Cement Sector Holds Bargains As Beijing Curbs Investment
Up and down the corridors of power in Beijing, policy makers have sounded the alarm over one of the most basic building blocks of the economy: cement.
As a vital ingredient for putting up factories and putting down roads, cement has provided a foundation, literally, for China's building boom. And so Beijing -- trying to cool down the nation's economy -- is hoping to restrict investment flowing into the cement sector in an effort to keep developers from building too much.
The effort threatens to end the boom for China's cement companies, some of which have seen their share prices crumble recently. But analysts say this isn't the time to spurn Chinese cement stocks. And they assert that the country's biggest player, Anhui Conch Cement, still has solid prospects.
Analysts say investors should be cautious in their bargain hunting because even as prices rise for cement products, so too do prices for energy and raw materials, and transportation, all of which raises the cost of making cement -- and eats into producers' profits.
China's industry is fragmented, with about 4,900 companies churning out cement, a key material in concrete. About 21 of those companies are publicly listed in China. Anhui Conch is listed in Hong Kong and Shanghai.
In China's building boom, investment has poured into the cement sector. But as Beijing attempts to apply brakes to the boom, the potential impact on cement companies worries finance officials. Bank loans account for 42% of the investment in the cement, steel and aluminum sectors, raising risks to the financial sector if there is a sudden slowdown, China's central bank said. In its latest quarterly economic report, the central bank last week criticized "huge waste" in those sectors and predicted that oversupply would be evident next year.
During the first quarter, China's gross domestic product grew at a blistering 9.8%, propelled by a 43% rise in fixed-asset investment and runaway credit growth from the first three months of 2003.
Concern that the rapid expansion could destabilize an economy already plagued by energy shortages prompted the government to crack down on what it said were "blind" and "excessive" investments, namely in cement, steel, aluminum and real estate. Last month, the State Council, China's highest executive body, set rules requiring companies in those industries to contribute more of their capital toward fixed-asset investments. The council also launched a nationwide audit of new projects in those sectors, while the central bank tightened bank credit.
Analysts said the crackdown would have a limited impact on large, more diversified cement producers like Anhui Conch, which was recently added to Morgan Stanley Capital International indexes. Demand remains strong for the high-quality cement used in road, bridge and apartment construction that Anhui Conch specializes in, analysts say.
"I'm very optimistic for high-end cement. There's not enough supply, and demand remains high," says Donovan Huang, an analyst at Standard & Poor's in Singapore.
High demand helped Anhui Conch post a strong start to 2004. In late April, the company reported a jump in first-quarter net profit to 443.2 million yuan ($53.5 million) from 81.6 million yuan a year earlier, as core revenue more than doubled.
But the good first-quarter results couldn't reverse a slide in the Anhui Conch's share price. Its Hong Kong shares have tumbled more than 46% since early April, when Beijing began steps to slow investment. The company's Shanghai shares have fallen about 25% during the same period. On Monday, Anhui Conch's shares fell 12% to HK$6.80 . For the year to date, the stock is down 32%.
Some analysts say there is plenty of room for the Anhui Conch's stock to rise. Mr. Huang has a 12-month target of HK$14.60. Merrill Lynch's target is HK$12.30, while ING Financial's target is HK$13.60.
The outlook of lower-tier cement producers may not be as bright. Shares of other cement makers listed in China have also generally lost ground over the past month, in line with the broader market, despite
posting impressive first-quarter results.
"The government austerity is targeting small and substandard players," said Mr. Huang.
Some other cement producers had solid first-quarter results -- but have declining share prices. Tangshan Jidong Cement, Hebei province, has lost about 21% since early April. The company reported first-quarter net profit of 12.2 million yuan, compared with 569,463 yuan a year earlier. Shares of Jiangxi Wannianqing Cement, whose first-quarter net profit more than tripled, have fallen about 6%.
Shares of Huaxin Cement, Hubei province, have risen 3% since early April. The company reported first-quarter earnings of 59.4 million yuan, compared with 2 million yuan a year earlier.
One reason analysts see good prospects for some cement producers is that China will continue to grow -- and any nation's demand for cement largely follows its economic growth. "It's a consumption-per-capita type of story," says Simon Francis, an analyst at ING Financial Markets in Hong Kong.
Some analysts wonder whether Anhui Conch might be too optimistic in forecasting demand. The company plans to expand production 40% to 50% this year, its board secretary Zhang Mingjing said. But Mr. Zhang also said higher prices for electricity and coal could reduce its profit margins.
