yum cha 飲 茶 - chinastock.com.hk · 10% over the next 2-3 years and the company is one of the...
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Yum Cha 飲 茶 November 30, 2015
Source: Bloomberg
INDICES Closing DoD%
Hang Seng Index 22,068.3 (1.9)
HSCEI 9,855.7 (2.5)
Shanghai COMP 3,436.3 (5.5)
Shenzhen COMP 2,184.1 (6.1)
Gold 1,057.6 0.0
BDIY 581.0 3.4
Crude Oil, WTI(US$/BBL) 41.9 0.3
Crude Oil, BRENT(US$/BBL) 44.8 (0.0)
HIBOR, 3-M 0.4 (0.7)
SHIBOR, 3-M 3.1 -
RMB/USD 6.4 0.1
RESEARCH NOTES
TALKING POINT - SDR WEIGHTING TO BE THE FOCUS
International Monetary Fund (IMF) will hold a board meeting today and it is widely expected that
RMB would be included in the basket of Special Drawing Rights (SDR). As we discussed two
weeks ago, the creation of SDR is to support the Bretton Woods fixed exchange rate system.
Following the collapse of this system, it lessened the need for the SDR. As of September 10,
2015, 204.1bn SDRs were created and allocated to members (equivalent to about US$280bn).
If we assume 15% will flow to RMB, it only represents a flow of US$42bn, a tiny amount in the
FX market. Therefore the short-term benefits are limited. However, it is considered by many
mainland investors as a milestone of RMB internationalization. Currently most people expect
RMB will have a weighting of 10%-15% in the SDR basket. If the actual weighting is closer to
the low-end of expectation or below 10%, it will be perceived as a negative because it suggests
IMF still thinks RMB is not a currency that can be used freely. It may exert depreciation pressure
on RMB and mainland aviation companies will be the major victims, as most of their debts are
dominated in foreign currencies. Analyst: Wong Chi-man, CFA
DATA RELEASES DUE THIS WEEK
Nov 30 Manufacturing PMI
Nov 30 Non-manufacturing PMI
Nov 30 Caixin China PMI Mfg
Nov 30 Caixin China PMI Composite
Nov 30 Caixin China PMI Services
YOFC [6869.HK; HK$8.35; BUY] - China Mobile’s [941.HK] acquisition of Tie Tong from the
parent may indicate that China Mobile will be more aggressive in fixed line and broadband
business which is positive to local optical fiber supply chain including Yangtze Optical Fibre &
Cable (YOFC). YOFC’s Q3 results were distorted by volatile foreign exchange rate movement.
Due to stabilization of RMB exchange rate, the level of exchange loss has been reduced signifi-
cantly in Q4 2015. We adjusted downward our earnings by 7.7% for 2015 after factoring in
exchange loss. Strong operating performance and increasing market attention are share price
catalysts. Maintain BUY with a new target price of HK$10.66 based on 11.0x 2015E PER.
ANHUI CONCH [0914.HK; HK$21.00; UPGRADE TO BUY] - We believe Anhui Conch has
secured a good deal by injecting four cement plants into West China Cement [2233.HK; WCC]
at an EV/tonne of about RMB860, nearly 2x of replacement cost. WCC will become a 51.57%-
owned subsidiary of Anhui Conch as the consideration will be settled by shares. The latter’s
cement production capacity will increase by 9.8% after deal completion, a milestone of market
consolidation. Although immediate earnings contribution will be limited, their combined market
share of >40% in Shaanxi post-deal should help improve the profitability. We maintain our tar-
get price of HK$27.1, based on 1.63x 2016E PBR. Upgrade from HOLD to BUY.
CHINA CEMENT WEEKLY - Average cement price (nationwide) climbed 0.13% to RMB253.08
tonne last week. Cement prices in part of Chongqing, Guangxi and Guizhou were up RMB10-
20/tonne. Average inventory level (nation-wide) dropped to 75.30% last week.
YOFC [6869.HK]
China Mobile’s [941.HK] acquisition of Tie Tong from parent may indicate that China Mo-
bile will be more aggressive in fixed line and broadband business which is positive to local
optical fiber supply chain including Yangtze Optical Fibre & Cable Joint Stock Limited
Company (YOFC). YOFC’s 3Q results were distorted by volatile foreign exchange rate
movement. Due to stabilization of RMB exchange rate, the level of exchange loss has
been reduced significantly in 4Q 2015. YOFC is one of the beneficiaries of 4G roll out and
continued investment in optical fiber based fixed line network in China. YOFC’s capacity
expansion is on track and margin is likely to improve given increasing in-house produc-
tion. YOFC will benefit from import substitution for fibre cables from the US, Japan and
Europe in the long term. We adjusted our earnings downward by 7.7% for 2015 after fac-
toring in exchange loss. Strong operating performance and increasing market attention
are share price catalysts. Maintain BUY with a new target price of HK$10.66 based on
11.0x 2015E PER. The target price adjustment is due to downward earning adjustment.
Beneficiary of China Mobile’s investment in wireline business. On 27 Nov 2015,
China Mobile announced that the company would buy Tie Tong from parent for a consideration of RMB32.9bn. Tie Tong provides the fixed line and broadband ser-vices (both residential and commercial). Tie Tong now has 18.3m fixed-line subscrib-ers and 12.0m broadband subscribers and both are much smaller than the subscriber base of its rivals. Acquisition of Tie Tong may indicate that China Mobile will be more aggressive in fixed line and broadband business to narrow the gap between Tie Tong and its two rivals. This is positive to the local optical fiber supply chain including YOFC.
Outlook for the local optical fiber supply will remain positive in 2016 given govern-
ment policy of enhancing broad band coverage and lower board band tariff. Due to 4G roll out and continued investment in optical fiber based fixed line network in Chi-na, demand for optical fibre related products is expected to remain strong in 2015-2017. YOFC’s management believes that the industry will grow at a CAGR of over 10% over the next 2-3 years and the company is one of the major beneficiaries. Ac-cording to management, the average selling of preform was up by 8-10% after the anti-dumping ruling after ministry of Finance earlier this year.
3Q results were distorted. YOFC’s 3Q results were distorted by foreign exchange
losses as 90% of the company’s borrowings was denominated in foreign currencies mainly USD and Euro. According to management, about 50% of exchange losses booked in 3Q has been recovered due to stabilization of foreign exchange market. Management is talking measures such as increasing RMB loan portion and issuing RMB to minimize exchange rate movement impact.
Realignment of interests. The Employee Stock Ownership Scheme has been ap-
proved by CSRC which, in our view, is positive as management has incentives to improve operating efficiency of the company.
