【研究报告内容摘要】
Cementprices were down0.18% w/wlast week.Eastern China continued its decline, down 1.2% w/w. This was mainly owing to prices in Fujian and Jiangxi being dragged down by surplus cement supplies from nearby provinces, which were a result of previous higher prices in these regionsencouraging extra production. Prices in other eastern provinces, such as Jiangsu, Zhejiang, and Anhui,remain stable. Southern China posted a 1.1% w/w increase, owing to an 11% w/w hike in Changsha, Hunan province, where priceshad lagged during 1H13. Inventory levelsremainhigh, with a 75% inventory/warehouse capacity ratioin Hunan, which could exert pressure on regional cement prices down the line.
Positive profit alerts. Three Hong Kong listed-cement companies released positive profit alertslast weekand the central government’smore positive toneabout maintainingeconomic growth helped the sector to rebound. We noticed a couple of common themes for the profit-alert companiesCR Cement (1313.HK), TCC (1136.HK)and Asia Cement (743.HK). First, they all posted big y/y dips in 1H12 net profit,rangingfrom 69%-81%, which made for a morefavorable1H13 comparison. Second, all of them havesignificant exposure to Southern Central China and South Western China, where cement prices were stable compared with the nationwide 7.3% decrease.
Soft 1Q13 to drag on Anhui Conch’s y/y improvement in 1H13. Anhui Conch’sshipments increased 41% y/y during 1Q13, beating its full-year target of 20% y/y, but ASP for cement products decreased20% y/yas the company prioritized volume over margins during the low season. This resulted in a 22% y/y decrease in 1Q13 net profit under China GAAP. Although shipmentshave continued to grow, ASPshave rebounded, and GP/ton increased from RMB52/ton in 1Q13 to more than RMB70/ton in 2Q13, the soft 1Q13 will likely drag on the 1H13y/y improvement. We remain positive about cement demand in 2H13in view of the acceleration in Chinese cement production growth YTD overthe past two months. Also,the central government’smore positive toneabout fosteringeconomic growth and the potential resumption of more railway construction works in 2H13 should spur further investment and demand for cement. These factors should make for a more favorable comparison between 2H13 and 2H12.
We have initiated coverage of BBMG (2009.HK, Buy, TP:HK$7.00).The company unexpectedly posted a loss in 1Q13,owing to higher fixed costsresulting from a production halt for its cement business and lower-than-expected GFA booked. This will make for a less favorable comparison between 1H13 and 1H12, but we see several positives: 1) the infrastructure pipelinefor the Beijing-Tianjin-Hebei region remains full, which should benefit BBMG given its strong market position in this region; 2) investment property should continue to benefit from rising rental rates, given the limited new office building supply and current low vacancy ratesin Beijing; 3) solid presale numbersand potential conversion of industrial lands should fuel both revenue and gross margin growth. The current trough valuation at 4.6XFY14E P/E on 27% FY14E EPS growth makesthe risk/reward profile attractive, in our view.