Cement Producers

Cement Producers

Postby winston » Sun Jan 25, 2009 7:29 pm

20090114 Macquarie Chinese cement
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Event
We review the Chinese cement market and related stocks.

Impact
Both Anhui Conch and CNBM have performed strongly over the past few months, given the market’s focus on infrastructure spending. This performance has also been fuelled by broker upgrades to both earnings and recommendations. We remain positive on the Chinese infrastructure spending story and the role that cement plays, but we think earnings in the market now might now be too high. When we initiated on the sector, our earnings forecasts were ahead of consensus, but they are now 10–20% below the market.

Volumes and prices improve in December, however gross profit margins were under pressure. While prices have been rising slightly and costs have been falling, the full impact has not been felt during 4Q. Gross margins fell to 20% for Conch and CNBM, from +30% earlier in the year. We are likely to see weaker margins in 1Q09.

Execution risk is now the focus for FY09. We continue to think that the cement story will be heavily weighted to the later half of 2009. Our price targets for the cement companies reflects this. Recent stock performance has now largely factored in a recovery in construction into 2H09. The stocks now need to deliver on expectations in order to maintain outperformance.

GP margin guidance per tonne of cement could actually mean some downgrade for Conch. Conch management has continued to guide for a GP per tonne of Rmb50–60. We understand that in 4Q08, the company achieved around Rmb48/t, the lowest for the year (average FY08 GP per tonne was about Rmb60). For FY09, the market is currently forecasting around Rmb77/t, which is higher than our Rmb70/t; both signal downside risk. Our earnings upgrade to CNBM now means it will deliver a GP per tonne of around Rmb60/t, which appears more reasonable.

Outlook
We think both Conch and CNBM will be well placed to pick up large government-related contracts going forward. Earnings will likely be weaker in the 1H09 but we expect they will improve into 2H09. Both stocks now need to deliver on these expectations.

Anhui Conch: We retain our Outperform rating on Conch but we do see a short-term opportunity to take profit. The stock performance in 4Q08 and 1Q09 is likely to be poor, and we think there is downside risk to the market’s earnings forecast for FY09. On an EV/t basis, we continue to feel comfortable with our target price of HK$40 but we think the stock will provide better opportunity below HK$30.


CNBM. We have upgraded our earnings estimate for CNBM to reflect our lower GP per tonne forecast. The stock is still in a period of strategic transition. While execution risk is high in the short term, we still see further upside to the share price performance.
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Re: Cement Producers

Postby winston » Tue Mar 10, 2009 2:31 pm

DJ MARKET TALK: Daiwa Starts China Cement Sector At Positive View

1221 [Dow Jones] Daiwa starts China cement sector at Positive. "Large-volume state-owned players, like Anhui Conch (0914.HK) and CNBM (3323.HK), are likely to be the biggest beneficiaries in the sector from the stimulus measures introduced by the central and local governments, which use quantity, quality and price as the main criteria for awarding contracts."

Expects sector's outperformance vs HSI likely to be sustained over next six months by flat power tariffs, declining spot coal prices, which mark about 70% of producers' input costs.

Starts CNBM at Buy, target HK$13.53 on view its debt burden has eased with new share placement, halting of aggressive acquisition strategy, optimizing debt structure.

Starts Anhui Conch at Outperform, target HK$43.09 on view current levels attractive after recent share-price correction. CNBM up 2.9% at HK$8.93, Anhui Conch up 5.7% at HK$36.80
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Re: Cement Producers

Postby winston » Tue Sep 22, 2009 3:46 pm

Not vested

DJ MARKET TALK: UOB KayHian Rates CNBM, Shanshui Cement At Buy

1514 [Dow Jones] STOCK CALL: UOBKayHian rates CNBM (3323.HK), Shanshui Cement (0691.HK) at Buy; says potential government policies to aggressively eliminate 500 million tonnes of outdated cement capacity in 2010-2013, 30% of total capacity in 2009, likely to lead to industry consolidation.

"These potential policies are likely to have a much bigger positive impact in terms of pricing power and industry profitability."

Sets CNBM's, Shanshui Cement's target at HK$21.24, HK$6.08 respectively.

Source: Dow Jones Newswire
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Re: Cement Producers

Postby winston » Wed Sep 30, 2009 12:24 pm

DJ MARKET TALK: HK Cement Plays Mixed; Policy Favors Leaders -UOB

1201 [Dow Jones] HK-listed cement stocks mixed, but changes small, mostly neutral to news cement industry among those targeted by Beijing's moves to tackle overcapacity issue.

UOB KayHian expects details of capacity elimination schedule, further details of policy to limit capacity per capita as well as price hikes in 4Q09 to offer key catalysts for sector performance, as will improve demand, supply dynamics, facilitate industry consolidation, which "will enable higher industry profitability and greater pricing power by the regional leaders."