Mark Po, CFA — Senior Analyst
(852) 3698-6318
Wong Chi Man, CFA —Head of Research
(852) 3698-6317
TMT Sector
Hardware
Outlooks remains positive. Maintain BUY
BUY
Close: HK$8.35 (Nov 27, 2015)
TP: HK$10.66 (+27.7%)
Share Price Performance
Market Cap US$689m
Shares Outstanding 639.5m
Auditor KPMG
Free Float 37.3%
52W range HK$6.28-11.88
3M average daily T/O US$1.2m
Major Shareholding Draka (28.1%)
China Huaxin
November 30, 2015
Key Financials
(in RMBm)2013 2014 2015E 2016E 2017E
Revenue 4,825.9 5,676.8 5,979.8 6,386.0 6,818.3
Change (YoY %) 1.0 17.6 5.3 6.8 6.8
Gross Profit 1,017.8 1,087.6 1,217.1 1,382.8 1,560.4
Gross Margin % 21.1 19.2 20.4 21.7 22.9
Net Profit 415.0 466.3 525.1 677.6 811.6
Net Margin % 8.6 8.2 8.8 10.6 11.9
EPS (Basic) 0.87 0.95 0.82 1.06 1.27
Change (YoY %) 13.8 10.2 (13.9) 29.0 19.8
DPS $0.000 $0.000 $0.123 $0.212 $0.254
ROE (%) 25.5 21.6 17.1 18.6 19.3
Dividend Yield (%) - - 1.74 2.99 3.59
PER (x) 8.2 7.4 8.6 6.7 5.6
PBR (x) 2.2 1.6 1.4 1.1 1.0
FCF Yield (%) 11.09% 5.69% 2.51% 2.75% 11.32%
Capex (m) (66.2) (36.3) (500.0) (400.0) (400.0)
Free cash flow per share 0.9 0.5 0.2 0.2 0.9
Net Gearing (%) 47.4 16.8 15.2 14.8 10.3
0
50
100
150
0
5
10
15
(HK$ million)(HK$)
Turnover (RHS) Price (LHS)
Figure 1: Key assumptions for YOFC
Sources: Company, CGIHK Research
Source: Company, CGIHK Research
2011 2012 2013 2014 2015F 2016F 2017F
Turnover (RMBm)
Optical fibre preforms and fibres 2,343.1 2,550.1 2,722.7 3,229.7 3,677.9 3,901.4 4,143.3
Optical fibre cables 1,788.1 2,070.3 1,817.6 1,989.4 1,971.9 2,025.7 2,061.4
Other products and services 43.9 157.4 285.6 457.7 330.0 459.0 613.7
Total 4,175.0 4,777.8 4,825.9 5,676.8 5,979.8 6,386.0 6,818.3
YoY Change (%)
Optical fibre preforms and fibres 8.8 6.8 18.6 13.9 6.1 6.2
Optical fibre cables 15.8 (12.2) 9.5 (0.9) 2.7 1.8
Other products and services 60.3 (27.9) 39.1 33.7
Total 14.4 1.0 17.6 5.3 6.8 6.8
Gross margin (%) 17.8 18.5 21.1 19.2 20.4 21.7 22.9
Optical fibre preforms and fibres 22.7 25.6 27.3 25.3 25.8 26.6 27.6
Optical fibre cables 11.4 9.4 11.7 9.1 8.5 9.1 9.1
Other products and services 10.9 22.2 21.4 19.4 30.9 34.9 37.6
Net margin (%) 8.2 7.6 8.6 8.2 8.8 10.6 11.9
ASP
Optical fibre preforms (RMB/tonne) 1,102.0 1,072.0 1,012.0 931.8 931.8 978.4 1,027.3
Optical fibres (RMB/fkm) 66.7 65.2 59.0 55.0 57.7 55.0 52.0
Optical fibre cables (RMB/fkm) 133.5 119.7 113.8 112.3 106.0 105.0 104.0
YoY Change (%)
ASP
Optical fibre preforms (2.7) (5.6) (7.9) 0 5.0 5.0
Optical fibres (2.3) (9.5) (6.7) 5.0 (4.8) (5.5)
Optical fibre cables (10.3) (5.0) (1.3) (5.6) (0.9) (1.0)
Volume
Optical fibre preforms (tonne) 624.0 683.0 964.0 1,289.6 1,547.5 1,702.2 1,872.5
Optical fibres (fkm) 24,816.0 27,900.0 29,628.0 36,874.0 38,717.7 40,653.6 42,686.3
Optical fibre cables (fkm) 13,395.0 17,292.0 15,975.0 17,717.0 18,603.0 19,292.0 19,821.0
YoY Change (%)
Volume
Optical fibre preforms 9.5 41.1 33.8 20.0 10.0 10.0
Optical fibres 12.4 6.2 24.5 5.0 5.0 5.0
Optical fibre cables 29.1 (7.6) 10.9 5.0 3.7 2.7
Cost (HKDm)
S,G&A (467.8) (528.1) (548.6) (565.4) (608.6) (649.9) (680.3)
Financial Expenses (68.0) (78.0) (81.3) (99.2) (98.4) (102.3) (106.5)
YoY Change (%)
S,G&A 12.9 3.9 3.1 7.6 6.8 4.7
Financial Expenses 14.8 4.2 22.1 (0.9) 4.0 4.1
CAPEX (RMBm) n.a. n.a. 66.2 36.3 500.0 400.0 400.0
Net Gearing (%) 51.6 43.0 47.4 16.8 15.2 14.8 10.3
Figure 2: Earnings projection
Sources: Company, CGIHK Research
Income Statement (RMBm) FY2013 FY2014 FY2015F FY2016F FY2017F Cash Flow Statement (RMBm) FY2013 FY2014 FY2015F FY2016F FY2017F
Revenue 4,826 5,677 5,980 6,386 6,818 Net Income 490 554 642 768 917
Growth yoy% 1.0% 17.6% 5.3% 6.8% 6.8% Depreciation & Amort. 110 114 147 174 200
Gross Profit 1,018 1,088 1,217 1,383 1,560 Change in Working Capital (110) (409) (161) (401) (139)
Growth yoy% 15.4% 6.9% 11.9% 13.6% 12.8% Cash from Ops. 491 258 628 540 978
Selling General & Admin Exp. (549) (565) (609) (650) (680) Capital Expenditure (66) (36) (500) (400) (400)
