China Resources Cement Holdings Limited is a Hong Kong-based investment holding company principally engaged in the cement and concrete businesses. The Company operates through two business segments. The Cement segment is engaged in the manufacture and sales of cement and related products. The Concrete segment is engaged in the manufacture and sales of concrete and related products. The Company is also involved in the trading of fly ash, mortars and shotcrete, as well as the property holding business through its subsidiaries.
Some easing on the China property sector. According to the South China Morning Post, Beijing’s loan limit for real estate companies has been partially relaxed. Chinese policymakers plan to exclude debt raised by a developer to acquire distressed assets of another home builder when calculating their compliance with the three red lines. According to the new rule, companies will be allowed to borrow more from banks and increase their debt level by 5 per cent annually for each red line threshold that they meet, subject to a maximum yearly debt increase of 15 per cent.
Cement price is under correction but remains at multiple year-highs. As of 10th January 2022, the China cement price index was at 178.24, up 16.2% YoY. The recent peak was 213.71 in October 2021. The soft demand for cement was due to the slowdown in the property construction and infrastructure project in 4Q21. However, clean energy projects as well as new infrastructure such as 5G and internet of things could uphold the demand for cement this year.
Value stocks will shine amidst the rate hike cycle. Global economy is entering into the rate hike cycle in 2022. Value stocks (low PE and high dividend yield) are expected to have decent returns in the volatile market.
Updated market consensus of the EPS growth in FY22/23 are 7.0%/4.2% YoY respectively, which translates to 5.4x/5.2x forward PE. Current PER is 6.8x. FY22F/23F dividend yields are 8.6%/9.1% respectively. Bloomberg consensus average 12-month target price is HK$8.88.
