20150623-JP_MORGAN-安徽海螺水泥股份(0914):STRATEGIC_INVESTMENT_IN_WEST_CHINA_CEMENT-726809

$安徽海螺水泥股份(hk00914)$
We view Anhui Conch’s(Conch)16.7% investment in West China Cement(WCC,2233.HK NR)as a positive strategic move that will amplify its market position in a region that will strongly benefit from China’s One Belt One Road(OBOR) plan.Along with the company’s 14.8% investment in Jidong Cement,its own and WCC capacity,we estimate all three companies will control c65% market share in the Shaanxi province.Conch’s WCC investment follows its purchase of a 55% stake in Shenhta Cement earlier this week and signals the company’s accelerating M+A efforts at a depressed point of the cycle.Armed with a strong balance sheet and solid free cash generation,Conch is well positioned to benefit from the market downturn.Reiterate OW rating.
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