original rules discount rate of bluechip a 70% minimum ... · china cement weekly - average cement...

Yum Cha 飲茶 November 16, 2015

Source: Bloomberg

INDICES Closing DoD%

Hang Seng Index 22,396.1 (2.2)

HSCEI 10,181.5 (2.2)

Shanghai COMP 3,580.8 (1.4)

Shenzhen COMP 2,205.6 (2.4)

Gold 1,088.2 0.4

BDIY 560.0 (3.3)

Crude Oil, WTI(US$/BBL) 40.9 0.3

Crude Oil, BRENT(US$/BBL) 44.6 0.2

HIBOR, 3-M 0.4 (0.4)

SHIBOR, 3-M 3.0 -

RMB/USD 6.4 0.1

RESEARCH NOTES

TALKING POINT - A-SHARE: STRONG SIGNAL FOR “SLOW” BULL

Last Friday, stock exchanges in Shanghai and Shenzhen announced that the minimum collat-

eral required for margin loans would be raised from 50% to 100%, effective on November 23.

Since existing margin financing contracts will not be affected, the actual immediate impact on

the market is limited. However, the psychological impact will be much bigger, as investors are

likely to interpret the revision as a strong cooling signal from the authorities trying to cool down

the market after a near 25% rebound within three months. A50 futures traded in Singapore

dropped 2.5% last Friday following the announcement of tighter margin financing rules, which

clearly showed the negative market sentiment. Share prices of brokerage stocks will be inevi-

tably hit in the near term due to their high beta nature. Meanwhile, the actual deleveraging

impact will be less severe than that highlighted in news headlines. We understand that as a

measure to control risk after the huge market volatility in Q3, brokerages usually ask for a

70%-90% minimum collateral, not 50%. In the medium term, we have concerns about whether

the tighter rules will again create room for OTC margin financing, which usually offers a higher

leverage. Finally, we would like to highlight that IPO application is likely to resume late this

week or early next week. It will create short-term liquidity pressure as this batch of IPOs will

follow the original rules, i.e. requires a huge prepayment of subscription.

Analyst: Wong Chi-man, CFA

DATA RELEASES DUE THIS WEEK

Nov 17 China October Property Prices

Nov 18 MNI November Business Indicator

Nov 18 Bloomberg Nov. China Economic Survey

Nov 19 Conference Board China October Lead-

ing Economic Index

MACRO - Last Friday, International Monetary Fund (IMF) recommended RMB should be in-

cluded in the basket of Special Drawing Rights (SDR). We expect RMB is likely to obtain the

official approval during the IMF board meeting on November 30. Although there is limited real

benefit in the near term, it will be a symbolic event for the internationalization of RMB. It will

also encourage more investment projects related to “One-Belt One-Road” to use RMB for set-

tling contracts. In addition, more central banks will be willing to add RMB in their FX reserve

gradually if the Chinese currency is included in the SDR basket.

CONSUN PHARMA [1681.HK; HK$4.75; NR] - Leading oral kidney traditional Chinese

medicine player with undemanding valuation: Consun holds over 25% share in oral kidney

TCM market in China and we believe it can continue its strong growth leveraging on the strong

distribution channel. Besides, Consun has recently acquired a 45% stake in Guangxi Yulin,

another growth driver for the company. Consun is trading at 2015E/16E PER of 14.6/11.7x,

which we believe is undemanding given its growth potential ahead.

CHINA CEMENT WEEKLY - Average cement price (nationwide) stabilized at RMB253.33

tonne for the last two weeks, except that cement prices in part of Hebei and Shanxi were down

RMB10/tonne. Mid-November saw a weakening market demand due to lacklustre performance

in property development and infrastructure. Rainy weather was also an unfavourable condition.

Simple example of margin financing trading

Original rules

Use RMB100 to buy Bluechip A 100

Discount rate of bluechip A 70%

Minimum collateral required for margin loans 50%

Maximum margin financing allowed [(100*70%)/50%] 140

New rules

Use RMB100 to buy Bluechip A 100

Discount rate of bluechip A 70%

Minimum collateral required for margin loans 100%

Maximum margin financing allowed [(100*70%)/100%] 70

http://1681.hk/

COMPANY / INDUSTRY NEWS

Analyst: Wong Chi Man, CFA (Tel: (852) 3689 6317); [email protected]

MACRO – IMF STAFF RECOMMENDED RMB SHOULD JOIN SDR BASKET

Board meeting on November 30 to determine the addition. Last Friday, International Monetary Fund (IMF) recommended RMB

should be included in the basket of Special Drawing Rights (SDR). A board meeting is to be held at the end of this month to discuss

this issue and China needs to secure no less than 70% of votes for support. Judging from the tone of the US and other major devel-

oped countries, it seems that RMB is very likely to obtain the approval.