Others Operating Expenses/Items 21 32 33 35 37 Sale of Property, Plant, and Equipment - - - - -
Operating Income 490 554 642 768 917 Change in Investing Acitivities (126) (290) 237 (4) (168)
Growth yoy% n.a. 12.9% 15.9% 19.6% 19.4% Cash from Investing (192) (326) (263) (404) (568)
Interest Expense (81.3) (99.2) (98.4) (102.3) (106.5) Net increase in bank borrow ings 614 886 (22) 98 104
Interest and Invest. Income 42.5 52.0 50.6 51.1 57.1
Income/(Loss) from Affiliates 76.6 18.6 28.2 57.3 61.4 Issuance of Common Stock 0 892 0 0 0
Other Non-Operating Inc. (Exp.) 0 0 0 (50.0) 0 Common Dividends Paid (163) (574) 0 (79) (136)
Impairment of Goodw ill - - - - - Special Dividend Paid - - - - -
Gain (Loss) On Sale Of Invest. - - - - - Other Financing Activities (99) (105) (110) (134) (149)
Gain (Loss) On Sale Of Assets - - - - - Cash from Financing 353 1,099 (132) (114) (180)
Income Tax Expense (55) (71) (76) (100) (121)
Minority Int. in Earnings 0 2 0 0 0 Net Change in Cash 652 1,031 232 22 230
Net Income 473 457 546 674 807
Growth yoy% 13.8% 12.4% 12.6% 29.0% 19.8%
Balance Sheet (RMBm) FY2013 FY2014 FY2015F FY2016F FY2017F Ratios FY2013 FY2014 FY2015F FY2016F FY2017F
ASSETS Profitability
Cash And Equivalents 906 2,011 1,955 1,976 2,206 Return on Assets % 9.2% 8.0% 7.6% 9.0% 9.8%
Receivables 1,665 1,898 2,086 2,517 2,687 Return on Capital % 16.1% 12.8% 10.2% 11.7% 12.5%
Inventory 721 697 735 785 838 Return on Equity % 25.5% 21.6% 17.1% 18.6% 19.3%
Other Current Assets 1 6 0 0 0
Total Current Assets 3,294 4,612 4,775 5,277 5,731 Margin Analysis
Net Property, Plant & Equipment 820 783 1,136 1,362 1,562 Gross Margin % 21.1% 19.2% 20.4% 21.7% 22.9%
Long-term Investments - - - - - SG&A Margin % 11.4% 10.0% 10.2% 10.2% 10.0%
Other Intangibles - - - - - EBIT Margin % 11.0% 10.7% 11.6% 12.8% 14.3%
Deferred Tax Assets, LT - - - - - EBITDA Margin % 13.4% 12.7% 14.1% 15.6% 17.2%
Other Long-Term Assets 894 1,197 1,251 1,308 1,368 Net Income Margin % 8.6% 8.2% 8.8% 10.6% 11.9%
Goodw ill - - - - -
Accounts Receivable Long-Term - - - - - Asset Turnover
Total Long Term Assets 1,713 1,979 2,387 2,670 2,930 Total Asset Turnover 1.0x 0.9x 0.8x 0.8x 0.8x
Total Assets 5,008 6,591 7,162 7,948 8,661 Fixed Asset Turnover 2.8x 2.9x 2.5x 2.4x 2.3x
Accounts Receivable Turnover 3.0x 3.2x 3.0x 2.8x 2.6x
LIABILITIES & EQUITY Inventory Turnover 6.7x 8.1x 8.1x 8.1x 8.1x
Accounts Payable 1,792 1,112 1,171 1,251 1,335
Accrued Exp. - - - - - Liquidity
Short-term Borrow ings 808 1,465 1,443 1,541 1,646 Current Ratio 1.3x 1.8x 1.8x 1.9x 1.9x
Curr. Port. of LT Debt - - - - - Quick Ratio 0.9x 1.5x 1.5x 1.5x 1.6x
Curr. Income Taxes Payable - - - - - Avg. Days Sales Out. 126.0 122.0 127.3 143.8 143.8
Unearned Revenue, Current - - - - - Avg. Days Inventory Out. 54.6 44.8 44.8 44.8 44.8
Other Current Liabilities 0 7 8 9 10 Avg. Days Payable Out. 140.2 115.5 87.5 88.3 89.8
Total Current Liabilities 2,600 2,584 2,623 2,801 2,991 Avg. Cash Conversion Cycle 59.6 106.0 112.2 129.6 130.5
Long-Term Debt 814 1,019 1,019 1,019 1,019 Net Debt to Equity 47% 17% 15% 15% 10%
Def. Tax Liability, Non-Curr. 84 76 84 93 102
Other Non-Current Liabilities 0 0 0 0 0 Growth Over Prior Year
Total Liabilities 3,498 3,680 3,726 3,912 4,112 Total Revenue 1.0% 17.6% 5.3% 6.8% 6.8%
Common Stock 480 639 639 639 639 Net Income 13.8% 12.4% 12.6% 29.0% 19.8%
Additional Paid In Capital - - - - - Payout Ratio % 0.0% 0.0% 15.0% 20.0% 20.0%
Retained Earnings 1,030 2,174 2,699 3,298 3,812
Treasury Stock
Comprehensive Inc. and Other - - - - -
Minority Interest 0 97.7 97.7 97.7 97.7
Total Equity 1,510 2,911 3,437 4,035 4,549
Total Liabilities And Equity 5,008 6,591 7,162 7,948 8,661
Figure 3: Peer Comparison
Sources: Bloomberg, Company, CGIHK Research estimates for covered stocks
Ticker Company
Price Market Cap 2015F 2016F 2017F 2015F 2016F 2017F 2014 2015F 2014 2015F 2014 2015F 2014 2015F
