金隅集团(2009.HK):Rating Buy,PT of HK$3.7

Cement demand recovery has accelerated in 2H18.

机构:德意志银行

评级:买入

目标价:3.7港元

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Cement demand recovery has accelerated in 2H18 BBMG remains confident that the FY18 cement sales volume will reach c.100 mt, flat yoy despite having sales volumes down 4.8% yoy in 1H. Cement demand has been recovering in 3Q18 with Sep 18 production of c.12mt versus c.11mt in Sep 17. Average 3Q18 volumes is expected to improve by 2% yoy. Management notes that the recovery in volumes has been infrastructure led, including water preservation projects, railway construction (Beijing-Xiong’an intercity railway and Beijing-Shijiazhuang highspeed railway), construction of facilities around the new Beijing airport, and the construction of sports stadiums for the 2022 Winter Olympics.The Xiong-An related projects will begin work in 2H18 with cement demand lasting till 2019/20 once they start. The demand recovery from infrastructure has offset the drop from property, which accounts for 25-26 ppts of BBMG’s cement sales versus infrastructure which is now at 50%.

BBMG plans to raise prices in 2H18 and expects a meaningful price hike in both Henan and Shandong provinces, both heavy polluting regions and subject to winter production halts. BBMG believes high prices are necessary to offset higher fixed costs because utilization rates are lower in Northern China.

Property sales accelerates in 2H18; housing policies could be loosened by 2H19 BBMG has maintained its guidance on contracted sales of RMB27bn for FY18, as it has accelerated property sales during 2H (1H contracted sales of RMB9.2bn) with a few projects to be launched in October. BBMG also expects higher property sales in FY19 as they see the price cap for first hand homes being loosened in 2H19. Management believes that the current housing policy is to ensure sufficient supply of public or rental housing and once that objective has been achieved, the government will let market forces determine the price for commercial housing as it should be. BBMG is also not worried about the slowdown in monetary compensation for Shanty Town as they don’t have much exposure to the property markets in T3 and T4 cities. In terms of GFA bookings, they expect gross margins to be c.31% for 2H18 (vs 32% in 1H18) and c.31% for 2019 as they are booking homes pre-sold in 2016/2017. However, BBMG highlighted that margins in homes sold now are lower due to price cap

On industrial land conversion, BBMG says the process is slow due to many government processes involved though they will have c.350k sqm of GFA to be converted for two land plots likely in 4Q18.

Cash flow to stay negative BBMG spent RMB4.02bn purchasing TJ BM in 1H18 while 2H18 capex will be focused on land banking with FY18 capex reaching RMB35bn. That means free cash flows should continue to stay negative for the full year.

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