House keeps Buy call on CNBM (3323.HK), Shanshui Cement (0691.HK), Sinoma (1893.HK), target prices HK$21.24, HK$6.08, HK$8.30 respectively.

Source: Dow Jones Newswire
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Re: Cement Producers

Postby winston » Tue Dec 01, 2009 9:57 am

DJ MARKET TALK: China Cement Sector Outlook Will Improve FY10 -DB

0905 [Dow Jones] Deutsche Bank says slowing FAI growth in China next year doesn't mean weaker cement demand; instead, believes Chinese cement supply/demand outlook will improve in FY10, driven by on-going infrastructure construction (many projects already running behind schedule), further recovery in real estate investment.

House expects more old cement capacity to be closed, thus incremental demand will outpace supply additions, leading to better cement pricing outlook; tips cement price will rise 5% in FY10 and FY11; keeps sector as Overweight.

Rates Anhui Conch Cement (0914.HK), CNBM (3323.HK), Sinoma (1893.HK) at Buy.

Source: Dow Jones Newswire
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Re: Cement Producers

Postby winston » Tue Dec 01, 2009 12:33 pm

DJ MARKET TALK: China Cement Stocks Offer Restructuring Play -MS

1157 [Dow Jones] China's cement sector offers most favorable restructuring potential over next five years, clear long-term winner across the materials sectors, Morgan Stanley says.

Expects China's government to refocus on aggressively restructuring energy-intensive, highly polluting industries; estimates to offer potential profit increases of 200%-300%, citing clear link from increased industry consolidation as country's cement market one of world's most fragmented.

Tips top four players to hold at least 30% market share by 2015 vs 19% now; tips further boost from M&A. Says valuations look attractive on near-term earnings, downright cheap looking out to 2015.

Rates Anhui Conch (0914.HK) at Equalweight, target HK$60.00. Sets CNBM (3323.HK), Sinoma (1893.HK), Shanshui Cement (0691.HK) targets at HK$24.50, HK$8.00, HK$7.80 respectively; rates all three at Overweight.

Source: Dow Jones Newswire
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Re: Cement Producers

Postby winston » Thu Dec 03, 2009 3:54 pm

Not vested.

DJ MARKET TALK:China Cement Cos May Benefit From Capacity Control

0658 GMT [Dow Jones] China government's efforts to curb capacity in cement sector will likely raise cement prices in southern area in 1H 2010; Gao Wei at Xiangcai Securities tips Anhui Conch Cement (600585.SH), Huaxin Cement (600801.SH) as top choices, says capacity control will help cement price recovery in southern provinces as prices this year pressured by too much capacity, also as more house building projects will increase demand.

China government says today will raise criteria for companies entering cement sector; local governments have stopped approving new cement projects.

Source: Dow Jones Newswire
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Re: Cement Producers

Postby winston » Tue Jan 19, 2010 11:07 am

Chinese Cement

DJ MARKET TALK: RBS Tips China Cement Plays To Outperform

1034 [Dow Jones] RBS rates China cement sector at Overweight after China Cement Conference. Expects eastern China may see better price discipline in 2010, with cooperation among major players, phase out of non-NSP plants going faster than expected in Guangdong, with many failing to re-start production in 4Q09 when cement prices high at around CNY400/ton.

Notes Anhui Conch (0914.HK), CNBM (3323.HK) signed agreement last week, according to China Cement Association; no details disclosed, but tips deal may be related closer cooperation. Notes sector plays down year-to-date on concerns over property market.

"However, we still believe that cement stocks should outperform, given their underperformance since 2H09 and the likely improvement in industry supply/demand in the medium term once the noise about the property market recedes and it is proved that the increase in cement capacity is not as great as some feared, especially in the coastal areas."

Tips Buy Anhui Conch, CNBM, TCC International (1136.HK).


Source: Dow Jones Newswire
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Re: Cement Producers

Postby winston » Fri Jan 29, 2010 7:24 am

According to Pivot Capital, Chinese excess capacity in cement is greater than the combined consumption by the U.S., Japan, and India combined.
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Re: Cement Producers

Postby winston » Tue Feb 02, 2010 10:09 am

DJ MARKET TALK: China Cement Plays Up At Pre-Open; Rural Boost

0947 [Dow Jones] At pre-open, Anhui Conch Cement (0914.HK) indicated +0.7% at HK$47.35, China National Building Material (3323.HK) +0.9% at HK$4.65, Sinoma (1893.HK) +1.1% at HK$5.31, Asia Cement (0743.HK) +3.5% at HK$4.15, CR Cement (1313.HK) +3.8% at HK$3.52, adding to yesterday's big sector rally which came on news of "building materials to countryside" theme.

ICBC International says rural development contributes about 35% of overall cement demand in China; assuming policy to increase rural building expenditure by CNY50-60 billion, estimates this could add 1.5%-1.8% to cement demand in 2010 forecast, which "seems not very material," but still meaningful amid current market concern on potential slowdown of cement demand from property development

Source: Dow Jones Newswire
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