Yum Cha 飲茶. October 13, 2014

Transcription

1 Yum Cha 飲茶 October 13, 2014 CHART OF THE DAY SLOW DATA WEEK FOR CHINA AS ECONOMY ADAPTS TO REFORM INDICES Closing DoD% Hang Seng Index 23,088.5 (1.9) HSCEI 10,301.5 (1.7) Shanghai COMP 2,374.5 (0.6) Shenzhen COMP 1,.6 (0.4) Gold 1, BDIY (1.1) Crude Oil, WTI(US$/BBL) 84.8 (1.2) Crude Oil, BRENT(US$/BBL) 89.2 (1.1) HIBOR, 3-M SHIBOR, 3-M RMB/USD DAILY NOTES FOR THIS WEEK Oct 09/15 Foreign Reserves Oct 09/15 New Yuan Loans Oct 09/15 Aggregate Financing RMB Oct 09/15 Money Supply M0 YoY Oct 09/15 Money Supply M1 YoY Oct 09/15 Money Supply M2 YoY Oct 13/18 Foreign Direct Investment YoY Oct 14 PPI YoY Oct 14 CPI YoY Oct 16 MNI October Business Indicator Source: Bloomberg 3Y T-BOND 10Y T-BOND 2Y T-BOND 3Y AA CORP (PROXY FOR LGFV) RMB/US$ The multiple series of data due this week industrial output, fixed asset investment, retail sales, money supply, etc. will not produce positive surprises, in all probability. On the manufacturing/ industrial side, official and HSBC purchasing managers indices (PMIs) were unchanged in September. Money growth slowed in August, and is likely to show stable or slow growth again for September, given the limited intervention by the People s Bank of China (PBoC) in the interbank market during the month. PBoC Governor Zhou Xiaochuan told the International Monetary Fund (IMF) at the weekend that monetary policy should be prudent, repeating the term used by various government officials, up to and including Premier Li Keqiang. It has been evident for some time that official Chinese policy is to focus on reform rather than stimulus, and this point has also been reinforced during the Washington meetings by PBoC chief economist Ma Jun, who said there is no need for big stimulus as the job market is stable and there is a need to control credit. We need to avoid further increase in leveraging in some sectors real estate, some state-owned enterprises (SOEs) and local government financing vehicles (LGFVs). The onshore RMB bond market has seen a flow of funds into government bonds, with yields down 150 basis points this year, while the risk premium on LGFV bonds (using corporate AA bonds as a proxy) has widened. This follows the stricter credit conditions imposed on local governments earlier this month. On a State visit to Germany, Premier Li said the employment target for 2014 had been achieved, that gross domestic product (GDP) growth this year of about 7.5% is still achievable, and that perseverance and stamina are as important as speed in the economic policy mix. While growth prospects are moderate, there is increasing demand for RMB-denominated investments, illustrated by a surge in A-share exchange traded funds (ETFs) and the increased use of RMB by central banks as reserve currencies. The European Central Bank (ECB) may officially add RMB to its reserves, underpinning demand. M1 M2 TALKING POINTS CHINA CEMENT WEEKLY - Average cement price (nation-wide) rose 1.37% in the last two weeks to RMB313.6/tonne. Following the seasonality, we have seen price rebounds in east china, south central China and southwest China. Cement prices in Shanghai, Anhui, Jiangxi, Fujian, Hubei, Hunan, Guangdong and Chongqing were lifted by RMB20-30/tonne. Meanwhile, cement industry earnings dropped 20% year-on-year in August but we see strong profit growth in Guangdong, Guangxi, Hainan and Fujian. All these provinces are the key operating regions of CR Cement [1313.HK, BUY]. 1