What is SDR? According to IMF’s website, “The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange

rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely

accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to

maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for

supporting the expansion of world trade and financial development that was taking place. Therefore, the international community de-

cided to create a new international reserve asset under the auspices of the IMF. Its value is based on a basket of four key internation-

al currencies, and SDRs can be exchanged for freely usable currencies.”

RMB to have a weighting >10%. The existing SDR basket breakdown is: 41.9% for USD, 37.4% for EUR, 11.3% for GBP and 9.4%

for JPY. According to various market estimates, RMB will have a weighting of low teens to about 15% if it is added to the SDR basket.

A symbolic event... We understand Chinese investors have paid heavy attention to the potential inclusion of RMB to the SDR bas-

ket, which will show RMB enjoys the same status as USD, EUR, GBP and JPY. In particular, as the SDR basket review is conducted

for every five years, missing the chance of being included this year will imply waiting for five more years. It will be considered as a big

setback for the internationalization of RMB.

...but real benefits to be limited in the near term. As we mentioned above, 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.

To encourage more use of RMB in the longer term. Although the immediate benefit is very limited after RMB’s inclusion in the

SDR basket, we still see benefits in the longer term. As China is trying to support cooperation with developing countries under the

“One-Belt One-Road” policy, it will be easier to encourage counterparties to use RMB for settling contracts, instead of USD, if RMB

enjoys a higher international status after adding to the SDR basket. In addition, more central banks will be willing to add RMB in their

FX reserve gradually if the Chinese currency is included in the SDR basket.

November 16, 2015


Analyst: Cyrus Ng, CFA ([email protected]; Tel: 852 - 3698 6275)

CONSUN PHARMA [1681.HK, HK 4.75] – Leading oral kidney traditional Chinese medicine player with undemanding valuation

Market Cap: US$ 612.9m; Free Float: 37.4%

CONSUN PHARMA (1681.HK; NOT-RATED) Company background: Consun mainly focuses on kidney thera-

peutic field and medical contrast medium in China. Its flagship prod-

uct, Uremic Clearance Granule (UCG), is mainly used for treatment

of stage three and four of chronic kidney disease (CKD) and renal

anemia.

Leading player in a promising industry. Consun is the leading

player in oral kidney traditional Chinese medicine (TCM) market

with >25% share. The market had a CAGR of 20.7% during 2008-

2014E, reaching RMB 2,341m in 2013. It is forecasted that the mar-

ket to grow with a CAGR of 15.8% in 2014E—2018E. We believe

the strong growth momentum will be driven by 1) increasing CKD

awareness rate; 2) irreversible nature of CKD and patients need

perpetual medication; 3) increasing recognition of oral kidney TCM

due to its mild side effects; and 4) improved medical coverage in

rural areas.

We believe the robust growth of UCG can continue: UCG is

mainly used for stabilizing kidney functions and delaying dialysis for

patients, and treatment of renal anemia. Listed in both National Es-

sential Drug List and National Drug Reimbursement List, the growth

of UCG would be supported by: (1) expanding usage to cover differ-

ent stages of CKD patients, and (2) increasing penetration into low-

er-tier hospitals.

Strong distribution channel on high-end hospitals: Consun em-

ploys academic promotion model for marketing of products. The

company employs over 730 academic promotion sales, 175 third-

party primary distributors, 580 third-party secondary distributors.

Currently covering 1,090 class III hospitals (~78% coverage) and

over 3,000 class II hospitals (~50% coverage), Consun promotes

new products by quickly penetrating into high end hospitals.

Short-term drag? Acquisition of Yulin: Consun has progressively

acquired 45.27% stake of Guangxi Yulin, at an overall cost of

RMB641m, implying 2014 PER of 34.5x. Management expects to

increase stake to over 51%. A China Time-honored Brand (中華老

字號) mainly engaged in manufacturing TCM and natural medicines,

Yulin recorded a net profit of RMB41m on turnover of RMB392m in

2014. It was restructured from a state-owned enterprise to limited

liability in 2001.