Lcy US$m x x x x x x x x % % % % % %
6869 HK YOFC 8.35 689 7.9 6.6 5.0 6.9 5.7 4.5 1.6 1.6 21.6 20.7 8.0 8.1 2.4 3.0
2342 HK Comba Telecom Systems 1.48 388 8.9 7.5 6.4 5.6 4.9 4.5 0.8 0.7 4.1 8.9 1.8 2.8 1.6 2.8
552 HK China Communications Service 3.03 2,708 7.1 6.6 6.1 3.7 3.5 3.1 0.7 0.7 9.6 10.2 4.1 4.7 3.7 4.4
763 HK ZTE Corp-H 17.58 10,976 16.2 14.4 12.4 13.3 11.8 11.3 1.7 1.9 11.1 13.0 3.4 2.7 n.a. 1.6
6168 HK China U-Ton Holdings Ltd 1.20 272 18.3 14.1 11.5 n.a. n.a. n.a. 3.9 2.7 15.9 15.8 13.0 8.4 0.0 0.8
3777 HK China Fiber Optic Netw ork Sy 0.83 230 2.8 2.6 2.2 1.7 1.5 1.3 0.5 0.4 17.1 15.6 9.0 10.3 0.0 5.8
877 HK O-Net Communications Group 2.21 209 18.4 12.3 9.2 n.a. n.a. n.a. 1.2 n.a. 3.2 5.9 3.8 n.a. 0.0 n.a.
1300 HK Trigiant Group Ltd 1.57 317 4.8 4.4 5.2 6.2 5.7 5.3 0.8 0.7 21.3 14.8 9.4 9.9 8.8 7.9
941 HK China Mobile Ltd 88.80 234,595 13.0 12.3 11.4 4.2 3.9 3.6 1.7 1.6 13.3 12.9 8.4 8.5 3.1 3.3
762 HK China Unicom Hong Kong Ltd 9.67 29,878 15.1 15.5 13.2 3.2 3.1 2.9 0.8 0.8 5.4 5.4 1.8 2.6 2.5 2.3
728 HK China Telecom Corp Ltd-H 3.80 39,681 13.2 12.1 10.7 3.3 3.1 2.9 0.9 0.8 6.2 6.5 3.1 3.8 2.4 2.6
1883 HK Citic Telecom International 3.07 1,339 13.6 13.6 12.6 8.4 8.1 7.8 1.5 1.5 11.4 11.3 4.4 4.8 3.7 3.8
Average 11.6 10.2 8.8 5.7 5.1 4.7 1.3 1.2 11.7 11.7 5.8 6.0 2.6 3.5
000063 CH Zte Corp-A 17.58 10,975 19.8 16.7 14.6 11.8 10.4 9.7 2.7 2.4 11.1 12.9 3.0 3.5 0.8 1.2
600804 CH Dr Peng Telcom & Media Gr-A 23.38 5,119 42.1 31.6 23.7 11.5 9.5 8.2 6.0 5.9 11.6 14.1 4.6 4.3 n.a. 0.7
300134 CH Shenzhen Tat Fook Technolo-A n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 22.5 n.a. 5.7 n.a. n.a. n.a.
600198 CH Datang Telecom Tech Co-A 23.15 3,193 28.9 23.2 n.a. n.a. n.a. n.a. 5.6 n.a. 6.8 n.a. -0.5 n.a. 0.0 n.a.
600498 CH Fiberhome Telecom Tech Co-A 26.18 4,285 35.4 28.5 23.4 33.2 26.9 22.7 4.1 3.8 9.1 10.2 3.7 4.5 n.a. 0.8
002396 CH Fujian Star-Net Communicat-A 21.92 1,848 38.5 32.3 23.0 n.a. n.a. n.a. 4.8 4.5 11.6 17.4 6.4 14.9 n.a. 1.2
002281 CH Accelink Technologies Co -A 59.60 1,956 58.8 40.6 29.6 27.8 20.1 n.a. 5.1 4.7 7.1 8.3 4.6 5.3 0.8 0.3
600487 CH Hengtong Optic-Electric Co-A 12.51 2,428 31.4 25.0 20.1 n.a. n.a. n.a. 3.5 2.0 10.1 10.6 3.6 4.1 n.a. 0.6
002491 CH Tongding Interconnection I-A 20.30 3,806 51.1 38.1 22.2 54.7 47.3 41.3 9.0 9.3 8.9 10.9 3.1 n.a. 0.2 n.a.
600522 CH Jiangsu Zhongtian Technolo-A 22.26 3,540 26.7 21.9 18.1 16.7 12.2 n.a. 2.3 2.5 8.6 9.9 5.0 6.4 n.a. 0.8
000070 CH Shenzhen Sdg Info Co Ltd-A 27.29 1,156 78.0 55.7 46.6 33.6 26.6 23.3 6.6 7.1 5.3 9.0 2.4 1.9 n.a. 0.2
300299 CH Fuchun Communications Co L-A 50.60 3,006 133.2 97.3 72.3 n.a. n.a. n.a. 33.9 n.a. 3.7 n.a. 2.9 n.a. 0.1 n.a.
Average 49.5 37.4 29.4 27.0 21.9 21.0 7.6 4.7 9.7 11.5 3.7 5.6 0.4 0.7
PRY IM Prysmian Spa 20.33 4,670 17.4 14.7 12.8 8.9 8.2 7.7 3.7 3.5 10.0 19.4 2.1 3.7 n.a. 2.3
JNPR US Juniper Netw orks Inc 30.41 11,734 15.3 13.8 13.0 8.4 8.2 7.8 2.6 2.7 -5.5 15.8 -3.7 8.3 1.3 1.3
4063 JP Shin-Etsu Chemical Co Ltd 6978.00 24,590 20.4 18.9 17.3 7.3 6.8 6.4 1.5 1.4 6.8 7.3 5.8 7.6 n.a. 1.6
5803 JP Fujikura Ltd 692.00 2,037 13.9 12.4 11.4 6.9 6.7 6.5 1.0 0.9 1.7 7.1 2.7 3.7 n.a. 1.2
MSI US Motorola Solutions Inc 71.83 12,682 21.7 17.8 16.4 11.6 10.9 10.7 n.a. n.a. 40.6 60.1 5.2 7.3 1.9 1.9
CSCO US Cisco Systems Inc 27.24 138,272 12.0 11.4 10.6 6.1 6.0 5.8 2.3 2.2 13.6 17.8 8.9 9.9 3.0 3.1
ALU FP Alcatel-Lucent 3.71 11,171 28.3 15.0 12.5 7.9 6.8 6.1 5.7 4.3 -4.9 13.9 -0.3 -0.9 n.a. 0.0
ERICB SS Ericsson Lm-B Shs 84.40 31,867 17.3 13.9 12.6 8.3 7.0 6.4 2.0 1.9 8.1 9.5 3.9 5.4 n.a. 4.3
NOK1V FH Nokia Oyj n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.#N/A Field Not Applicablen.a. 45.9 13.1 5.4 7.1#N/A Field Not Applicablen.a.
Average 18.3 14.7 13.3 8.2 7.6 7.2 2.7 2.4 12.9 18.2 3.3 5.8 2.1 1.9
PE EV/EBITDA P/B ROE ROA Div yield
Anhui Conch [0914.HK]
BUY (upgraded from HOLD)
Close: HK$21.00 (Nov 27, 2015)
Target Price: HK$27.10 (+29%)
Price Performance
Market Cap US$13,714m
Shares Outstanding 5,299.3m
Auditor KPMG
Free Float 55.0%
52W range HK$20.30-34.15
3M average daily T/O US$30.8m
Major Shareholding Conch Holdings
(36.78%)
Sources: Company, Bloomberg
Wong Chi Man—Head of Research
(852) 3698 6317
Livy Lyu— Research Assistant
(852) 3698 6393
Sources: Company, CGIHK Research
China Cement Sector
We believe Anhui Conch has secured a good deal by injecting four cement plants into West
China Cement [2233.HK; WCC] at an EV/tonne of about RMB860, nearly 2x of replacement
cost. In addition, WCC will become a 51.57%-owned subsidiary of Anhui Conch as the consid-
eration will be settled by shares. The latter’s cement production capacity will increase by 9.8%
after deal completion, a milestone of market consolidation. Although immediate earnings con-
tribution will be limited as WCC only recorded a net profit of RMB2.4m in 1H15 due to unfa-
vourable market environment, their combined market share of >40% in Shaanxi post-deal
should help improve the profitability. We maintain our target price of HK$27.1, based on 1.63x
2016E PBR. Upgrade from HOLD to BUY as the recent correction offers a good entry point.
