Conch’ upside likely capped despite profit guidance, China

Conch’ upside likely capped despite profit guidance, China
Published: 07 April 2011

Anhui Conch Cement’s upside is likely to be limited despite its upbeat profit guidance; the company expects its 1Q11 net profit to rise "over 150%" YoY, implying at least CNY1.98bn given 1Q10 net profit of CNY792.3m, which represents 23% of full-year earnings forecast of CNY8.54bn now pegged by Thomson Reuters, suggesting that a strong earnings growth is expected already.

In addition, the sector has had a tremendous rally in the past one month, and is likely more or less priced in the strong sector growth prospects.

Anhui Conch ended Monday down 1.3% at HK$47.20 on profit-taking, but the stock rallied 30.6% in March.

The company attributes the strong earnings growth to "significantly" higher product prices driven by "the continuous improvement in the supply and demand of the cement market."