Recent developments in the cement industry: the cement index fell 8.74% last week. We believe that it is mainly due to the disturbance of market capital factors, there is no significant decline in fundamentals, the logic of future rise remains unchanged, and the restless market in Q1 spring is still expected. Last week, the national cement market price was 519 yuan / ton, down 7.1 yuan / ton month on month, up 69.7 yuan / ton year-on-year. The price drop areas are mainly Shanghai, Jiangsu, Fujian, Guangxi, Hainan and Guizhou, with a range of 30-50 yuan / ton. In mid January, as the Spring Festival approached, workers returned home one after another, the operating rate of projects and mixing plants continued to decline, the shipment rate of cement enterprises decreased to 43%, and the cement price continued to decline, which was in line with expectations.
Core view: there is an obvious “restless spring” market in the cement index. In recent 20 years, the Q1 cement index has risen for 13 years, outperforming the Shanghai Composite Index for 16 years, and the average relative return in recent five years is 7%. We believe that the combination of the steady growth policy and the high starting point of prices at the beginning of the year provides favorable support for this round of agitation, and the market can be expected in spring. In the future, the industry will focus on the opportunities brought by the change of the industry supply side under the objectives of “double control” and “double carbon”: a) the policy requires that the proportion of benchmark capacity in 2025 will exceed 30%. In the future, the industry’s capacity of 2500t / D and below is expected to withdraw one after another, and the total capacity will shrink by more than 8.6%. b) The cement industry may be incorporated into carbon trading in 2022. The transformation of carbon tax + emission reduction will aggravate the cost pressure of small enterprises, highlight the leading competitive advantage, and is expected to further expand through mergers and acquisitions, enhance the voice, and gradually raise the price center. At present, the price difference of water and coal is 67 yuan / ton higher than that of last year, reflecting that the profit of the enterprise is better than that of last year. We believe that the cement price may still be slightly adjusted in January, but it is unlikely to fall sharply. The price is at a high starting point in the beginning of 22 years. On the demand side, it is expected that the Q1 infrastructure side will make a good start in 22 years, and the bottom of the real estate side will pick up. In the medium and long term, the cement industry as a whole may develop in the trend of “volume reduction and price increase”. If carbon trading is included in 22 years, or the improvement of supply side concentration is accelerated, the improvement of leading share is expected to support performance growth. From the perspective of dividend yield and valuation, cement companies have high investment performance price ratio.
From the perspective of growth, it is recommended that [ Huaxin Cement Co.Ltd(600801) ] (the cement price in Southwest China is expected to get out of the depression, and the growth elasticity of overseas cement and aggregate business is high), [ Gansu Shangfeng Cement Co.Ltd(000672) ] (the growth elasticity of cement production capacity is large, and the development of one main wing and two wings injects new vitality into the company), [ Jiangxi Wannianqing Cement Co.Ltd(000789) ] (Jiangxi cement is the leader, with great regional infrastructure potential, and the current valuation of the company is relatively cheaper), Also recommend [ Anhui Conch Cement Company Limited(600585) ] (a national leader with both scale and cost advantages, which is expected to benefit the most after the implementation of carbon trading)
