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Shen Wan Hongyuan: Conch Cement Buy Rating

January 11, 2019 13:27

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  annualPerformance285-317 billion yuan, in line withShen Wanhongyuanexpected.The company released 2018 annual results pre-increasedannouncement, is expected to achieve the return of the whole yearNet profit28.5 billion yuan to 31.7 billion yuan, an increase of 80% to 100% compared with the same period last year.profit prediction30.1 billion yuan is located in the central position of the notice interval, which is basically in line with expectations. In the fourth quarter alone, we expect the company to achieve a net profit of about 9.4 billion yuan, a year-on-year increase of about 56%. Among them, the comprehensive sales of self-produced and self-selling cement clinker by the weather fell slightly year-on-year, mainly due to price increases.

  The real demand continues to improve, and the price is lowered or become the peak of the spring turmoil.Recently, affected by the rain and snow weather in Jiangsu, Zhejiang, Anhui and other places, the demand for cement continued to shrink. The price of clinker along the Yangtze River Delta was lowered by 160 yuan/ton, down to 360 yuan/ton (the price of clinker was lowered by 170 yuan/ton at the beginning of 2018). Up to 350 yuan / ton), and I have known each other last year. We believe that the one-step down-regulation is not only a highlight of Conch's control of clinker along the Yangtze River, but also another warning of clinker. However, unlike last year, this year's weather factors have not completely released the real demand for cement, from the downstream. See, Q4 started to rebound from the growth rate of infrastructure investment.real estateThe growth rate of investment in construction projects turned from negative to positive in November, and the growth rate of new construction area rebounded to 21.7%. The trend and the growth rate of cement production deviated from the phased lag of demand. The subsequent release of spring release is worth looking forward to.

  The industry pattern reshapes the bottom of the company's earnings, and the valuation is expected to usher in a repair.If the cyclical products in 2017 are synchronized, the 2018 is the traditional cycle of Waterloo and the Arc de Triomphe in the cement industry. The differentiation behind the industry is the reshaping of the industry pattern hidden under the main line of supply-side reform. Up to now, 14 cement joint companies have been established nationwide, and the concentration of invisibility has increased significantly. Among them, the core area of ​​Conch has a 74% of the CR5 center in East China, and it has basically established cement enterprises in developed countries.UtilitiesWe believe that 2019 will be the year when major regional and group companies continue to maintain and strengthen synergies. Under the concession of price-changing enterprises in southern cement, it is expected to see a high level of cement prices in 2019. And the rise of the long-term price at the bottom. With the current share price and 2017DividendThe rate (40%) is extrapolated. We expect the company's 2018, 2019 and long-term profit bottom dividend yields to be 7.7%, 8.5%, and 3.8%, respectively.

  Profit forecast and valuation:We believe that the reshaping of the industry pattern in 2019 will keep cement prices stable, while the incremental contribution of new capacity and aggregate business will be expected to continue to rise. We maintain the company's profit forecast. It is estimated that the company's net profit for the year 2018-2020 will be 30.089 billion yuan, 32.908 billion yuan, and 34.359 billion yuan, respectively, corresponding to earnings per share of 5.68 yuan, 6.21 yuan, 6.48 yuan. The current stock price corresponds to 5.1 times, 4.7 times and 4.5 times PE in 18-20 years, maintaining a “Buy” rating.

(Article Source:Shen Wanhongyuan)

                (Editor: DF328)

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