In spite of its well-known brand name, Yulin recorded stagnant

growth in previous years. Consun plans to improve its operation by

managing distribution channels and target a 34.6% CAGR of net

profit in 2014-2017E. Besides, Consun also expects synergy in (1)

expanding sales of UCG through the strong OTC channel of Yulin,

(2) improving the product mix of Consun. In spite of the potential

ahead, we still believe the over 30x 2014 PER valuation is too high.

We do not think the market will view this acquisition positively until

some signs of improvement or synergy emerge.

Source: Bloomberg

November 16, 2015

2014-2017E net profit CAGR: 23.7%: Excluding the contri-

bution of Yulin, Consun is expected to see a 24.5% CAGR

revenue growth and 23.7% CAGR growth in net profit in 2014

-2017E. Given expected industry growth of around 15%, we

believe the forecast is a bit aggressive for the core business.

Nevertheless, taking into account the growth potential of Yu-

lin, performance of Consun may beat market expectations

depending on its restructuring progress.

Valuation: Consun is trading at 2015/16E PER of

14.6/11.7x, or 21%/17% lower than peers’ simple average.

We believe current valuation is undemanding with a PEG of

around 0.6x. The latest share price weakness should be due

to the excess valuation given to the acquisition of Yulin. Giv-

en the growth potential ahead and the restructuring potential

of Yulin, the market may rerate the company.

Catalysts: Positive progress on operation improvement of

Yulin, ramp up of UCG.

Risks: ASP pressure of UCG, slower than expected integra-

tion with Yulin, potential exit of pre-IPO investors

2014 2015E 2016E 2017E

Revenue (RMB m) 731 918 1,152 1,409

YoY 27.8% 25.6% 25.4% 22.4%

Net profit (RMB m) 212 266 334 401

YoY 38.4% 25.9% 25.5% 20.0%

EPS (RMB) 0.21 0.27 0.34 0.40

YoY 5.0% 27.4% 25.2% 20.1%

Net margin 29.0% 29.0% 29.0% 28.5%

ROE (%) 15.7 17.6 19.4 20.0

Dividend yield (%) 1.7 1.1 1.5 1.8

PER (x) 18.0 14.6 11.7 9.7

PBR (x) 2.7 2.4 2.1 1.8

0

50

100

150

200

250

300

350

400

0

1

2

3

4

5

6

7

Nov14 Feb15 May15 Aug15

(HK$ million)(HK$)

Turnover (RHS) Price (LHS)


Figure 1: Oral kidney TCM market growth

Source: Southern Medicine Economy Research Institute (SMERI)

Figure 2: Oral kidney TCM market shares in 2014

Source: SMERI



November 16, 2015

895 1,093

1,334

1,691 2,029

2,341

2,774

3,234

3,752

4,335

4,991

-

1,000

2,000

3,000

4,000

5,000

6,000

2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

Oral kidney TCM market (RMB m)

UCG

Haikunshenxi Capsule

Ambrette Capsule

Shenyankangfupian

Yinhuamiyanling Pian

Others

Figure 3: MRI medical contrast medium market growth

Source: SMERI

207261

337422

504

635

787

967

1180

1434

0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E

MRI medical contrast medium market (RMB m)


Figure 4: 1H15 revenue breakdown

Source: Company


Kidney medicines, 78.3%

Medical contrast medium, 16.2%

Other medicines, 5.6%

Figure 5: UCG revenue growth (2014 estimated value)

Source: Company

232

301

348

437

560

29.8%

15.4%

25.8% 28.0%

76.5% 77.4% 75.9% 76.5% 76.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

100

200

300

400

500

600

2010 2011 2012 2013 2014E

UCG revenue (RMB m) YoY (RHS) % of total revnue (RHS)

Figure 6: Total revenue growth

Source: Company

304

389

458

572

731

320

387

28.2%

17.6%

24.9%27.8%

40.2%

20.9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 1H14 1H15

Total revenue (RMB m) YoY (RHS)

79

107

136

153

211

91

121

35.4%

26.9%

12.2%

38.1%

53.8%

33.4%

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

2010 2011 2012 2013 2014 1H14 1H15

Net profit (RMB m) YoY (RHS)