Investment Highlights
Key info of the deal. WCC proposed to acquire four cement plants located in Shaanxi from
Anhui Conch, including Baoji FHS, Baoji JLH, Qianxian Cement and Qianyang Cement. Each
of them has a clinker production line of 4,500 tonnes/day and a cement grinding system of
2.2m tonnes capacity per year (except Baoji FHS, which has a cement grinding system of
3.8m tonnes capacity per year). WCC will issue 3.4bn new shares at HK$1.35 per share
(HK$4.6bn) to Anhui Conch to settle the transaction. Anhui Conch’s stake in WCC will in-
crease from 21.17% to 51.57%. WCC’s book value per share is HK$1.40 before the transac-
tion while its share price before trading suspension is HK$1.45. The deal will require support
from >50% independent shareholders (i.e. ex-Anhui Conch). Excluding Anhui Conch, WCC’s
chairman Zhang owns 46% of the remaining portion. It should not be difficult to secure an
additional 4% to secure the approval in the extra-ordinary shareholders’ meeting.
Favourable deal to Anhui Conch based on key indicators. We estimate the deal values the
four cement plants at EV/tonne of about RMB860, nearly 2x of replacement cost. The transac-
tion price also implies 1.87x adjusted book value and 2.68x 2014A price/sales (Anhui Conch:
1.44x).
Short-term gain limited but clear long-term positives. As a result of unfavourable market
environment in Shaanxi, WCC only reported a net profit of RMB2.4m in 1H15. However, the
two companies will have a combined market share of >40% (WCC alone: close to 25%) after
deal completion, which should strengthen their pricing power in the region. If we assume WCC
can achieve 12% ROE in the medium term, it will generate a net profit of RMB739m per year,
equivalent to 6.7% of Anhui Conch’s 2014 net profit. Our earnings forecasts remain un-
changed at the moment as the timing of deal completion is uncertain, subject to approval from
regulators and independent shareholders.
To propose a general offer at HK$1.69 per share after the deal. Since Anhui Conch will
own >50% shares in WCC after the transaction, the former will need to propose a general
offer. However, Anhui Conch clearly expressed its intention to keep the listing status of WCC.
A Milestone of Market Consolidation; Upgrade to BUY on Valuation
November 30, 2015
Y/E Dec 31 2012 2013 2014 2015E 2016E
Turnover (RMB m) 45,766 55,262 60,759 53,592 57,168
Recurring net profit (RMB m) 6,293 9,504 10,951 6,425 6,713
Net margin (%) 14 17 18 12 12
Recurring EPS (RMB) 1.19 1.79 2.07 1.21 1.27
% Change (45) 51 15 (41) 4
PER (x) 14.4 9.3 8.0 14.3 14.0
PBR (x) 1.9 1.6 1.4 1.3 1.2
EV/EBITDA (x) 8.3 5.9 5.3 7.6 7.0
0
500
1000
1500
0
10
20
30
40
Dec14 Jan15 Mar15 May15 Jul15 Sep15 Nov15
(HK$ million)(HK$)
Turnover (RHS) Price (LHS)
Key financials
Anhui Conch (00914.HK)
Income Statement
(RMB'000, except for per share amount)
Year ended 31 Dec 1H 2H 1H 2H 1H 2H 2012 2013 2014 2015E 2016E
Revenue 23,587,088 31,674,589 28,784,483 31,974,018 24,223,323 29,368,701 45,766,203 55,261,677 60,758,501 53,592,024 57,167,586
COGS (17,023,072) (20,251,896) (18,598,993) (21,961,099) (17,635,061) (22,217,597) (33,264,544) (37,274,968) (40,560,092) (39,852,658) (42,192,275)
Gross profit 6,564,016 11,422,693 10,185,490 10,012,919 6,588,262 7,151,104 12,501,659 17,986,709 20,198,409 13,739,366 14,975,311
Operating expenses (2,212,686) (2,873,948) (2,404,103) (3,220,149) (2,687,472) (3,353,515) (4,458,118) (5,086,634) (5,624,252) (6,040,987) (6,469,484)
Operating profit 4,351,330 8,548,745 7,781,387 6,792,770 3,900,790 3,797,589 8,043,541 12,900,075 14,574,157 7,698,379 8,505,828
Other income and gains 445,405 473,137 484,954 506,809 689,651 534,637 1,054,996 918,542 991,763 1,224,288 1,021,180
EBIT 4,796,735 9,021,882 8,266,341 7,299,579 4,590,441 4,332,226 9,098,537 13,818,617 15,565,920 8,922,667 9,527,008
Net f inance costs (532,341) (436,278) (371,008) (247,929) (246,654) (241,845) (998,855) (968,619) (618,937) (488,499) (564,052)
Profits from associates and JCEs (42,416) 16,734 (26,652) (32,826) 33,428 17,000 (22,829) (25,682) (59,478) 50,428 84,000
Non-recurrent items (141,407) (11,740) (2,199) 41,736 1,887,285 (64,817) 48,844 (153,147) 39,537 1,822,468 -
Income before tax 4,080,571 8,590,598 7,866,482 7,060,560 6,264,500 4,042,564 8,125,697 12,671,169 14,927,042 10,307,064 9,046,956
Income tax expense (912,014) (1,938,151) (1,741,894) (1,618,289) (1,514,374) (950,002) (1,639,068) (2,850,165) (3,360,183) (2,464,376) (2,196,687)
Minority interests (110,040) (321,666) (313,727) (272,215) (35,638) (15,463) (155,526) (431,706) (585,942) (51,101) (137,005)
Net income 3,058,517 6,330,781 5,810,861 5,170,056 4,714,488 3,077,098 6,331,103 9,389,298 10,980,917 7,791,586 6,713,263
Recurring net income 3,164,573 6,339,586 5,812,510 5,138,754 3,299,024 3,125,711 6,293,042 9,504,159 10,951,264 6,424,736 6,713,263
EPS (RMB) 0.577 1.195 1.097 0.976 0.890 0.581 1.195 1.772 2.072 1.470 1.267
Recurring EPS (RMB) 0.597 1.196 1.097 0.970 0.623 0.590 1.188 1.793 2.067 1.212 1.267