2 China Cement Weekly October 13, 2014 Industry Earnings Fell 20% in August but Performance in South Central China Remained Strong China Cement Sector Cement prices up 1.37% in last two weeks. Average cement price (nation-wide) rose 1.37% in the last two weeks (i.e. before the national holidays) to RMB313.6/tonne. Following the seasonality, we have seen price rebounds in east china, south central China and southwest China. Cement prices in Shanghai, Anhui, Jiangxi, Fujian, Hubei, Hunan, Guangdong and Chongqing were lifted by RMB20-30/tonne. Little change in overall inventory level. Average inventory level (nation-wide) was largely unchanged at 69.9% compared with the level before the national holidays. Inventory in south central China declined to 67.5% last week from 67.7% two weeks ago while inventory in east southwest China rose from 70.6% to 71.3%. Coal prices remained stable last week. The comprehensive average price index for Bohai -Rim Steam Coal (Q5500K) remained stable last week at RMB482/tonne. The index is 10% lower than the level in the same period last year. Cement industry earnings dropped 20% year-on-year in August. According to Digital Cement, the performance in north China, northeast China and northwest China was not encouraging largely due to lacklustre demand (next page). However, we see strong profit growth in Guangdong, Guangxi, Hainan and Fujian. All these provinces are key operating regions for CR Cement [1313.HK; BUY]. Although the company released a positive profit alert last week for the first nine months of this year, the share price was largely unchanged after the announcement, probably because of overall weak market sentiment. Cement stocks under our coverage down 2.1% in last two weeks. Overall sector share price performance was relatively weak due to unfavourable market sentiment. The worst performer was Anhui Conch [0914.HK; HOLD], down 3.3%. The best performer is CNBM [3323.HK; BUY], down 1.4%. Share price premium of Anhui Conch-H over Anhui Conch-A narrowed further from 17.9% two weeks ago to 12.6% last Friday. Wong Chi Man Senior Analyst (852) cmwong@chinastock.com.hk John Mulcahy Head of Research (852) johnmul@chinastock.com.hk Valuation Table Sources: Company, Bloomberg, CGIHK Research estimates PER (x) PBR (x) EV/EBITDA(x) Net debt/equity (%) Company Ticker Rating Price (HK$) Market cap (US$m) E 2015E E 2015E E 2015E 2014E Anhui Conch 914 HK Equity HOLD , CNBM 3323 HK Equity BUY , BBMG 2009 HK Equity BUY , CR Cement 1313 HK Equity BUY , Shanshui Cement 691 HK Equity HOLD Simple average Weighted average EPS Grow th (%) E PEG(x) ROE (%) Dividend yield (%) Company Ticker 2014E 2015E CAGR (%) 2014E E 2015E E 2015E Anhui Conch 914 HK Equity CNBM 3323 HK Equity CR Cement 1313 HK Equity BBMG 2009 HK Equity Shanshui Cement 691 HK Equity (42.5) (4.5) (25.9) (0.4) Simple average Weighted average

3 Cement industry earnings in August 2014 (RMB m) 2013/ /08 YoY change Nationwide 7,007 5, % - - North China Beijing % Tianjin % Hebei % Shanxi 50 (57) n.a. Inner Mongolia % Northeast China Liaoning 320 (79) n.a. Jilin 469 (195) n.a. Heilongjiang % East China Shanghai % Jiangsu % Zhejiang % Anhui % Fujian (53) 28 n.a. Jiangxi % Shandong % South Central China Henan % Hubei % Hunan % Guangdong % Guangxi % Hainan % Southwest China Chongqing % Sichuan % Guizhou % Yunnan % Tibet % Northwest China Shaanxi % Gansu % Qinghai % Ningxia % Xinjiang 86 (39) n.a. Sources: Capital IQ, CGIHK Research 3

4 Peer Comparison Market cap PER (x) PBR (x) EV/EBITDA(x) Company Ticker Rating Price (HK$) (US$m) E 2015E E 2015E E 2015E Anhui Conch 914 HK Equity HOLD , CNBM 3323 HK Equity BUY , BBMG 2009 HK Equity BUY , CR Cement 1313 HK Equity BUY , Shanshui Cement 691 HK Equity HOLD TCC International 1136 HK Equity NR , China National Materials 1893 HK Equity NR Asia Cement 743 HK Equity NR West China Cement 2233 HK Equity NR Tianrui Cement 1252 HK Equity NR n.a. n.a n.a. n.a. 7.2 n.a. n.a. Simple average Weighted average Sources: Bloomberg, CGIHK Research 1-Year Relative Performance Sources: Capital IQ, CGIHK Research 4

5 Figure 1: Regional Cement Price National Average (P.O. 42.5) North China Northeast China East China South Central China Southwest China Northwest China Sources: Digital Cement, CGIHK Research 5

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