- BUY Entry – 38 Target – 42 Stop Loss – 36
- Anhui Conch Cement Co Ltd is a China-based company principally engaged in production and sale of cement, commodity clinker and aggregate. The Company’s main cement products included 32.5-grade cement, 42.5-grade cement and 52.5-grade cement, which are widely used in construction projects of large-scale national infrastructures such as railways, expressways, airports and hydraulic power as well as urban property, cement products and the rural markets. The Company distributes its products within the domestic market and to overseas markets.
- A new round of loosening monetary policy. On April 15th, PBOC lowered the requirement reserve ratio by 25bps but kept the one-year loan prime rate at 2.85%. There will be RMB530bn (US$83.25bn) in long term liquidities released in the banking system, buffering the slowdown in the economy due to lockdowns in main cities. Previously, China’s central government drew up lists of infrastructure projects totalled at US$2.3tn. It is evident that China will resort to government spending to boost the economy in the near term.
- China cement price holding up well. As of 25th April, China cement price index (CEMPI) grew by 9.13% YoY to 169.76. The index has been consolidating at the current level YTD. The supply and demand dynamics are relatively balanced as the production and the consumption declined due to lcokdowns of cities.
China Market Price of Commodities Ordinary Portland Cement P.C 42.5 in Bulk
- FY21 financials review. Revenue mildly dropped by 4.7% YoY to RMB168bn. Gross profit mildly dropped by 3.3% YoY to RMB48.6bn. GPM increased by 0.4ppt. Net profit dropped by 5.3% YoY to RMB32.2bn. NPM was flat at 19.2%. The company will announce the 1Q22 results on 28th April Thursday.
- The updated market consensus of the EPS growth in FY22/23 is -3.3%/2.9% YoY respectively, which translates to 5.4x/5.2x forward PE. The current PER is 5.2x. FY22F/23F dividend yield is 7%/7.2% respectively. Bloomberg consensus average 12-month target price is HK$55.02.
Anhui Conch Cement Company Limited (914 HK) (Source: Bloomberg)