高盛-中国-基础材料行业-中国基础材料2018年11月监测：订单量稳定，但恐惧带来代价-20181122-39页_2mb

China Basic Materials Monitor Summary - November 2018

Core Content

This report provides an analysis of the China basic materials market in November 2018, highlighting the status of orderbooks, inventory levels, and commodity price trends. It also includes target prices for key companies in the sector, along with investment ratings and performance data.

Main Points

• Orderbook Trends:
  The forward orderbook for downstream sectors showed a slight improvement in November compared to October, with continued solid construction demand reflected in stable steel mill orderbooks and strong cement shipment.
  FAI infrastructure rebounded to 6% in October after declines in the third quarter of 2018.
  Weaker seasonality persists in manufacturing-related basic materials such as metals and paper, but signs of sequential stabilization are emerging.
  Winter suspension has not significantly affected supply levels.
  However, uncertainty in macroeconomic conditions has led to reduced confidence, affecting commodity pricing, especially steel, as futures prices continue to put downward pressure on physical prices due to over-destocking by traders.

• Inventory Levels:
  Inventory levels at producers are mostly at or below normal levels for basic materials and finished products.
  Inventory for finished steel is at normal levels and trending upwards.
  Iron ore and coking coal are at normal levels and mostly stable.
  Aluminum inventory is above normal levels and moving up.
  Alumina inventory is below normal levels and mostly stable.
  Copper inventory is below normal levels and trending downwards.
  Cement inventory is below normal levels and trending downwards.
  Containerboard inventory is below normal levels and trending downwards.

• Commodity Price Deck:
  The report includes forecasted prices and year-on-year changes for various commodities such as base metals, bulk commodities, and China-specific prices.
  Prices are as of November 20, 2018, and the data is sourced from Bloomberg and Goldman Sachs Global Investment Research.

