UBS starts China Shanshui Cement at Buy with a target price of HK$15.00. It says Shanshui is the largest cement producer in China’s Shandong and Liaoning provinces and is expanding into other regions; it has been one of the most aggressive consolidators among tier-two cement producers, and is continuing to expand capacity. "We expect these trends to continue for the next two to three years."
UBS says cement prices in Shanshui’s primary markets are rising, driven by improved supply-demand dynamics and changes in market structure; it forecasts Shanshui’s FY11/12/13 EPS to rise 201%/28%/22% on-year to CNY1.05/1.35/1.65, driven by both volume and ASP increases.
"We believe consensus estimates have materially underestimated Shanshui’s margin improvement."