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1、Deutsche Bank Markets Research Asia China Resources Metals be selective and Buy South China _ Deutsche Bank AG/Hong Kong All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendor
2、s. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should co
3、nsider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012. Johnson Wan Research Analyst (+852) 2203 6163 James Kan Research Analyst (+852) 2203 6146 Top picks CR Cement (1313.HK),HKD4.51 Buy
4、 Companies Featured CR Cement (1313.HK),HKD4.51 Buy BBMG (2009.HK),HKD5.94 Buy CNBM (3323.HK),HKD8.57 Buy West China Cement (2233.HK),HKD1.36 Buy Sinoma (1893.HK),HKD2.18 Hold Anhui Conch Cement (0914.HK),HKD24.15 Hold China Shanshui Cement (0691.HK),HKD5.05 Hold Whats changed? Stock FY12e/13e earni
5、ngs changes Target Price Rating CNBM -10%/- 20% From HKD10.81 to HKD9.76 Maintain BUY Shanshui 3%/-25% From HKD4.76 to HKD4.45 Maintain HOLD Sinoma -37%/- 50% From HKD3.15 to HKD2.50 BUY to HOLD Upside/downside to TP Company Target Price % upside/downside Conch HKD20.26 -16% CNBM HKD9.76 14% CRC HKD
6、5.65 25% BBMG HKD7.44 25% Shanshui HKD4.45 -12% Sinoma HKD2.50 15% WCC HKD1.67 23% This report changes ratings, target prices and/or estimates for several stocks under our coverage. For details see the tables above. We have seen cement prices stabilizing nationwide ahead of the peak season, but we b
7、elieve it is still too early to overweight the China cement sector. We analyzed leading indicators such as property construction starts and medium to long-term financing for infrastructure projects and conclude that the recovery in 4Q looks weak. We recommend staying selective as South China has the
8、 best momentum headed into 4Q with strong demand improvement and the lowest inventory levels in China. Our top pick is currently CR Cement. August cement volumes show minor improvement driven by South China Cement demand was weak this summer even though there was a marginal improvement in August cem
9、ent volumes, up 2% MoM. Compared to the average monthly volumes of 203mt in 2Q, August volumes of 195mt were still 4% below the levels seen in 2Q. The only region that saw a pickup was in South China, up 11% MoM in August. Inventory levels as a result have also declined to 62% of storage capacity, t
10、he lowest in the nation. Since the end of August, there have already been price hikes of 27% or RMB75/t in the South. Improvement in property sales but slow recovery in construction starts Despite improving property sales (GFA sold improved from -14% YoY in February to -4% YoY in August), cash flow
11、for most developers remains tight and the appetite to purchase land and increase construction starts is still weak. Commodity property GFA starts, a leading indicator of construction activity, are at -7% YoY in August versus an average of 23% YoY growth in 2011. The land acquisition area, a proxy fo
12、r cash flow of developers, was at -16% YoY in August versus an average of 19% YoY growth in 2011. Tight medium- to long-term financing suggests weak infrastructure recovery Since early 2011, funding for infrastructure projects as measured by non- financial medium- to long-term financing has declined
13、 rapidly and continues to remain tight. While the pace of deceleration has slowed recently, improving to -9% YoY in August 2012 from -50% in March 2012, the absolute value of financing is less than half of what it was during the RMB4 trillion stimulus in 2009. Further, the investment size of cement-
14、related projects under the Environmental Impact Assessment (EIA) stage (usually 2-3 month lag to construction starts) fell by 40% YoY in August, also indicating a weak recovery to construction. However, isolating those projects likely to be rolled out in 4Q; we found that South China had the largest
15、 value of approvals (32% of China). Prefer CNBM to Conch on valuations; top pick: CR Cement We believe current valuation for Conch implies a V-shaped recovery to ASPs in East and Central China which seems unlikely. Among the big caps, we prefer CNBM over Conch due to more attractive valuations. We r
16、ecommend being selective and buying names with a healthy turnaround in supply/demand and ASP improvement such as CRC. For small cap names, we recommend WCC given the consolidated nature of Shaanxi and the long-term growth prospects of cement demand in Western China. Our least preferred name is Shans
17、hui given maturing demand in Shandong and Liaoning. Risks:Risks: slower/faster-than- expected recovery in Chinas economy. 3 October 2012 Metals hence risk to earnings is to the upside. For other regions such as East and Central China, we expect only a weak recovery. Hence, we have lowered our earnin
18、gs for CNBM (we had already cut earnings for Conch). In North, Northeast and Northwest China, we do not expect a material turnaround in 4Q demand as they will enter the slow season beginning in late November. In Northwest, we expect further supply additions in Xinjiang to pressure ASPs and have ther
19、efore lowered our earnings for Sinoma. In Shaanxi, due to its geographic nature (further south) and imminent infrastructure starts such as the Xian-Hefei railway, we expect supply/demand to improve in 4Q. In North China, supply/demand is improving and inventories are relatively low but competition i