Figure 7: Net profit growth

Source: Company

November 16, 2015


RMB m 2012 2013 2014 1H14 1H15 YoY

Revenue 458 572 731 320 387 20.9%

COGS (111) (120) (159) (70) (76) 8.5%

Gross profit 347 452 572 250 311 24.5%

Distribution Cost (135) (178) (231) (115) (117) 1.5%

Administrative Expenses (51) (78) (114) (44) (58) 34.0%

Other Revenue 21 13 38 17 17 -1.0%

Other Net Income/(loss) (2) 0 (0) (0) (2) 1518.8%

Pre-tax Profit 179 210 264 109 152 39.6%

Taxes (43) (58) (53) (18) (30) 71.0%

Net Income 136 153 211 91 121 33.4%

EPS (Basic) (RMB) 0.18 0.2 0.21 0.09 0.12 33.3%

Figure 8: Consun’s P&L

Source: Capital IQ


Figure 9: Kidney medicines segment revenue growth

Source: Company


Figure 10: Medical contrast medium segment revenue growth

Source: Company

233

304

353

446

580

246

303

30.3%

16.2%

26.5%30.0%

40.3%

23.4%

76.7% 78.0% 77.0% 78.1% 79.4%76.7% 78.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 1H14 1H15

Kidney medicines (RMB m) YoY (RHS) % of total revnue (RHS)

43.5

51.7

65.3

85.1

107.1

48

63

18.7%

26.3%

30.4%

25.8%

18.3%

31.3%

14.3%13.3%

14.3% 14.9% 14.7%

14.9%

16.2%

0%

5%

10%

15%

20%

25%

30%

35%

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 1H14 1H15

Medical contrast medium (RMB m) YoY (RHS) % of total revnue (RHS)

Figure 11: Other medicines segment revenue growth

Source: Company

27.3

34.0

39.8 40.4

43.3

27

22 24.9%

17.0%

1.4% 7.2%

106.8%

-20.0%

9.0% 8.7% 8.7% 7.1% 5.9% 8.4% 5.6%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

0

5

10

15

20

25

30

35

40

45

50

2010 2011 2012 2013 2014 1H14 1H15

Other medicines (RMB m) YoY (RHS) % of total revnue (RHS)

79.0%75.5% 75.7%

79.1% 78.3% 78.0%80.3%

20.9%

33.0%35.1% 34.4%

31.0%28.5%

35.1%

26.1% 27.6%29.8%

26.7%28.9% 28.4%

31.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2010 2011 2012 2013 2014 1H14 1H15

Gross profit margin Operating margin Net margin

Figure 12: Margin performance

Source: Company

Figure 13: Peers’ valuation

Source: Bloomberg

November 16, 2015

Price Mkt cap PER (x) PBR(x) ROE(%) EV/EBITDA(x)

Company name Ticker (HK$) (HK$ m) 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E

TRAD CHI MED 570 5.47 24,526 24.3 14.8 12.1 1.8 1.7 1.5 10.6 13.8 13.8 16.1 8.1 6.8

LIVZON PHARM-H 1513 35.65 20,819 18.3 15.2 12.7 2.7 2.4 2.0 14.9 15.4 15.9 16.8 14.2 12.5

TONG REN TANG-H 1666 12.10 15,497 23.5 20.4 18.5 3.3 3.1 2.2 14.1 14.0 13.0 13.1 11.6 10.4

CHINA SHINEWAY 2877 10.22 8,452 10.2 9.9 9.9 1.3 1.2 1.2 13.5 13.1 12.2 4.6 4.4 4.3

CONSUN PHARMACEU 1681 4.75 4,750 14.6 11.7 9.7 2.4 2.1 1.8 17.6 19.4 20.0 8.5 6.4 5.3

PURAPHARM CORP L 1498 4.67 1,051 19.7 12.6 10.0 2.2 1.9 1.7 12.0 15.1 16.4 16.2 10.5 9.3

Simple average 18.4 14.1 12.2 2.3 2.1 1.7 13.8 15.1 15.2 12.5 9.2 8.1

Weighted average 20.2 15.3 13.2 2.3 2.1 1.8 13.3 14.6 14.5 13.9 10.1 8.8



Figure 14: Consun’s product portfolio

Source: Company


November 16, 2015


Product name Intended treatment Year of

launch

OTC /

Prescription

Patent

protection

and

expiration

National List

of

Essential

Medicines

National

Medical

Insurance

Medicines

Catalogue

Uremic clearance granule

(尿毒清顆粒)

For chronic kidney failure 1998 Prescription March 2024 Yes Yes

Kidney repair and edema

alleviation granule

(益腎化濕顆粒)

For chronic glomerulonephritis 2009 Prescription May 2026 No No

Renal supplement and impotence

cure oral solution

(補腎填精口服液)