DPS (RMB) - 0.350 - 0.650 - 0.441 0.250 0.350 0.650 0.441 0.380
Depreciation and amortization 1,751,688 1,822,365 1,897,808 1,929,961 2,175,521 2,305,742 3,275,946 3,574,053 3,827,769 4,481,263 4,968,002
EBITDA 6,506,007 10,860,981 10,137,497 9,196,714 6,799,390 6,654,968 12,351,654 17,366,988 19,334,211 13,454,358 14,579,009
Cement and clinker ASP (Rmb/tonne) 224.7 248.4 246.3 228.6 204.5 194.5 241.3 237.8 236.7 198.8 200.0
Cement and clinker vol. ('000 tonnes) 103,278 124,658 113,543 135,568 115,360 146,442 186,789 227,936 249,112 261,802 277,266
Cost per tonne (Rmb) 161 156 156 154 146 144 173.7 158.3 155.0 144.8 144.6
Gross profit per tonne (Rmb) 64 92 91 74 59 50 67.5 79.5 81.7 54.0 55.4
Growth Rates:
Revenue 15% 26% 22% 1% -16% -8% -6% 21% 10% -12% 7%
EBIT 16% 81% 72% -19% -44% -41% -44% 52% 13% -43% 7%
EBITDA 15% 62% 56% -15% -33% -28% -34% 41% 11% -30% 8%
Core net income 8% 89% 84% -19% -43% -39% -45% 51% 15% -41% 4%
Recurring EPS 8% 89% 84% -19% -43% -39% -45% 51% 15% -41% 4%
Margins and Ratios:
Gross margin 27.8% 36.1% 35.4% 31.3% 27.2% 24.3% 27.3% 32.5% 33.2% 25.6% 26.2%
Net margin 13.9% 21.0% 21.3% 16.9% 13.8% 10.7% 14.1% 18.0% 19.0% 12.1% 12.0%
EBIT margin 20.3% 28.5% 28.7% 22.8% 19.0% 14.8% 19.9% 25.0% 25.6% 16.6% 16.7%
EBITDA margin 27.6% 34.3% 35.2% 28.8% 28.1% 22.7% 27.0% 31.4% 31.8% 25.1% 25.5%
Effective tax rate 22% 23% 22% 23% 24% 23% 20% 22% 23% 29% 24%
Sources: Company data, CGIHK Research estimates
2015E20142013
Key financials
Anhui Conch (00914.HK)
Balance Sheet Statement of Cash Flow
(RMB'000 , except for per share amount)
As at 31 Dec 2012 2013 2014 2015E 2016E Year ended 31 Dec 2012 2013 2014 2015E 2016E
Inventories 4,038,538 3,692,690 4,375,977 4,600,000 5,000,000 Profit before tax 8,125,697 12,671,169 14,927,042 10,307,064 9,046,956
Trade receivables 230,370 358,861 333,247 400,000 450,000 Depreciation & Amortization 3,105,016 3,429,022 3,773,534 4,251,263 4,718,002
Bills receivable 8,158,709 7,166,484 3,885,568 6,500,000 6,700,000 Change in w orking capital 2,179,477 811,633 3,467,025 (1,756,204) (650,000)
Others 3,068,984 2,618,126 2,663,578 2,810,946 3,010,946 Others / adjustments (3,073,899) (2,956,694) (5,642,793) (509,416) (2,449,569)
Bank balances and cash 8,124,974 11,140,832 14,012,121 14,012,121 14,012,121 Net operating cash f low 10,336,291 13,955,130 16,524,808 12,292,707 10,665,389
Total current assets 23,621,575 24,976,993 25,270,491 28,323,067 29,173,067
Capex (6,157,233) (6,425,753) (6,222,740) (9,500,000) (9,000,000)
PPE, net 52,607,328 56,276,368 62,469,127 67,247,573 71,529,571 Others (2,312,428) (6,050,574) 1,371,626 - -
Prepaid lease payments 3,291,595 3,655,950 4,043,759 3,900,000 4,000,000 Net investing cash f low (8,469,661) (12,476,327) (4,851,114) (9,500,000) (9,000,000)
Others 8,003,025 8,185,169 10,469,720 9,651,386 9,735,386
Total non-current assets 63,901,948 68,117,487 76,982,606 80,798,959 85,264,957 Change in debt 1,301,207 (1,599,709) (2,274,301) 651,840 672,087
Dividends (1,854,760) (1,324,826) (1,854,756) (3,444,547) (2,337,476)
Total assets 87,523,523 93,094,480 102,253,097 109,122,026 114,438,024 Others (945,022) (121,415) (1,526,938) - -
Net f inancing cash f low (1,498,575) (3,045,950) (5,655,995) (2,792,707) (1,665,389)
Trade payables 5,133,852 3,791,010 4,014,855 5,000,000 5,200,000
Other payables 5,705,945 6,391,519 7,188,773 7,500,000 7,500,000 Increase / Decrease in cash 156,162 3,015,858 2,871,289 - -
Bank and other borrow ings 2,658,427 2,934,811 2,329,168 1,000,000 1,000,000 Net cash/(debt) (15,613,087) (11,000,536) (5,904,123) (6,555,963) (7,228,050)
Others 1,023,099 1,427,981 864,211 968,369 901,447
Total current liabilities 14,521,323 14,545,321 14,397,007 14,468,369 14,601,447 Finance Ratios
Bank and other borrow ings 21,079,634 19,206,557 17,587,076 19,568,084 20,240,171 2012 2013 2014 2015E 2016E
Others 1,119,445 940,843 1,041,930 1,460,348 1,458,389 Valuation
Total non-current liabilities 22,199,079 20,147,400 18,629,006 21,028,432 21,698,560 PE(x) 14.4 9.3 8.0 14.3 14.0
EPS grow th (%) 45- 51 15 41- 4
Total liabilities 36,720,402 34,692,721 33,026,013 35,496,802 36,300,007 Yield (%) 1.5 2.1 3.9 2.5 2.1
PEG (x) -0.32 0.18 0.53 -0.35 3.13
Shareholders' equity 48,537,540 55,763,501 65,849,976 70,197,016 74,572,803 EV/EBITDA (x) 8.3 5.9 5.3 7.6 7.0
Minority interests 2,265,581 2,638,258 3,377,108 3,428,209 3,565,214 PB(x) 1.89 1.65 1.40 1.31 1.23
Operational
Revenue grow th (%) 6- 21 10 12- 7
Gross margin (%) 27.3 32.5 33.2 25.6 26.2
Net profit margin (%) 14.1 18.0 19.0 12.1 12.0
Days receivables 77 53 35 38 45
Days payables 56 44 35 41 44
Days inventories 46 38 36 41 42
Current ratio (x) 1.6 1.7 1.8 2.0 2.0
Quick ratio (x) 1.1 1.3 1.3 1.4 1.4
Asset/Equity (x) 1.7 1.6 1.5 1.5 1.5
Net debt/equity (%) 31 19 9 9 9
EBITDA interest coverage (x) 12.4 17.9 31.2 27.5 25.8
Core ROE (%) 13.5 18.2 18.0 9.4 9.3
Sources: Company data, CGIHK Research estimates
Figure 4: Cement Prices in East China (RMB/tonne) Figure 5: Cement Prices in South Central China (RMB/tonne)
