Key investment points
Event: Xinjiang Tianshan Cement Co.Ltd(000877) issued a fixed increase announcement. This non-public offering issued 310 million shares, raised 4.25 billion yuan, and the issue price was 13.50 yuan / share. There are 16 issuers in total, including 3 cement enterprises, Anhui Conch Cement Company Limited(600585) subscribed and allocated 74.07 million shares, accounting for 0.86% of the total share capital after Xinjiang Tianshan Cement Co.Ltd(000877) this non-public offering; Jinyu Dingxin cement ( Tangshan Jidong Cement Co.Ltd(000401) holding subsidiary) was allocated 37.04 million shares, accounting for 0.43%; Shangfeng building materials ( Gansu Shangfeng Cement Co.Ltd(000672) wholly owned subsidiary) was allocated 22.22 million shares, accounting for 0.26%, and the three cement enterprises held a total of 1.55%.
Cement leaders hope to share the development achievements of the industry, and the industry pattern is expected to be further optimized. We believe that the allocation of Xinjiang Tianshan Cement Co.Ltd(000877) shares to the three leading cement enterprises this time is reflected in the trend of accelerated restructuring and integration of the industry. The competition and cooperation of leading enterprises are gradually replacing competition. In the future, leading enterprises hope to jointly promote the optimization and improvement of the industry pattern. As an enterprise with the largest business scale and production capacity, the restructured Xinjiang Tianshan Cement Co.Ltd(000877) will also play a leading and benchmarking role; On the other hand, cement enterprises actively allocate shares of leading enterprises to reflect the confidence of industrial capital in the medium and long-term development of the industry and hope to share the development achievements of the industry.
Steady growth is expected to continue to heat up. At present, it is an important layout time point. In our previous report “cement: the trend of the sector in the previous stable growth cycles, and the current allocation and cost performance are outstanding”, we resumed the three rounds of stable growth cycles in recent ten years. We believe that the cement sector can achieve an excess return of about 10% for a period of time after each round of stable growth is set. In mid December, the central economic work conference has set the tone for steady growth, and the 22-year special bond issuance is expected to promote infrastructure investment. In January, local bonds made a good start, issuing 698.9 billion yuan of local bonds that month, an increase of 336.5 billion yuan year-on-year, mainly special bonds (accounting for 69.3%). In addition, according to the 21st Century Business Herald, recently, the regulatory authorities have asked to submit additional special bond projects, and the expectation of steady growth continues to rise. At present, it is the empty window period of economic data, and the cement sector is expected to benefit from excess returns. Therefore, it is an important layout time point of the cement sector.
Cement demand is expected to decline slightly in 22 years, but maintain a high platform period, and the willingness of supply coordination is expected to increase instead of decrease. We expect that under the steady growth of infrastructure construction and the decline of real estate demand, the cement demand will shrink in 22 years, but it is still in a high platform period. The annual output is expected to decline in single digits year-on-year, and the total volume will remain more than 2 billion tons. In the context of shrinking demand, enterprises are expected to strengthen their willingness to cooperate on the supply side in order to maintain the steady development of the market, and areas with poor supply pattern in the past, such as Yunnan, Guizhou and Northeast China, have been significantly improved.
The cement price center is expected to remain relatively high and the enterprise has strong business toughness. As of January 28, 2004, the average price of high-standard cement in China was 518 yuan / ton (unchanged month on month, year-on-year + 75), and the price center remained high. Under the low inventory level, the price of clinker along the Yangtze River Delta increased by 30 yuan on February 7, making a good start for 22 years. From the perspective of cost, the market price center of thermal coal is expected to be 700-900 yuan / ton in 22 years, which is lower than that in 21 years, but higher than the average value in 16-20 years. We expect the cement price center to be stable and the profitability to be improved in 22 years. It is expected that by the end of the first quarter of 2012, infrastructure projects are expected to be implemented, and the performance of cement enterprises may be improved quarter by quarter.
The valuation of the sector is at a historical low, the medium and long-term pattern is optimized, the extension of the industrial chain contributes to growth, the short-term relative income is obvious, and the long-term value is prominent. As of February 10, 2012, PE (TTM) of SW cement sector was 8.3 times, pb1.5 times 2 times, both at historic lows. On the one hand, the short-term allocation of cement sector is expected to obtain excess returns under the expectation of stable growth. On the other hand, the valuation is low, the safety margin of cement allocation is high, and the defensive attribute is prominent. In the medium and long term, the sufficient capital advantage of cement is helping the industry to accelerate the integration and merger, the leading enterprises are expected to become bigger and stronger, the regions with poor pattern will also benefit from improvement, and the extension of the industrial chain of cement enterprises into aggregate, commercial concrete and other markets will fully contribute to growth. Under the optimization of the supply pattern driven by the dual carbon policy, we suggest that investors pay attention to the “long-term” investment opportunities of enterprises and look at the long-term development. We continue to focus on Anhui Conch Cement Company Limited(600585) , Huaxin Cement Co.Ltd(600801) , and suggest to focus on Gansu Shangfeng Cement Co.Ltd(000672) , China building materials, Xinjiang Tianshan Cement Co.Ltd(000877) , Guangdong Tapai Group Co.Ltd(002233) , Jiangxi Wannianqing Cement Co.Ltd(000789) , China Resources Cement, etc.
Risk tips: macroeconomic risk, cement price fluctuation risk, lower than expected downstream demand, sharp fluctuation of raw material price, failure risk of fixed increase issuance, etc.