For kidney degeneration 1997 Prescription N/A No No

Jin-gang pill (金剛丸) For kidney deficiency 1997 Prescription N/A No No

Gadopentetate dimeglumine

injection (釓噴酸葡胺注射液)

For magnetic resonance image

formation

1998 Prescription N/A No Yes

Compound amino acid injection

(18AA-V) (複方氨基酸注射液(18AA-V))

For malnutrition and

hypoproteinemia

Before 2009 Prescription N/A No Yes

Iron dextran oral solution

(右旋糖酐鐵口服液)

For chronic anemia and iron

deficiency anemia

Before 2009 OTC N/A No No

Erythromycin estolate

suspension (依託紅霉素混懸液)

For mycoplasmal pneumonia,

other pneumonia and urinary

tract infection

Before 2009 Prescription N/A No No

Cetirizine hydrochloride oral

solution (鹽酸西替利嗪口服溶液)

For seasonal or perennial allergic

rhinitis, urticaria and itchy skin

2000 Prescription N/A No Yes

Alfacalcidol capsule

(阿法骨化醇膠囊)

For chronic kidney insuff iciency,

osteoporosis or diseases due to

vitamin D metabolic disorder

Before 2009 Prescription N/A Yes Yes

Doxofylline and

glucose injection

(多索茶堿葡萄糖注射液)

For bronchus disease Before 2009 Prescription N/A No Yes

Kidney medicines

Medical contrast medium

Other medicines


Figure 15: CKD background information

Supplementary notes: Kidney disease is a group of diseases with symptoms or origins from or related to the kidney.

Certain factors or lifestyle, such as overwork, drug toxicity, unhealthy diet, and physical inactivity, may lead to increased risks of kidney disease.

Chronic kidney disease and acute kidney disease are two major forms of kidney disease.

Chronic kidney disease is a progressive loss of kidney function over times. The major types of chronic kidney disease include chronic kidney failure,

chronic glomerulonephritis, hypertensive kidney disease, and diabetic nephropathy. Chronic kidney disease is divided into five stages of increasing

severity. According to the diagnostic criteria normally adopted in the PRC, patients with chronic kidney disease at the second to fifth stages are classi-

fied as having chronic kidney failure. Under most cases, once a patient is diagnosed with chronic kidney failure, medication has to be started from

then on to control the situation and prevent worsening of the condition, and the condition is mostly irreversible.


November 16, 2015


CKD stage Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Description of each

stage

Early kidney damage

with normal or even

increased GFR

Worse kidney damage

with slightly reduced

GFR

Moderately

reduced GFR

Severely reduced GFR Kidney failure

Treatment options

Identifying cause and

trying to reverse it

Monitoring creatinine

level, blood pressure,

and general health

and well-being.

Stopping or slowing

the worsening of

kidney function

Stopping or slowing

the worsening of

kidney function.

Patients learning more

about the disease and

treatment options

Planning and creating

access site for

dialysis. Receiving

assessment for

possible kidney

transplantation

Starting renal

replacement therapy:

dialysis or kidney

transplantation

Source: Company

China Cement Weekly

November 16, 2015

Wong Chi Man—Head of Research

(852) 3698-6317

[email protected]

Livy Lyu—Research Assistant

(852) 3698-6393

[email protected]

Cement Price Little Change Last Week; Tianrui Group’s Financial Posi-

tion Looks Shaky After Shanshui’s Default Cement prices largely stable last week. Average cement price (nationwide) stabilized at

RMB253.33 tonne for the last two weeks, except that cement prices in part of Hebei and Shanxi

were down RMB10/tonne. Mid-November saw a weakening market demand due to lacklustre

performance in property development and infrastructure. Rainy weather was also an

unfavourable condition. Average inventory level (nation-wide) climbed to 74.79% last week.

Coal prices continued to drop last week. Comprehensive average price index for Bohai-Rim

Steam Coal (Q5500K) declined RMB3/tonne last week to RMB376/tonne. The index was 26.1%

lower on year-on-year (YoY) basis.

Uncertain financial position of Tianrui Group after Shandong Shanshui’s debt default.