Sources: Digital Cement, CGIHK Research Sources: Digital Cement, CGIHK Research
Figure 3: Quarterly Results Highlights
Sources: Company, CGIHK Research
Y/E Dec (RMB '000) Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
Turnover 8,827,026 11,732,129 11,630,418 13,576,630 9,859,581 13,608,450 13,350,813 18,323,776 12,571,606 16,212,877 14,808,295 17,165,723 11,181,618 13,041,705 13,659,068
Gross Profit 2,325,054 3,130,712 2,632,568 4,413,325 2,431,801 4,112,466 4,380,387 7,042,306 4,439,897 5,745,593 4,364,936 5,647,983 3,240,900 3,347,362 3,172,171
Margin 26.3% 26.7% 22.6% 32.5% 24.7% 30.2% 32.8% 38.4% 35.3% 35.4% 29.5% 32.9% 29.0% 25.7% 23.2%
Operating profit 1,512,729 2,088,404 1,522,124 2,920,284 1,392,036 2,942,145 3,171,830 5,376,915 3,332,341 4,449,046 3,016,401 3,776,369 1,974,797 1,925,993 1,789,941
Net Profit 1,249,018 1,686,914 1,020,539 2,374,632 972,201 2,087,696 2,324,139 4,006,642 2,473,498 3,337,363 2,351,558 2,818,498 1,713,524 3,000,964 1,397,375
Adjusted net profit 1,253,775 1,683,237 1,017,661 2,338,369 970,546 2,219,950 2,326,707 4,012,879 2,476,458 3,337,363 2,347,664 2,791,090 1,662,015 1,637,009 1,462,193
YoY Change -43% -54% -67% 2% -23% 32% 129% 72% 155% 50% 1% -30% -33% -51% -38%
Sales volume ('000 tonne) 33,000 47,550 53,730 52,509 46,300 56,978 58,600 66,058 48,000 65,543 65,000 70,568 50,500 64,860 70,590
YoY Change 11.1% 15.9% 35.2% 10.8% 40.3% 19.8% 9.1% 25.8% 3.7% 15.0% 10.9% 6.8% 5.2% -1.0% 8.6%
ASP (Rmb/tonne) 266 238 217 245 215 229 227 263 250 240 221 231 215 196 179
YoY Change -13.1% -24.9% -31.1% -14.1% -19.2% -4.0% 4.6% 7.3% 16.3% 5.0% -2.6% -12.0% -14.0% -18.2% -19.0%
Gross profit per ton 70 67 52 82 52 74 76 107 91 86 66 82 63 55 44
Figure 1: Peer Valuation
Net debt/equity (%)
Company Ticker Rating Price (HK$) Market cap (US$m) 2014 2015E 2016E 2014 2015E 2016E 2014 2015E 2016E 2015E
Anhui Conch 914 HK Equity BUY 21.00 13,629 8.0 14.3 14.0 1.40 1.31 1.23 5.3 7.6 7.0 9
CNBM 3323 HK Equity HOLD 4.16 2,879 3.2 12.1 6.1 0.46 0.48 0.45 7.4 9.6 8.8 249
BBMG 2009 HK Equity BUY 5.04 6,014 10.7 11.0 7.7 0.61 0.66 0.62 8.3 8.7 7.0 65
CR Cement 1313 HK Equity BUY 2.55 2,136 3.9 6.7 6.9 0.59 0.58 0.54 4.2 6.6 5.7 56
Shanshui Cement 691 HK Equity SELL 6.29 2,725 45.9 42.2 34.7 1.58 1.52 1.47 10.6 10.3 9.4 134
Simple average 14.3 17.3 13.9 0.93 0.91 0.86 7.1 8.6 7.6 103
Weighted average 11.5 15.5 13.3 1.08 1.04 0.99 6.6 8.2 7.3 63
Source: CGIHK Research estimates
PER (x) PBR (x) EV/EBITDA(x)
Figure 2: Peer Comparison
2014 -2016E PEG(x)
Company Ticker 2015E 2016E CAGR (%) 2015E 2014 2015E 2016E 2014 2015E 2016E
Anhui Conch 914 HK Equity (41.3) 4.5 (21.7) (0.7) 18.2 18.0 9.4 2.1 3.9 2.5
CNBM 3323 HK Equity (69.8) 102.5 (21.7) (0.6) 14.4 4.0 7.8 5.0 1.4 2.5
CR Cement 1313 HK Equity (42.1) (3.0) (25.0) (0.3) 14.1 16.2 8.7 4.1 6.7 2.8
BBMG 2009 HK Equity 1.3 46.8 21.9 0.5 6.8 6.1 8.4 1.6 1.2 1.5
Shanshui Cement 691 HK Equity 10.4 21.8 15.9 2.6 3.7 3.7 4.4 - 0.5 0.6
Simple average (28.3) 34.5 (6.1) 0.3 11.4 9.6 7.7 2.6 2.7 2.0
Weighted average (29.9) 25.2 (8.6) (0.0) 13.5 12.4 8.5 2.2 2.9 2.1
Source: CGIHK Research estimates
EPS Growth (%) ROE (%) Dividend yield (%)
200
250
300
350
400
450
500
550
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
East China
2011 2012 2013 2014 2015
250
270
290
310
330
350
370
390
410
430
450
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
South Central China
2011 2012 2013 2014 2015
Figure 6: Rolling Forward PER Range Figure 7: Rolling Forward PBR Range
Sources: Bloomberg, CGIHK Research Sources: Bloomberg, CGIHK Research
Figure 8: EV/EBITDA Range
Sources: Bloomberg, CGIHK Research
5
7
9
11
13
15
17
19
21
23
25
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Rolling forward PER (x) Average +1 Standard deviation -1 Standard deviation
1.0
1.5
2.0
2.5
3.0
3.5
4.0
01/2
009
04/2
009
07/2
009
10/2
009
01/2
010
04/2
010
07/2
010
10/2
010
01/2
011
04/2
011
07/2
011
10/2
011
01/2
012
04/2
012
07/2
012
10/2
012
01/2
013
04/2
013
07/2
013
10/2
013
01/2
014
04/2
014
07/2
014
10/2
014
01/2
015
04/2
015
07/2
015
10/2
015
P/B trend (x) 1 Standard deviation
-1 Standard deviation Average
4
5
6
7
8
9
10
11
12
13
14
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
EV/EBITDA (x) Average (x)
+1 Standard deviation -1 Standard deviation
China Cement Weekly
November 30, 2015
Wong Chi Man—Head of Research
(852) 3698-6317
Livy Lyu—Research Assistant
(852) 3698-6393
Counterattack from Zhang’s Family on Shanshui’s Control; Mild In-
crease in Cement Price Last Week
Cement prices rose 0.13% last week. Average cement price (nationwide) climbed 0.13%
to RMB253.08 tonne last week. Cement prices in part of Chongqing, Guangxi and Guizhou
were up RMB10-20/tonne. Downstream demand gradually recovered as the weather turned
better since late November. Demand returned to normal level in Guangdong and Jiangxi
areas while other regions still saw a relatively weak demand. Average inventory level
(nation-wide) dropped to 75.30% last week.
