GPM reached a record high in 1Q18
Strong 1Q18 results driven by gross margin reaching a record high. Net profit surged 196% YoY in 1Q18, driven by GPM recovery to the record high levels seen during the 1Q thanks to the substantial cement price hikes outweighing the increase in coal cost. Meanwhile, SG&A expenses reduced further on management’s efforts in continuously improving the overall operational production efficiency.
Supply-side collaboration remains supportive for higher cement prices. We believe the expansion of cement production capacity in China will be strictly off-limits in 2018, contrary to consumption drivers in the Southern region which is expected to see stable growth, which will favour the company’s sequential earnings growth prospects, in our view.
Long-term beneficiary of Greater Bay Area and “Hainan free port” development. As the Chinese government has planned to develop Hainan as an International Tourism Island and a free-trade port, forging closer cooperation within the Greater Bay Area, and to reach out to economies in the Indian Ocean and other parts of Asia under the belt and road plan, we believe such strategic policies would bring positive impact on cement consumption, in anticipation of acceleration in infra project investments and the future real estate development needs. Based on the industry data, there is a limited number of pipeline cement projects in Guangdong Province and the Guangxi region, which suggest the overall industry outlook for CRC remains positive.
Positive earnings outlook. We expect CRC’s cement sales volume to increase 2.5% YoY in FY18E, driven by the full-year contribution of its 2mtpa production line in Hepu County which commenced operation towards the end of last year. In anticipation of rising cement prices entering the high season, we have revised up our gross dollar margin assumption for FY18E to HKD142/ton vs. HKD148/ton achieved in 1Q18 and up from HKD94/ton in 2017.
Attractive valuation. CRC is currently trading at an undemanding valuation of 9.6x FY18E PER and a 4.7% dividend yield. Our revised DCF-based price target of HKD9.0 translates to 11.0x FY18E PER, which is in line with the average of its 5-yr historical level, and implies 14.8% upside potential; thus, we reiterate our BUY rating.
China Resources Cement Holdings is an investment holding company. Through its subsidiaries, Co. is principally engaged in the production and sale of cement, concrete and related products and services. Co.'s operations range from the excavation of limestone to the production, sale and distribution of cement, clinker and concrete. Co.'s products are primarily used in the construction of infrastructure projects such as hydroelectric power stations, dams, ports, bridges, airports and roads, as well as suburban development and high-rise buildings. Co.'s products are mainly sold in Guangdong, Guangxi, Fujian, Hainan, Shanxi, Yunnan and Guizhou provinces in China.
EM Remains In Favor; Shanghai Comp Breaking Out A weakening US dollar (DXY) continues to be a major tailwind for both EM equities and the commodity Sectors. Improving price and RS trends for these risk-on areas of the market are among the many characteristics consistent with historical bull markets. Therefore, we continue to label this a bull market and we believe global equities are still in the early innings of a broad-based advance. • EM Equities. Price action has remained weak for the US dollar (DXY), which has been great news for EM equities. As outlined in our 12/19/19 Int'l Compass an...
CHINA RES.CMT.HDG.LTD. (HK), a company active in the Building Materials & Fixtures industry, reduced its market risk and raised its general evaluation. The independent financial analyst theScreener awarded an improved star rating to the company, which now shows 4 out of 4 possible stars; its market behaviour has improved and can be considered as defensive. theScreener believes that this new assessment merits an overall rating upgrade to Positive. As of the analysis date December 17, 2019, the closing price was HKD 9.61 and its potential was estimated at HKD 10.15.
China Shanshui Cement Group Limited - Strategy, SWOT and Corporate Finance Report Summary China Shanshui Cement Group Limited - Strategy, SWOT and Corporate Finance Report, is a source of comprehensive company data and information. The report covers the company's structure, operation, SWOT analysis, product and service offerings and corporate actions, providing a 360˚ view of the company. Key Highlights China Shanshui Cement Group Limited (Shanshui Cement) is a construction materials manufacturing company in China. It produces and distributes cement, concrete and clinker. The company marke...
Unfortunately, this report is not available for the investor type or country you selected.Browse all ResearchPool reports
Report is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.