Cement Producers

[winston]

DJ MARKET TALK: Beware Of Likely Profit Cut On China Cement Makers

0838 [Dow Jones] The most critical question for the China cement sector is whether the current consensus earnings forecasts are being overly optimistic, as after the selloff Monday and Tuesday, China National Building Material (3323.HK), for example, is trading on 4.8X FY12 EPS based on Thomson Reuters, Shanshui Cement (0691.HK) on 4.7X, even sector leader Anhui Conch Cement (0914.HK) in only valued at 7.1X.

Still, one should be vigilant about drastic earnings cuts should the industry fundamentals deteriorate like Credit Suisse predicts; the house's FY12 EPS forecast for CNBM is CNY0.97, about half of CNY1.82 currently pegged 23 analysts polled by Thomson Reuters, illustrating the kind of operating leverage cement makers are facing.

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: China Cement Stocks' Rebound Fizzles Out Quickly

1046 [Dow Jones] China cement stocks' rebound fizzles out quickly, despite most sector names taking a 15%-20% mauling in the past two sessions, as investors remain wary of a likely deterioration of the industry's supply-demand outlook.

On the supply side, big players' discipline is critical in protecting margins; on this UBS believes supply discipline is still effective; it says that according to its market channel checks, the leading cement producers in Eastern China remain determined in terms of supply discipline and cement price protection.

The house believes cement price and sales volume could have some seasonal recovery in September with the help of the supply discipline, which could trigger some rebound of the cement stocks with easing concern over supply discipline cracking down.

Source: Dow Jones Newswire

[winston]

not vested

DJ MARKET TALK: China Cement Stks Rebound; TCC Leaps 11.8%

1039 [Dow Jones] China cement stocks are rebounding after a heavy selloff earlier this week on concerns over a deteriorating industry demand/supply outlook.

China National Building Material (3323.HK) is up 2.5% at HK$10.70 after plunging 21.9% over the previous four sessions, but the biggest gainer today is TCC International (1136.HK), which leaps 11.8% to HK$3.61 after falling 19.9% over the past four sessions.

TCC says it plans to raise HK$2.42 billion via a 3-for-20 open offer, which consists of 494 million unlisted new convertible preference shares with a conversion price of HK$4.90, which represents a very unusual 51.7% premium over the stock's Wednesday close.

JPMorgan says the current cement retail price weakness is due to 3Q low season, a higher base in 2Q11 and tight credit, but "it doesn't suggest company ASP is also falling."

The house's top sector pick in the current macro environment remains Anhui Conch Cement (0914.HK); Conch is up 1.9% at HK$27.40.

Source: Dow Jones Newswire

[winston]

vested

DJ MARKET TALK: China Cement Stock Weak; Downstream Concerns

1114 [Dow Jones] China Cement stocks' selloff continues, with leaders Anhui Conch Cement (0914.HK) and China National Building Material (3323.HK) both tumbling more than 6%.

In the very near term, a technical rebound is expected given how oversold these stocks are; CNBM, for example, has tumbled 30% in 7 sessions. Valuations appear to be extremely cheap with CNBM on 4.2X consensus FY12 EPS based on Thomson Reuters, but investors clearly are not trusting such numbers.

UBS says although the earnings of cement producers could be supported by supply discipline, "we believe the earnings growth will slow down." It adds, downstream remains under pressure because of monetary tightening; it expects the seasonal strengthening to trigger some rebound but a new round of rally "requires a macro policy turnaround."

CNBM is down 8.4% at HK$9.34, Conch falls 6.2% to HK$25.05, China Resources Cement (1313.HK) is off 6.0% at HK$6.30.


Source: Dow Jones Newswire

[winston]

vested

Operating cash flow improved but receivable turnover days increased

We noticed that operating cash flow for most companies improved in H111,
but the net change in cash for the sector did not improve significantly and the average receivable turnover days increased from 81 days in H110 to 137
days in H111.

We believe this is largely due to the aggressive expansion of many cement companies and the credit tightening policy.


H211 outlook for cement sector

Although the earnings of cement producers could be supported by supply discipline, we believe the earnings growth will slow down.

