Credit Suisse lowers China Shanshui Cement target price

Credit Suisse lowers China Shanshui Cement target price
Published: 22 March 2013

Credit Suisse lowered its target price for China Shanshui Cement to HK$4.2 from HK$5.5, and maintained its "neutral" call.

The house expects unit gross profit to soften in 2013 to CNY65/t due to moderate supply pressure in Shandong, combined with depressed margins in Shanxi and Xinjiang (13 per cent of 2013 sales).

Credit Suisse said its recent visit to Shandong also suggests 2Q2013 construction demandmay disappoint versus expectations. The house slightly reduced its 2013 earnings by three per cent.

Shanshui Cement, , which is the largest cement producer in Shandong and Liaoning Provinces, achieved a revenue of CNY16,161m, a profit of CNY3,099m and a gross profit of CNY4,111m last year.

Cement sales volumes fell by 0.2 per cent YoY to 47.83Mtt, hurt by the deceleration of economic growth and fixed assets in the country. However, sales volumes of commercial clinker increased by 28.9 per cent YoY to reach 9.02Mt but cement and clinker prices declined by 5.9 per cent and 21.7 per cent, respectively.

Last year the company expanded cement and clinker capacity by 5.4Mta and 1.6Mta, respectively. All suitable clinker lines were equipped with waste heat generation facilities with a total installed capacity of 209.5MW.