20、s rife. Major leaders are unwilling to raise prices as they are afraid they will lose market share to smaller factories. Therefore, we do not expect a major recovery to ASPs unless demand picks up sharply (we had previously lowered our earnings estimates for BBMGs cement business). In Northeast Chin
21、a and Shandong, demand continues to be weak (negative growth ytd) and a major rebound in 4Q is unexpected, given also the seasonality issues. We have therefore lowered our earnings for Shanshui in 2013 as we believe demand has matured and room for price improvement is limited. Figure 25: Summary of
22、changes to target prices, ratings and earnings Conch Conch CNBM CNBM CRC CRC BBMG BBMG Shanshui Shanshui Sinoma Sinoma WCC WCC Ticker 0914.HK 3323.HK 1313.HK 2009.HK 0691.HK 1893.HK 2233.HK Reporting currency CNY CNY HKD CNY CNY CNY CNY Share price (HKD/sh) as of 09/28/12 24.15 8.57 4.51 5.94 5.05 2
23、.18 1.36 Market cap (USD bn) 16.2 5.8 3.8 3.2 1.8 1.0 0.7 New Rating New Rating Hold Hold Buy Buy Buy Buy Buy Buy Hold Hold Hold Hold Buy Buy Previous Rating Hold Buy Buy Buy Hold Buy Buy Previous target Price (HKD/sh) 20.26 10.81 5.65 7.44 4.76 3.15 1.67 New TP (HKD/sh) New TP (HKD/sh) 20.26 20.26
24、9.76 9.76 5.65 5.65 7.44 7.44 4.45 4.45 2.50 2.50 1.67 1.67 Potential upside/downside (%) Potential upside/downside (%) -16% -16% 14% 14% 25% 25% 25% 25% -12% -12% 15% 15% 23% 23% % chg to TP 0% -10% 0% 0% -7% -21% 0% Previous target PE multiple 13.0 7.4 13.0 7.8 6.3 9.2 8.0 New target PE multiple*
25、New target PE multiple* 13.0 13.0 7.5 7.5 13.0 13.0 7.8 7.8 6.8 6.8 11.3 11.3 8.0 8.0 % chg to PE Target price 0% 1% 0% NA 8% 23% 0% FY12 DBe EPS (old) 1.10 1.05 0.26 0.67 0.52 0.20 0.10 FY13 DBe EPS (old) 1.31 1.32 0.43 0.77 0.71 0.36 0.17 FY12 DBe EPS (new) 1.10 0.95 0.26 0.67 0.53 0.13 0.10 FY13
26、DBe EPS (new) 1.31 1.06 0.43 0.77 0.53 0.18 0.17 EPS revision 2012E (%) EPS revision 2012E (%) 0% 0% -10% -10% 0% 0% 0% 0% 3% 3% -37% -37% 0% 0% EPS revision 2013E (%) EPS revision 2013E (%) 0% 0% -20% -20% 0% 0% 0% 0% -25% -25% -50% -50% 0% 0% Source: Bloomberg Finance LP, Deutsche Bank, *Note: We
27、use SOTP to value BBMG and P/B multiple to value Sinoma. Target PE multiple for the two companies are implied from such valuations 3 October 2012 Metals 2) slower-than- expected recovery in demand. 3 October 2012 Metals we expect weak recovery in prices in 4Q ? Production halts across its core regio
28、ns of Shandong, Zhejiang but impact to ASPs is limited and demand recovery is still weak Valuation and risks We value CNBM using a target PE multiple of 7.5, in line with our previous multiple and also equal to its 3yr mid-cycle forward PER. Our target price of HKD9.76 is derived using 2013e earning
29、s. Risks:Risks: Weaker-than-expected price cooperation and recovery in cement demand. Figure 28: Revisions to assumptions CNBM For year ended Dec 31 New forecast New forecast Old forecast Old forecast % Chg % Chg Unit 2011A 2012F 2013F 2014F 2012F 2013F 2014F 2012F 2013F 2014F Cement Capacity Cement
30、 Capacity mt mt 260.0 260.0 317.0 317.0 348.2 348.2 374.6 374.6 340.0 340.0 384.5 384.5 404.2 404.2 -7% -7% -9% -9% -7% -7% China United mt 80.0 84.0 88.2 92.6 90.0 94.5 99.2 -7% -7% -7% South Cement mt 130.0 138.0 144.0 150.0 140.0 145.0 150.0 -1% -1% 0% North Cement mt 25.0 35.0 41.0 47.0 40.0 55.
31、0 60.0 -13% -25% -22% Southwest Cement 25.0 60.0 75.0 85.0 70.0 90.0 95.0 -14% -17% -11% Blended sales volume Blended sales volume mt mt 183.4 183.4 219.6 219.6 238.1 238.1 260.6 260.6 227.8 227.8 262.0 262.0 296.7 296.7 -4% -4% -9% -9% -12% -12% China United mt 61.2 62.7 67.6 74.0 65.4 70.9 80.7 -4
32、% -5% -8% South Cement mt 101.7 102.9 111.5 120.5 109.6 117.2 125.6 -6% -5% -4% North Cement mt 17.7 24.1 30.3 37.0 26.6 38.9 49.9 -10% -22% -26% Southwest Cement 3.0 30.0 28.7 29.2 26.2 34.9 40.5 15% -18% -28% Cement 2) cement inflows from nearby provinces that hurt pricing; 3) faster-than-expected
33、 infrastructure starts in Shaanxi; and 4) execution risks from the Fuping and Shifeng acquisitions. 3 October 2012 Metals 2) expansion to Shanxi and Henan; 3) fluctuations in the appraised value of investment properties; 4) greater-than- expected declines in cement prices; and 5) tightening policies
34、 leading to further declines in residential ASPs. Conch (Hold, target price of HKD20.26) Outlook ? We expect price weakness to persist in 3Q12 but with limited room for further price declines as smaller producers are now loss-making ? Inventories lowered ahead of peak season but the absence of incre
35、ased property and infrastructure starts implies only a mild recovery to ASPs ? Limited capacity additions in 2H and post-2012 seen in Conchs core regions ? Continue to increase its investment in Western China and overseas Valuation and risks We value Conch using its historical mid-cycle PE of 12.7x
36、to FY13e earnings. Risks: Risks: slower/faster-than-expected demand recovery in China and expansion into overseas markets. 3 October 2012 Metals as a result, the recommendations may differ and the price targets and estimates of each may vary widely. In August 2009, Deutsche Bank instituted a new pol
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