发帖
雷达卡
Greater China Hard Hat
China trip takeaways + CNBM initiation
China
Taiwan
Cement
Nick LaiAC
(886-2) 2725-9864
nick.yc.lai@jpmorgan.com
J.P. Morgan Securities (Taiwan) Limited.
Frank Gong
(852) 2800 7006
frank.fx.gong@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
See page 41 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Share price performance relative to
index (re-based, Taiwan Cement and
Asia Cement)
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Dec-07 Jun-08 Dec-08
Taiwan Cement Asia Cement
Source: TEJ.
Share price performance relative to
index (re-based, Anhui Conch and
CNBM
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
Dec-07 Jun-08 Dec-08
CNBM Anhui conch-H
Source: TEJ.
• Inconvenient truth: Our recent cement trip to China leads us to believe
that the weak demand in 2H08 could linger into 1H09, resulting in
potential disappointment in earnings and growth expectation. We cut our
overall 2009/2010 cement consumption growth forecast for China to
only ~3-4% p.a. in from 5-6% and expect that 1H09 might not see any
growth. We estimate ~15% downside to major players’ 2008 consensus
earnings (reporting in April) such as Anhui Conch and CNBM.
• CNBM: We initiate on China National Building Materials (CNBM)
with UW and Dec-09 PT of HK$7.5 or 12% downside. Despite being
the 2nd largest cement company in China (after Conch), we believe the
challenges CNBM faces include highly leveraged balance sheet and
execution risk from aggressive M&A in the past in addition to
unjustified valuation. The rights issue in Feb (at HK$7.85/share) diluted
its earnings (11%). Our 2008/09E EPS are ~10-15% below the Street.
• We downgrade Conch A-share to UW: To reflect our top-down
cautious view, we trim our 2008/09E earnings by 13% each and cut our
Dec-09 PT to HK$/Rmb28 (from HK$/Rmb30). We downgrade our
rating for A-share to UW from Neutral after its recent rally. We maintain
UW on H-share.
• China trip takeaways: Conch’s management indicates that its 4Q08
margin or profit per ton is the lowest compared to 1Q-3Q08; Lafarge has
decided to extend its expansion plan in western China by two years;
CNBM has denied the recent news of its asset sales and lease back plan;
China National Materials expects oversupply in its eastern China
cement business in 1H09; China Cement Industry Association believes
cement demand growth will slow from 2009.
• Recommendation: Our top pick is Taiwan Cement as we still estimate
20% upside. Our UW rating on Conch is a valuation call; we recommend
that investors revisit Conch after its 4Q08 results on March 25 or below
~HK$/Rmb25. We believe CNBM is more attractive below ~HK$6 but
we need to see evidence of improving balance sheet and execution on
previous M&A.
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