20161017-中国银河国际证券-Strong_Cement_Price_Hike_Post_National_Holiday__BBMG_to_Reshuffle_the_Management_of_Jidong_Cement_12页_1mb

China Cement Sector Summary

Core Content

The China cement sector has experienced a significant price increase in the week following the National Holiday, with the national average cement price rising by 5.7% week-on-week to RMB297.08/tonne, and a 16% year-on-year increase. This surge in prices is attributed to rising coal costs, increased transportation expenses, and reduced market supply due to expected production cuts in Henan, Shandong, and Hebei in November. Prices in regions such as Beijing-Tianjin-Hebei, Hubei, Hunan, Guizhou, Yunan, Gansu, and Shaanxi were raised smoothly after the holiday, while prices in northeast China remained flat. Further price hikes in the Yangtze River Delta are anticipated in the coming weeks. The average inventory level nationwide rose slightly to 66.94%.

Main Points

• Cement Price Increase:

  • National average cement price increased by 5.7% week-on-week and 16% year-on-year.
  • Regional price hikes ranged from RMB20 to RMB50 per tonne, with some areas experiencing stable prices.
  • Price increases were executed smoothly in key regions after the National Holiday.
  • Price hikes in the Yangtze River Delta are expected.

• Coal Price Trends:

  • The Bohai-Rim Steam Coal (Q5500K) price increased by RMB9/tonne over two weeks, reaching RMB570/tonne.
  • YoY increase in coal prices was 47%, contributing to the rising cement costs.

• Management Restructuring at Jidong Cement:

  • BBMG has taken control of Jidong Development Group, leading to a restructuring of the senior management team.
  • Six senior management members, including the chairman and deputy general manager, have tendered their resignations.
  • The changes are expected to enhance the operational efficiency of Jidong Cement in areas like materials procurement, pricing, and the wholesale system.

• Stock Performance:

  • Cement stocks under coverage fell by an average of 6.1% last week.
  • CNBM [3323.HK] was the best performer, dropping by 3.7%.
  • BBMG [2009.HK] was the weakest, declining by 8.5%, due to concerns about property market policy tightening.

Key Information

Valuation Table (2015-2017E)

EPS Growth and Valuation Metrics

Peer Comparison

Regional Cement Price Breakdown

• East China:

  • Anhui: 36.7% (2015), 5.1% (2016)
  • Jiangsu: 1.9% (2015), 5.8% (2016)
  • Shandong: 0.8% (2015), 14.2% (2016)
  • Zhejiang: 1.6% (2015), 11.4% (2016)

• South Central China:

  • Guangdong: 7.5% (2015), 0.0% (2016)
  • Hunan: 10.7% (2015), 7.3% (2016)
  • Hubei: 0.0% (2015), 0.0% (2016)
  • Henan: 0.0% (2015), 5.6% (2016)

• North China:

  • Hebei: 0.0% (2015), 0.9% (2016)
  • Shanxi: 0.0% (2015), 8.8% (2016)

• Southwest China:

  • Sichuan: 4.4% (2015), 12.6% (2016)
  • Guizhou: 9.6% (2015), 8.8% (2016)
  • Yunnan: 3.0% (2015), 6.6% (2016)

• Northwest China:

  • Gansu: 3.2% (2015), 0.0% (2016)
  • Shaanxi: 5.1% (2015), 0.0% (2016)

Market Share in Terms of Clinker Capacity (2015)

Summary

The cement sector in China is showing signs of recovery with a notable increase in prices, driven by higher coal costs, increased transportation expenses, and reduced supply due to production cuts. The management restructuring at Jidong Cement, following BBMG's takeover, is expected to enhance operational efficiency. However, the overall stock performance has been weak, with BBMG experiencing the largest decline due to concerns over property market policies. Valuation metrics indicate varying growth prospects and price-to-earnings ratios across different companies, while the regional breakdown shows that certain provinces like Anhui and Sichuan hold significant market shares.