Trina Chen, an analyst at Merrill Lynch in Hong Kong, forecast the average cement price for Anhui Conch to rise 15% in 2004. However, she expects the price it pays for coal to increase by the same amount, and average power costs to rise 5%. Ms. Chen forecasts Anhui Conch's per-share earnings will rise 55% this year, slower than last year's gain, and then decline 1% in 2005
逢低吸纳水泥类股正当时？
北京的政策制定者们对经济领域中一个最基本的建筑材料──水泥行业敲响了警钟。
作为建厂铺路必备的一个重要成分，毫不夸张地说，水泥是中国建筑业繁荣的基础。而如今正试图为中国经济降温的中国政府希望通过限制水泥行业的投资来控制开发商的建设步伐。
此举将威胁到中国水泥行业的蓬勃发展，近来一些水泥制造商股价已经大幅受挫。但分析师们说，现在还不是放弃中国水泥股的时候。他们声称，中国最大的水泥制造商安徽海螺水泥股份有限公司(Anhui Conch Cement Co. Ltd., 600585.SH, 简称：安徽海螺水泥)前景仍很光明。 分析师们说，投资者在逢低吸纳时应该谨慎从事，因为在水泥产品价格上涨的同时，能源、原材料和交通运输价格也在上涨，这些都会增加水泥制造成本，从而降低生产商的利润。
中国的工业领域分布零散，缺乏规模，光水泥生产厂家就多达4,900家，其中约21家在中国上市，安徽海螺水泥同时在香港和上海两地上市。
在中国的建筑繁荣时期，大笔投资源源涌入水泥行业。然而，如今中国政府试图减缓迅猛发展步伐，此举对水泥行业的潜在影响令金融官员颇感不安。中国央行称，水泥、钢铁和电解铝制造业的全部投资额中有42%来自银行贷款，一旦上述行业的增长突然放缓，将增加金融业面临的风险。央行上周发表了最近一期季度经济报告，其中对上述行业的巨大浪费提出批评，并预计明年将出现明显的供应过剩。 今年第一季度，中国国内生产总值(GDP)增长了9.8%，主要受到固定资产比去年同期激增43%和失控的信贷增长推动。
由于担心本已受到能源短缺困扰的经济会因过快增长而遭遇震荡，政府开始采取措施限制水泥、钢铁、电解铝和房地产开发行业的盲目和过度投资。
中国最高权力执行机构国务院上个月发出通知，要求上述行业提高固定资产投资项目中的自有资本金比例。就在央行收紧银行信贷的同时，国务院还要求对全国上述行业的新项目进行一次全面清理。 分析师们称，这一打击对安徽海螺水泥等规模较大、业务更为多样化的水泥制造企业的影响并不大。摩根士丹利资本国际公司(Morgan Stanley Capital International Inc. MSCI)近来刚刚将安徽海螺水泥加入其指数。
分析师们说，对于道路、桥梁和住宅建设用高质水泥的需求仍很强劲。
标准普尔公司(Standard & Poor's Corp.)驻新加坡分析师Donovan Huang自称对高端水泥市场非常乐观，认为这部分市场的供应不足，但需求仍很高。
高需求帮助安徽海螺水泥在2004年来了个开门红。4月下旬，该公司公布第一季度净利润升至人民币4.432亿元（5,350万美元），上年同期为人民币8,160万元，同期核心收入增长了一倍多。
但良好的一季度业绩并未能挽回安徽海螺水泥股价下滑之势。自4月初中国政府开始采取措施限制投资以来，该股在香港市场的跌幅超过46%。同期，该股在上海证交所下挫25%左右。周一，安徽海螺水泥收于6.80港元，跌幅12%。今年迄今为止，该股下跌32%。
一些分析师称，安徽海螺水泥的上升空间很大。标准普尔的Donovan Huang将该股的12个月目标股价设在14.60港元。美林(Merrill Lynch)将目标价位定在12.30港元，ING Financial的目标股价在13.60港元。
规模较小的生产商的前景或许没有那么光明。上个月，其他上市水泥制造商的股价大都随同大盘一道走低，尽管这些公司都公布了不错的一财季业绩。
Donovan Huang说，政府的限制举措面向的都是那些规模小且不符合标准的水泥公司。
不少公司在公布强劲业绩的同时股价依然下跌。河北省的唐山冀东水泥股份有限公司(Tangshan Jidong Cement Co. Ltd., 000401.SZ, 简称：冀东水泥)就是其中之一。该股自4月初以来下跌21%。公司第一财政季度净利润为人民币1,220万元，上年同期为569,463元。江西万年青水泥股份有限公司(Jiangxi Wannianqing Cement Co. Ltd., 000789.SZ, 简称：江西水泥)的第一季度业绩增长了两倍多，但股价还是下跌了6%左右。
湖北省的华新水泥股份有限公司(Huaxin Cement Co. Ltd., 600801.SH, 简称：华新水泥或华新B股)自4月初以来上涨了3%。公司公布第一季度利润达人民币5,940万元，远远高于上年同期的200万元。
分析师看好部分水泥制造商的一个原因在于，中国仍将继续增长，而对任何国家而言，经济增长的背后往往就是水泥需求的大量增加。
有些分析师怀疑安徽海螺水泥在预测需求方面或许有些过于乐观了。该公司的董事会秘书章明静说，公司计划今年增产40%-50%。但他也表示，电力和煤炭价格上升将影响公司的利润率。
美林驻香港的分析师Trina Chen预计2004年安徽海螺水泥的产品价格将平均上涨15%。然而，预计该公司为煤炭支付的成本也将增加15%，平均电力成本增长5%。她预计安徽海螺水泥今年每股收益将增长55%，低于去年的升幅，之后将在2005年下降1%。