Last week, Shanshui Cement [0691.HK; SELL] announced that it concluded a default on the

RMB2bn Super & Short-term Commercial Paper (SCP) due November 12. The company filed a

winding-up petition and an application for the appointment of provisional liquidators with the

Grand Court of the Cayman Islands for a collective restructuring plan in the best interest of all

stakeholders. If we assume the worst case scenario, i.e. the equity holders to get nothing after

the whole process, CNBM [3323.HK; HOLD] will need to write off HK$1.56bn, equivalent to

3.4% of its equity, which should not have large impact on its financial position, although it will

again hurt the company’s image on balance sheet management. The parent company of Asia

Cement [0743.HK; NOT-RATED] should also be able to absorb the potential loss, given its

equity of >HK$34bn. However, financial position of the parent of Tianrui Cement [1252.HK; NOT

-RATED] looks shaky. As of end-June, its shareholder equity was about RMB17.7bn. We

estimate its investment cost in Shanshui is about RMB4.17bn. A full write-off will represent

23.6% of its shareholder equity. Although it will not directly affect the listco (Tianrui Cement), it

will inevitably create an overhang on its share price if investors have doubts about the parent’s

financial position.

Cement stocks under coverage declined 7.1% in average last week. Market sentiment was

quite weak after Shanshui’s winding-up petition. Best performer was BBMG [2009.HK; BUY]

down 5.1% to HK$5.61/share. CR Cement [1313.HK;BUY] was the weakest among our target

stocks, which plummeted 9.4% 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 HOLD 22.75 14,879 8.7 15.5 15.2 1.51 1.42 1.34 5.7 8.1 7.5 9

CNBM 3323 HK Equity HOLD 4.28 2,963 3.3 11.5 5.8 0.47 0.46 0.43 7.4 9.5 8.7 249

BBMG 2009 HK Equity BUY 5.61 5,982 10.9 11.3 7.9 0.68 0.67 0.64 8.7 8.8 7.0 65

CR Cement 1313 HK Equity BUY 2.80 2,345 4.3 7.3 7.6 0.65 0.63 0.59 4.4 6.9 6.0 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 14.6 17.6 14.2 0.98 0.94 0.89 7.3 8.8 7.7 103

Weighted average 11.7 16.1 14.0 1.17 1.11 1.05 6.8 8.5 7.6 61

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 1.9 3.6 2.3

CNBM 3323 HK Equity (69.8) 102.5 (21.7) (0.5) 14.4 4.0 7.8 4.9 1.5 2.6

CR Cement 1313 HK Equity (42.1) (3.0) (25.0) (0.3) 14.1 16.2 8.7 3.8 6.1 2.5

BBMG 2009 HK Equity 1.3 46.8 21.9 0.5 6.8 6.1 8.4 1.4 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 2.4 2.6 1.9

Weighted average (30.6) 24.3 (9.4) (0.1) 13.8 12.6 8.5 2.1 2.8 2.0

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 HOLD 22.75 14,879 8.7 15.5 15.2 1.51 1.42 1.34 5.7 8.1 7.5

CNBM 3323 HK Equity HOLD 4.28 2,963 3.3 11.5 5.8 0.47 0.46 0.43 7.4 9.5 8.7

BBMG 2009 HK Equity BUY 5.61 5,982 10.9 11.3 7.9 0.68 0.67 0.64 8.7 8.8 7.0

CR Cement 1313 HK Equity BUY 2.80 2,345 4.3 7.3 7.6 0.65 0.63 0.59 4.4 6.9 6.0

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 1.47 932 5.0 14.3 9.0 0.41 0.34 0.33 4.0 9.4 8.5

China National Materials 1893 HK Equity NR 1.81 829 9.1 9.3 8.6 0.36 0.37 0.35 6.4 7.5 7.1

Asia Cement 743 HK Equity NR 2.13 428 6.5 44.9 10.9 0.29 0.29 0.29 4.1 9.5 7.4

West China Cement 2233 HK Equity NR 1.4 973 167.9 44.3 13.9 1.01 0.92 0.91 7.5 8.2 5.8

Tianrui Cement 1252 HK Equity NR 1.99 613 8.2 n.a. n.a. 0.55 n.a. n.a. 7.0 n.a. n.a.

Simple average 27.0 22.3 12.6 0.75 0.74 0.70 6.6 8.7 7.5

Weighted average 16.0 16.8 13.4 1.10 1.03 0.98 6.7 8.4 7.4

PER (x) PBR (x) EV/EBITDA(x)

Figure 1: Regional Cement Price

Sources: Digital Cement, CGIHK Research

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Explanation on Equity Ratings

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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 :

original rules discount rate of bluechip a 70% minimum ... · china cement weekly - average cement...

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