Coal prices continued to drop last week. Comprehensive average price index for Bohai-
Rim Steam Coal (Q5500K) declined by RMB2/tonne last week to RMB373/tonne. The index
was 27.3% lower on year-on-year (YoY) basis.
Shanshui’s accusations against Tianrui Group. Shandong Shanshui Cement Group
(SSCG), a subsidiary of Shanshui Cement [0691.HK; SELL] has commenced proceedings
in Jinan, Shandong, against Tianrui Group. In an announcement last Friday, SSCG claimed
that from the evidence obtained by the relevant court in connection with such proceedings, it
discovered that Tianrui Group and its related persons made payments in a total sum of over
RMB500m through various individuals and companies to certain individuals who are
minority shareholders of China Shanshui Investment (a substantial shareholder of Shanshui
Cement) and who commenced the petition of the receivership of China Shanshui
Investment. Shanshui Cement believes that some of the acts of Tianrui Group constituted or
might constitute breaches of the laws, regulations and/or codes of Hong Kong and other
jurisdictions. Shanshui Cement has taken steps to report the matters to the relevant
authority, and may take further actions to protect its interest and shareholders. It remains to
be seen whether this latest development will affect Tianrui Group’s plan to hold an extra-
ordinary shareholders’ meeting to appoint its representatives to the board of directors of
Shanshui Cement.
Cement stocks under coverage dropped 7.3% in average last week. Market sentiment
was weak as a result of poor commodity prices and investigations against major brokers.
Best performer was CR Cement [1313.HK; BUY] down 6.3% to HK$2.55/share. BBMG
[2009.HK;BUY] was the weakest among our coverage stocks, which plummeted 8.2% for
the past week.
China Cement Sector
Sources: Company, Bloomberg, CGIHK Research estimates
Valuation Table
Net debt/equity (%)
Company Ticker Rating Price (HK$) Market cap (US$m) 2014 2015E 2016E 2014 2015E 2016E 2014 2015E 2016E 2015E
Anhui Conch 914 HK Equity BUY 21.00 13,629 8.0 14.3 14.0 1.40 1.31 1.23 5.3 7.6 7.0 9
CNBM 3323 HK Equity HOLD 4.16 2,879 3.2 12.1 6.1 0.46 0.48 0.45 7.4 9.6 8.8 249
BBMG 2009 HK Equity BUY 5.04 6,014 10.7 11.0 7.7 0.61 0.66 0.62 8.3 8.7 7.0 65
CR Cement 1313 HK Equity BUY 2.55 2,136 3.9 6.7 6.9 0.59 0.58 0.54 4.2 6.6 5.7 56
Shanshui Cement 691 HK Equity SELL 6.29 2,725 45.9 42.2 34.7 1.58 1.52 1.47 10.6 10.3 9.4 134
Simple average 14.3 17.3 13.9 0.93 0.91 0.86 7.1 8.6 7.6 103
Weighted average 11.5 15.5 13.3 1.08 1.04 0.99 6.6 8.2 7.3 63
PER (x) PBR (x) EV/EBITDA(x)
2014 -2016E PEG(x)
Company Ticker 2015E 2016E CAGR (%) 2015E 2014 2015E 2016E 2014 2015E 2016E
Anhui Conch 914 HK Equity (41.3) 4.5 (21.7) (0.7) 18.2 18.0 9.4 2.1 3.9 2.5
CNBM 3323 HK Equity (69.8) 102.5 (21.7) (0.6) 14.4 4.0 7.8 5.0 1.4 2.5
CR Cement 1313 HK Equity (42.1) (3.0) (25.0) (0.3) 14.1 16.2 8.7 4.1 6.7 2.8
BBMG 2009 HK Equity 1.3 46.8 21.9 0.5 6.8 6.1 8.4 1.6 1.2 1.5
Shanshui Cement 691 HK Equity 10.4 21.8 15.9 2.6 3.7 3.7 4.4 - 0.5 0.6
Simple average (28.3) 34.5 (6.1) 0.3 11.4 9.6 7.7 2.6 2.7 2.0
Weighted average (29.9) 25.2 (8.6) (0.0) 13.5 12.4 8.5 2.2 2.9 2.1
EPS Growth (%) ROE (%) Dividend yield (%)
1-Year Relative Performance
Sources: Capital IQ, CGIHK Research
Peer Comparison
Sources: Bloomberg, CGIHK Research
Market cap
Company Ticker Rating Price (LC) (US$m) 2014 2015E 2016E 2014 2015E 2016E 2014 2015E 2016E
Anhui Conch 914 HK Equity BUY 21.00 13,629 8.0 14.3 14.0 1.40 1.31 1.23 5.3 7.6 7.0
CNBM 3323 HK Equity HOLD 4.16 2,879 3.2 12.1 6.1 0.46 0.48 0.45 7.4 9.6 8.8
BBMG 2009 HK Equity BUY 5.04 6,014 10.7 11.0 7.7 0.61 0.66 0.62 8.3 8.7 7.0
CR Cement 1313 HK Equity BUY 2.55 2,136 3.9 6.7 6.9 0.59 0.58 0.54 4.2 6.6 5.7
Shanshui Cement 691 HK Equity SELL 6.29 2,725 45.9 42.2 34.7 1.58 1.52 1.47 10.6 10.3 9.4
TCC International 1136 HK Equity NR 1.44 913 4.9 14.0 8.8 0.40 0.33 0.32 4.0 9.3 8.4
China National Materials 1893 HK Equity NR 1.65 756 8.4 9.3 8.5 0.33 0.34 0.32 6.3 7.5 7.1
Asia Cement 743 HK Equity NR 2.02 406 3.3 42.7 10.4 0.28 0.28 0.27 4.1 9.3 7.3
West China Cement 2233 HK Equity NR 1.45 1,008 149.0 46.0 14.4 1.05 0.96 0.94 7.7 8.4 6.0
Tianrui Cement 1252 HK Equity NR 1.81 557 7.5 n.a. n.a. 0.50 n.a. n.a. 6.8 n.a. n.a.
Simple average 24.5 22.0 12.4 0.72 0.72 0.68 6.5 8.6 7.4
Weighted average 15.5 16.4 12.8 1.02 0.97 0.92 6.5 8.1 7.2
PER (x) PBR (x) EV/EBITDA(x)
Figure 1: Regional Cement Price
Sources: Digital Cement, CGIHK Research
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BUY share price will increase by >20% within 12 months in absolute terms :
SELL share price will decrease by >20% within 12 months in absolute terms :
HOLD no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL :