AnhuiConchandCNBMwillreleasetheirannualresultson24Marand25Marrespectively.Wedon’texpectmuchsurpriseonConchgivenitspositiveprofitalert(earningsup50%YoY),butremaincautiousonCNBMduetoitshighgearing.
AnhuiConch’sexpectedearningstorise49%YoY.WeestimateConch’s2013earningstorise49%YoYtoRmb9,440m.Weexpecttotalsalesvolumetorise18%YoYto219mtonnesandblendedASPtoincrease3.7%YoYtoRmb251/t,thankstothedecentreboundincementpricesinEasternandSouthCentralChinain2H13.Wealsoexpect2H13GP/ttorise45%YoYtoRmb97/t,thankstolowercoalcost.Keyareastowatchforinclude:a)updateonsalesyear-to-date;b)management’sviewonthecurrentgovernmentreform,pricingenvironmentandtrendincoalprice.
CNBM.Weexpect2013earningstodecline6%YoYtoRmb5,247m,draggedbyaveryweak1H13(withearningsdown29%YoY)despitethebetteroperatingenvironmentin2H13.Wesawnetgearinghittingalltimehighof513%asattheendof1H13andweestimatenetfinancecostwouldaccountfor67%offull-yearoperatingprofit.Keyareastowatchforincludinganypotentialreliefinnetgearing,whethercapexhascomedownafterpreviousmajoracquisitionsandthepotentialgrowthofthecommercialconcretebusiness.
ValuationThesharepricesofConchandCNBMhavecorrected12-13%overthepastmonth.Theyarecurrentlytradedat10.1xand5.0x2014EPE,at32%and47%discounttotheir5-yearhistoricalPE.WemaintainourestimatestobependingreviewaftertheresultsbriefingandmaintainourAccumulateandHoldratingsrespectively.