Key Companies and Their Ratings

| Company | Ticker | Price (Nov 20, 2018) | Target Price | Rating | Upside | EPS (ccy/sh) | PE (17A/18E/19E) | PB (17A/18E/19E) | ROE (17A/18E/19E) | EV/EBITDA (17A/18E/19E) | FCF Yield (18E/19E) | Div Yield (18E/19E) | Perf. YTD |
|--------|--------|---------------------|---------------|--------|--------|---------------|------------------|------------------|------------------|-------------------------|------------------------|---------------------|---------------------|------------|
| Angang-H | 0347.HK | 6.40 | 7.30 | Buy* | 70% | 0.775 / 1.003 / 1.051 | 6.9 / 5.7 / 5.4 | 0.8 / 0.7 / 0.7 | 12% / 14% / 13% | 5.6 / 4.1 / 3.5 | 10% / 22% | 5.3% / 5.1% | 5.6% / -10% |
| Angang-A | 000898.SZ | 5.87 | 7.30 | Buy | 84% | 0.775 / 1.003 / 1.051 | 7.8 / 5.9 / 5.6 | 0.9 / 0.8 / 0.7 | 12% / 14% / 13% | 6.5 / 4.2 / 3.6 | 17% / 21% | 5.1% / 5.4% | 5.4% / -10% |
| Baosteel | 600019.SS | 7.30 | 7.30 | Buy | 85% | 0.861 / 0.970 / 1.050 | 8.4 / 7.5 / 7.0 | 1.0 / 0.9 / 0.9 | 12% / 13% / 13% | 5.6 / 4.6 / 4.2 | 17% / 14% | 6.9% / 7.5% | 7.5% / -16% |
| Maanshan-H | 0323.HK | 4.05 | 5.40 | Buy | 33% | 0.536 / 0.719 / 0.606 | 5.3 / 5.0 / 5.9 | 0.9 / 1.0 / 0.9 | 19% / 21% / 16% | 3.7 / 3.4 / 2.9 | 19% / 24% | 6.0% / 5.1% | 5.1% / 10% |
| Maanshan-A | 600808.SS | 4.00 | 6.10 | Buy | 53% | 0.536 / 0.719 / 0.606 | 7.3 / 5.6 / 6.6 | 1.3 / 1.1 / 1.0 | 19% / 21% / 16% | 4.5 / 3.7 / 3.2 | 17% / 22% | 5.4% / 4.5% | 4.5% / -3% |
| Chinacoal-H | 1898.HK | 3.38 | 5.10 | Buy | 51% | 0.263 / 0.407 / 0.453 | 12.5 / 7.4 / 6.6 | 0.5 / 0.4 / 0.4 | 4% / 6% / 6% | 8.4 / 6.7 / 6.3 | 2% / 10% | 3.4% / 3.8% | 3.8% / -4% |
| Chinacoal-A | 601898.SS | 5.16 | 5.90 | Neutral | 14% | 0.263 / 0.407 / 0.453 | 22.6 / 12.7 / 11.4 | 0.9 / 0.7 / 0.7 | 4% / 6% / 6% | 10.5 / 8.2 / 7.7 | 1% / 7% | 2.0% / 2.2% | 2.2% / -10% |
| Yanzhou-H | 1171.HK | 7.60 | 12.00 | Buy | 58% | 0.263 / 0.407 / 0.453 | 4.0 / 3.7 / 3.8 | 0.6 / 0.6 / 0.6 | 17% / 18% / 15% | 5.9 / 4.4 / 4.6 | 12% / 11% | 8.7% / 8.4% | 8.4% / -17% |
| Yanzhou-A | 600188.SS | 10.18 | 14.60 | Buy | 43% | 0.263 / 0.407 / 0.453 | 8.1 / 5.6 / 5.8 | 1.3 / 0.9 / 0.8 | 17% / 18% / 15% | 9.1 / 5.1 / 5.3 | 9% / 9% | 5.7% / 5.6% | 5.6% / -30% |
| Conch-H | 0914.HK | 40.25 | 44.00 | Neutral | 9% | 3.000 / 5.098 / 3.499 | 8.3 / 7.0 / 10.2 | 1.5 / 1.7 / 1.6 | 19% / 27% / 16% | 5.0 / 4.2 / 5.6 | 11% / 9% | 5.9% / 4.1% | 4.1% / 10% |
| Conch-A | 600585.SS | 32.23 | 40.00 | Neutral | 24% | 3.000 / 5.098 / 3.499 | 7.7 / 6.3 / 9.2 | 1.4 / 1.6 / 1.5 | 19% / 27% / 16% | 4.6 / 3.8 / 5.0 | 12% / 10% | 6.6% / 4.5% | 4.5% / 10% |
| BBMG-H | 2009.HK | 2.50 | 4.60 | Buy | 84% | 0.266 / 0.441 / 0.325 | 12.3 / 5.0 / 6.8 | 0.7 / 0.4 / 0.4 | 6% / 9% / 6% | 11.2 / 7.7 / 8.5 | 13% / 20% | 3.6% / 2.6% | 2.6% / -30% |
| BBMG-A | 601992.SS | 3.70 | 5.50 | Buy | 49% | 0.266 / 0.441 / 0.325 | 22.8 / 8.4 / 11.4 | 1.3 / 0.7 / 0.7 | 6% / 9% / 6% | 14.2 / 8.8 / 9.7 | 10% / 15% | 2.2% / 1.6% | 1.6% / -32% |
| CNBM | 3323.HK | 5.90 | 10.80 | Buy | 83% | 0.597 / 1.277 / 0.855 | 7.7 / 4.1 / 6.1 | 0.5 / 0.7 / 0.6 | 7% / 19% / 11% | 8.1 / 6.7 / 7.1 | 27% / 21% | 6.4% / 4.3% | 4.3% / -16% |
| CRC | 1313.HK | 7.10 | 7.00 | Sell | -1% | 0.554 / 1.125 / 0.743 | 7.9 / 6.3 / 9.6 | 0.9 / 1.2 / 1.2 | 13% / 22% / 13% | 5.6 / 3.8 / 5.1 | 20% / 12% | 7.1% / 4.7% | 4.7% / 38% |
| WCC | 2233.HK | 1.19 | 1.60 | Neutral | 34% | 0.131 / 0.260 / 0.175 | 7.5 / 4.1 / 6.0 | 0.8 / 0.7 / 0.7 | 11% / 20% / 12% | 3.9 / 2.6 / 3.0 | 22% / 24% | 2.5% / 7.3% | 7.3% / 2% |
