GuocoCapital thinks Anhui Conch’s average selling price will peak in 4Q11, with an average of CNY325/t for 2011, which translates into revenue growth of 50.6% to CNY52bn assuming management’s sales target of 160Mt is achieved. It tips its gross profit per ton of CNY140 in 2H11 and, therefore, full year gross profit of CNY137/t.
Given a relative stable fixed cost structure, Anhui Conch will therefore post net profit growth of about 108.3% on year to CNY13.4bn in 2011. "We tend to be positive on AC’s ability of maintaining current profitability given high industry concentration."
In Eastern, Southern and Central China, Anhui Conch and other top four domestic peers control more than 60% of cement supply thus enhancing their pricing power to maintain a high margin environment, it adds.