20180611-中国银河国际证券-China_Cement_Weekly__Northeast_China_Cement_Companies_Propose_Improving_Supply_Discipline_12页_634kb

报告摘要

China Cement Weekly Summary - June 11, 2018

Core Content Overview

The China Cement Weekly report from June 11, 2018, provides an analysis of the cement market, including price trends, inventory levels, and company-specific performance metrics. It also highlights the proposed changes in supply discipline by cement companies in the Northeast China region to address overcapacity and stabilize prices.

Main Points and Key Information

Cement Price Trends

National Average Cement Price: Declined slightly by 0.2% to RMB 416/tonne from the previous week.
Regional Price Movements:
- Tianjin: Increased by about RMB 30/tonne.
- Shanghai, Fujian, Chongqing: Prices fell by RMB 10–30/tonne.
Downstream Demand: Decreased in early June due to the low season for cement demand, influenced by the National College Entrance Examination and rainy weather.
Shipments: Declined by 10–20% week-on-week (WoW).
Price Resilience: Cement prices remained relatively stable due to production suspension during the low season and stable demand.
Inventory Level: The national average inventory level increased slightly to 55%.

Coal Price Stability

Bohai-Rim Steam Coal (Q5500K): The average price index remained stable at RMB 570/tonne.
Year-on-Year Increase: The index rose by 1.42% compared to the same period in 2017.

Northeast China Supply Discipline Proposal

Seven Leading Companies: Including Yatai Cement, Tianrui Cement, North Cement, Daying Cement, Mengxi Cement, BBMG, and Shanshui Cement.
Objective: To improve supply discipline during the winter season to maintain working capital and secure sales volume in the following year.
Presale Agreements: Common practice in the region led to weak cement prices due to overcapacity.
Proposed Changes: Companies are to stop presale agreements and encourage working capital support via platform companies.
Impact: The proposal is expected to benefit BBMG and CNBM, though these companies are not major players in the Northeast region.

Stock Performance

Cement Stocks Under Coverage: Increased by an average of 4.1% last week.
Best Performer: CNBM saw a 10.5% week-on-week increase.
Weakest Performer: BBMG fell by 1.5% YoW.

Valuation Table Highlights

Company	Ticker	Rating	Price (HK$)	Market Cap (US$m)	PER (x) 2017	PER (x) 2018E	PER (x) 2019E	PBR (x) 2017	PBR (x) 2018E	PBR (x) 2019E	EV/EBITDA (x) 2018E	EV/EBITDA (x) 2019E	Net Debt/Equity (%)
Conch Cement	914 HK Equity	BUY	48.45	30,271	15.0	9.6	9.6	2.44	2.04	1.82	8.5	5.7	5.8
CNBM	3323 HK Equity	BUY	9.77	8,002	13.1	7.6	7.5	0.99	0.87	0.80	9.2	7.5	7.6
BBMG	2009 HK Equity	BUY	3.35	5,833	12.0	8.2	7.6	0.62	0.55	0.52	11.4	9.3	8.5
CR Cement	1313 HK Equity	BUY	9.78	8,191	17.9	8.5	8.5	2.11	1.82	1.65	10.5	6.0	6.0

Market Share by Region (2017)

Region	Anhui Conch	CNBM	CR Cement	Shanshui	BBMG	Asia Cement	WCC	Huaxin-Lafarge	Sinoma Group
East China	46.2%	25.7%	1.5%	5.5%	0.5%	0.0%	0.0%	0.0%	2.7%
South Central China	20.0%	29.8%	8.2%	0.0%	0.7%	41.5%	5.3%	32.1%	0.0%
North China	8.1%	0.0%	0.0%	3.0%	12.7%	0.0%	0.0%	94.7%	67.6%
Northeast China	100.0%	22.3%	0.0%	9.4%	6.7%	0.0%	0.0%	0.0%	0.0%
Southwest China	7.5%	0.0%	0.0%	2.9%	5.6%	0.0%	8.2%	2.8%	4.7%

Key Takeaways

Market Dynamics: Cement prices are influenced by seasonal demand and inventory levels.
Supply Discipline: Northeast companies are proposing to end presale agreements to improve market stability.
Stock Performance: The cement sector showed relatively strong performance, with CNBM leading the pack.
Valuation Metrics: Companies like Conch Cement and CNBM are rated BUY, while BBMG is the weakest performer.
Regional Exposure: The report highlights regional market share and clinker capacity distribution, with Anhui Conch and CNBM dominating in East China and North China, respectively.

Disclaimer and Interests

The report is issued to institutional clients and not for general public distribution.
China Galaxy International Securities may have financial interests in the companies covered.
Analyst Certification: The views expressed reflect the personal opinion of the analyst and are not necessarily aligned with the views of China Galaxy International.
No Warranty: No guarantees are made regarding the accuracy or future performance of the report.

Conclusion

The cement sector in China is navigating seasonal demand fluctuations, inventory pressures, and overcapacity challenges, particularly in the Northeast. The proposed supply discipline improvements aim to stabilize prices and enhance working capital management. The stock performance remains positive, with CNBM showing the strongest gains. Valuation metrics indicate varying levels of growth potential and dividend yields, with Conch Cement and CNBM being more favorable in terms of PER and PBR.