2018E)
  • Net Debt/Equity: 82%

• Weighted Average:

  • PER: 17.4 (2016), 12.2 (2017E), 11.5 (2018E)
  • EV/EBITDA: 10.9 (2016), 8.0 (2017E), 7.6 (2018E)
  • Net Debt/Equity: 46%

Regional Cement Price Breakdown

• East China:

  • Anhui Conch and ONBM dominate with significant market shares.
  • Prices showed varied movements across provinces.

• South Central China:

  • Anhui Conch, CR Cement, and Asia Cement had notable market presence.
  • Jiangxi and Guangxi had higher price increases, while Hunan had a slight decrease.

• North China:

  • ONBM had the largest share in Inner Mongolia.
  • BBMG and Asia Cement had strong exposure in Hebei and Shanxi, respectively.

• Northeast China:

  • ONBM dominated in Jilin and Heilongjiang.
  • BBMG had a strong presence in Heilongjiang and Liaoning.

• Southwest China:

  • BBMG and Asia Cement had significant market shares in Sichuan and Guizhou.

• Northwest China:

  • Asia Cement and Sinoma Group had major market shares in Shaanxi and Qinghai, respectively.

Market Share in Terms of Clinker Capacity (2016)

• East China:

  • Anhui Conch had the largest market share at 17.6%.
  • ONBM and CR Cement had 10.7% and 3.5%, respectively.

• South Central China:

  • Anhui Conch and ONBM had 11.8% and 15.9%, respectively.
  • Asia Cement had 1.1%, and BBMG had 1.4%.

• North China:

  • ONBM had 6.3%, and BBMG had 5.4%.

• Northeast China:

  • ONBM had 20.7%, and BBMG had 6.5%.

• Southwest China:

  • BBMG had 11.2%, and Asia Cement had 7.5%.

• Northwest China:

  • Asia Cement had 7.5%, and Sinoma Group had 28.0%.

Main Points

• Production and Demand: Q1 2017 saw a slight drop in cement production, but demand remained relatively stable in key regions.
• Price Movements: Regional price fluctuations were observed, with some areas seeing increases and others declines.
• Inventory Levels: National cement inventory levels decreased slightly, indicating improved demand.
• Stock Performance: The sector was mixed, with CR Cement outperforming and BBMG underperforming due to profit-taking.
• Valuation Metrics: The valuation table highlights varying PER and EV/EBITDA ratios across companies, with BBMG showing higher valuation multiples and ONBM and CR Cement having more conservative valuations.
• Market Share: Companies like Anhui Conch, ONBM, and BBMG had dominant positions in various regions, with Asia Cement and Sinoma Group also showing significant market shares.

Conclusion

The cement sector in China faced mixed conditions in Q1 2017, with production declining slightly but supported by resilient demand and coordinated supply-side measures. Regional price movements varied, and stock performance reflected investor sentiment, with CR Cement being the top performer and BBMG the weakest. Valuation metrics and market share data indicate the sector's complex landscape, with key players having different regional exposures and financial metrics.