| Chalco-H | 2600.HK | 2.93 | 5.60 | Buy | 91% | 0.092 / 0.093 / 0.230 | 44.5 / 27.8 / 11.3 | 1.6 / 0.8 / 0.8 | 4% / 3% / 7% | 11.2 / 9.7 / 9.9 | -1% / 1% | 0.0% / 0.0% | 0.0% / -48% |
| Chalco-A | 601600.SS | 3.86 | 6.00 | Buy | 55% | 0.092 / 0.093 / 0.230 | 65.7 / 41.3 / 16.8 | 2.3 / 1.2 / 1.1 | 4% / 3% / 7% | 13.3 / 11.2 / 11.5 | -8% / 2% | 2.2% / 2.4% | 2.4% / -32% |
| Hongqiao | 1378.HK | 4.59 | 9.60 | Buy | 109% | 0.829 / 0.657 / 1.026 | 7.9 / 6.2 / 4.0 | 1.0 / 0.6 / 0.5 | 13% / 10% / 14% | 5.0 / 3.8 / 2.8 | 26% / 31% | 4.3% / 6.7% | 6.7% / -48% |
| JXC-H | 0358.HK | 9.33 | 11.50 | Neutral | 23% | 0.476 / 0.730 / 0.793 | 22.8 / 11.3 / 10.4 | 0.8 / 0.6 / 0.6 | 3% / 5% / 5% | 4.9 / 5.8 / 5.1 | -13% / 3% | 3.7% / 4.0% | 4.0% / -25% |
| JXC-A | 600362.SS | 13.67 | 17.10 | Neutral | 25% | 0.476 / 0.730 / 0.793 | 37.3 / 18.7 / 17.2 | 1.3 / 1.0 / 0.9 | 3% / 5% / 5% | 7.7 / 8.6 / 7.6 | -8% / 2% | 2.2% / 2.4% | 2.4% / -32% |
| MMG | 1208.HK | 3.56 | 5.80 | Buy | 63% | 0.018 / 0.035 / 0.061 | 21.6 / 13.2 / 7.5 | 2.6 / 2.5 / 1.8 | 13% / 20% / 28% | 6.0 / 6.5 / 5.2 | 17% / 20% | 0.0% / 0.0% | 0.0% / -8% |
| Chinamoly-H | 3993.HK | 3.12 | 3.70 | Neutral | 19% | 0.143 / 0.253 / 0.220 | 21.1 / 10.9 / 12.6 | 1.7 / 1.4 / 1.4 | 10% / 14% / 11% | 6.1 / 4.7 / 4.4 | 12% / 13% | 5.5% / 4.8% | 4.8% / -38% |
| Chinamoly-A | 603993.SS | 4.12 | 5.60 | Neutral | 36% | 0.143 / 0.253 / 0.220 | 40.0 / 16.3 / 18.7 | 3.2 / 2.1 / 2.0 | 10% / 14% / 11% | 10.6 / 6.8 / 6.6 | 8% / 9% | 3.7% / 3.2% | 3.2% / -40% |
| Zijin-H | 2899.HK | 2.88 | 3.90 | Buy | 35% | 0.156 / 0.183 / 0.208 | 15.3 / 13.9 / 12.2 | 1.6 / 1.6 / 1.5 | 11% / 12% / 12% | 6.0 / 6.3 / 5.4 | 9% / 9% | 3.6% / 4.1% | 4.1% / -2% |
| Zijin-A | 601899.SS | 3.54 | 4.90 | Buy | 38% | 0.156 / 0.183 / 0.208 | 23.3 / 19.3 / 17.0 | 2.4 / 2.2 / 2.0 | 11% / 12% / 12% | 8.5 / 8.3 / 7.1 | 7% / 7% | 2.6% / 2.9% | 2.9% / -23% |
| Zhaojin | 1818.HK | 7.12 | 5.40 | Sell | -24% | 0.198 / 0.168 / 0.182 | 29.4 / 37.5 / 34.7 | 1.4 / 1.5 / 1.5 | 5% / 4% / 4% | 14.8 / 16.2 / 16.2 | -2% / 0% | 0.8% / 0.9% | 0.9% / 18% |
| Lee&Man | 2314.HK | 6.96 | 12.00 | Buy | 72% | 1.115 / 1.384 / 1.158 | 7.1 / 5.0 / 6.0 | 1.6 / 1.2 / 1.1 | 26% / 26% / 19% | 6.5 / 4.6 / 5.0 | 14% / 17% | 6.6% / 5.5% | 5.5% / -25% |
| NDPaper | 2689.HK | 7.96 | 14.20 | Buy | 78% | 0.939 / 1.679 / 1.294 | 7.2 / 6.3 / 5.5 | 1.1 / 1.4 / 0.8 | 16% / 24% / 16% | 6.3 / 5.9 / 5.7 | 4% / 4% | 4.7% / 5.5% | 5.5% / -36% |

Key Investment Insights

• Preferred Sectors:
  The steel sector and steel equities are preferred due to their attractive risk/reward profile.
  Aluminum and coal are also favored based on industry supply/demand outlook.

• Top Picks:

  • Angang-H (Buy): Higher earnings visibility and preference for flat products.
  • Baosteel (Buy): Higher earnings visibility, strong cash flow generation, and higher dividend payout.
  • Chalco-H (Buy): Higher upside to target price.

• Least Favored:

  • CR Cement (Sell): Less positive outlook on the sector and downside to the share price vs. target price.

Disclaimer

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware of potential conflicts of interest that may affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decisions. For important disclosures, see the Disclosure Appendix or visit www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.