外文报告：Macquarie-China cement sector：June Survey – weathering the rain-120621

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CHINA

Macquarie has developed a proprietary
survey of cement market participants to
gauge sentiment on the ground on a monthly
basis. We interview 60-70 cement and
downstream concrete and property
companies, asking about sequential changes
in demand, inventory, production, profitability
and raw materials.



HK/China Cement Universe

Stock
Ticker
Rec
Mkt cap
(US$m)
Turnover
(US$m)
CNBM 3323 HK OP 6,381 48.05
Shanshui 691 HK OP 2,140 4.16
BBMG 2009 HK OP 3,434 9.20
Sinoma 1893 HK OP 1,183 2.01
CR Cement 1313 HK N 4,453 7.36
Anhui Conch 914 HK UP 15,674 39.20
Source: Company data, Macquarie Research, June 2012



Analyst(s)
Pelen Ji
+852 3922 4741 pelen.ji@http://wendang.chazidian.com
Laura Shi
+852 3922 3564 laura.shi@http://wendang.chazidian.com
Andrew Dale
+852 3922 3587 andrew.dale@http://wendang.chazidian.com


21 June 2012
Macquarie Capital Securities Limited
China cement sector
June Survey – weathering the rain
Event
 Our June survey with 60-70 cement and downstream operators reveals that
underlying operations are soft in June. Respondents expressed cautious near
term expectations but are turning more positive on a 3-month view.
 We think it’s important to be selective and focus on names in which the
market has already priced in or more than priced in the YTD cement price
weakness. CNBM and Shanshui remain our favourites in the sector.
Impact
 Off-peak seasonality coupled with muted demand has taken its toll.
More producers reported declining orders in June compared with mid May.
Inventory level has ticked up marginally across the nation heading into the off-
peak month of June. China averaged 63% as of mid-June, up from 56%.
? Near term outlook cautious. More producers expect price cuts in July
(e.g. east china went from 43% of respondents to 57% in June) and lower
output (e.g. east china went from 14% of respondents to 43%).
? 3-month outlook more positive. While still in cautious territory,
nationwide producers are becoming more positive. This is most
remarkable in East and South China where producers are getting more
positive on the near-term outlook.
? Downstream – Concrete operators cautious but property companies
optimistic. More concrete producers are turning cautious on their
production outlook in July. Property companies on the other hand see
above budget sales and some plans to lower discounts in July. One-third
of developers expect the pace of construction to pick up in the next month,
the highest confidence level since Sep 2011. .
 Our view – see light at the end of Q3, LT growth intact. We forecast 2012
cement prices to drop by 6-14% YoY for the east names and we are 15-20%
below consensus in our earnings forecast. However we still expect cement
prices to moderately recover towards the back end of Q3 on both stronger
seasonality and a pickup in the construction market. After a muted 2012, we
expect 2013 earnings to recover by 30%.
Outlook
China cement stocks at a glance; CNBM top pick

Ticker

Stock

Rec Price
TP
Lcy
Potential
Upside
FY12E
P/E
FY11E
EV/t

Comment
3323 HK CNBM OP 9.17 12.00 31% 5.6 51.6 Top pick. Oversold as market de-risks
691 HK Shanshui OP 5.97 7.00 17% 6.0 45.6 Beneficiary of northeast exposure
2009 HK BBMG OP 6.22 9.00 45% 4.3 43.3
First to benefit from any rebound in
construction
1893 HK Sinoma OP 2.57 5.20 102% 5.0 23.5 Still cheap
1313 HK
CR
Cement
N 5.30 5.50 4% 7.9 76.9
Volume growth driven by good M&A
execution.
914 HK Conch UP 22.95 19.00 -17% 9.6 88.6
Largest and low cost; see downside over the
medium term.
743 HK ACC OP 3.41 4.70 38% 3.7 61.4
Valuation attractive but cautious on
east/central China exposure.
1136 HK TCCI OP 2.15 4.20 95% 2.1 38.0
Better earnings growth outlook in 2012
supported mainly on volume expansions
Source: Bloomberg, Macquarie Research, June 2012, priced as of 20 June 2012.
anonymous@http://wendang.chazidian.com FIRST LAST 06/21/12 01:02:52 PM Hong Kong Highpower