Downstream remains under pressure because of monetary tightening. We expect the seasonal strengthening to trigger some rebound but a new round of rally requires a macro policy turnaround.

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: China Cement Stocks Tumble, But Slower 4Q Priced In-UBS

1145 [Dow Jones] Selling pressure in China cement stocks remain relentless: China National Building Material (3323.HK) tumbles 6.2% to HK$8.49 and has fallen 36.5% vs its Sept. 1 close of HK$13.36; CNBM is trading at 3.9X consensus FY12 earnings based on Thomson Reuters.

"Share prices seem to be pricing in excessive EPS-forecast revisions," says Daiwa.

Separately, UBS says cement companies' earnings growth rate could slow down in 4Q due to the higher base, but "we believe it is already factored in by the stock price." It adds, the upcoming seasonal strengthening could trigger a round of rebound, but "the final turnaround might wait for the coming signals of government policy easing."

Anhui Conch Cement (0914.HK) is down 2.4% at HK$24.00.

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: China Cement Stock Up; Citi Tips Limited Downside

1451 [Dow Jones] China cement stocks are rebounding for the second session but gains have moderated to mostly 1%-2%, as investors remain concerned that an expected cement price rebound in 4Q may not materialize.

Citigroup says the market is pricing-in a hard landing scenario with cement demand flattening out in 2012 or even diminishing, but investment contributes more than 5 percentage points to China's GDP growth; if cement demand posts zero or negative growth, China's GDP should contract in 2012 with exports worsening and consumption stagnating.

The house adds, sector leaders Anhui Conch Cement (0914.HK) now trades at 8.2X FY11 P/E; in 2003, when the industry peaked out in the last cycle, the leading P/E averaged at 8X.

"We see limited downside from current level even if we paint a negative picture with earnings peaking out in 2011."

Conch is up 2.0% at HK$25.40, China National Building Material (3323.HK) is up 2.0% at HK$9.07.

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: China Construction Deceleration Inevitable In 2012-UBS

1302 [Dow Jones] UBS says its findings from various channel checks include:

1. Beijing is determined and should be able to achieve the target to start 10 million units of social housing construction in 2011 and 2012;

2. tightening impact is felt across the board and could further bite until Beijing loosens;

3. constructors with strong balance sheets and access to bank lending are able to cherry-pick projects so as to ensure high profitability and returns.

UBS expects construction activities, steel supply and material demand will remain at an elevated level, yet growth deceleration seems inevitable in 2012;

It views China State Construction International (3311.HK) as best positioned among Chinese constructors. CSCI tumbles 8.1% to HK$4.97.

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: Some Relief For Cement Names On Public House News

0801 [Dow Jones] Recently beaten-down China construction-related stocks may get some relief from news that China's State Council said the central government will keep boosting subsidies for public housing projects and urged local governments to boost fiscal investment in the area, according to a statement posted on a government portal Monday.

The falls in China cement stocks have accelerated in the past few sessions, tracking the steep declines in mainland property stocks on slowdown fears; the public housing news may provide some comfort on the demand front.

Sector leader Anhui Conch Cement (0914.HK) plunged 12.0% to end Monday at HK$22.40, China National Building Material (3323.HK) slumped 9.2% to HK$8.29, China State Construction International (3311.HK) fell 8.5% to HK$4.95.

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: Cement Names Rally More; Funding A Challenge - JPM

1020 [Dow Jones] China cement stocks extend Tuesday's big rally: China National Building Material (3323.HK) stands out and is up 5.5% at HK$7.74 on top of its 14.0% rally Tuesday.

Still, investors perhaps shouldn't lose sight of the fact that the sector was also one of the most beaten-down during the recent market selloff; despite the rebound, CNBM has more than halved vs its 52-week high of HK$17.58 hit July 8.

JPMorgan says tight credit is now the major challenge to cement demand growth; "we believe demand itself in the long term is there but there is no funding to support it."

It adds, the average retail cement price across China has finally seen an upward trend last week, up 0.4% on-week (after a 5% drop in 3Q) as the market moves into 4Q peak season.

JPM currently prefers China Resources Cement (1313.HK). CR cement is up 2.0% at HK$5.53.

Source: Dow Jones Newswire