Deutsche Bank: Conch to gain greater pricing power, China

Deutsche Bank: Conch to gain greater pricing power, China
27 March 2013

In light of slowing demand growth and severe overcapacity in East China, the operating landscape has changed in favour of Conch partly through superior production costs and greater pricing power, Deutsche Bank says in a recent note.

The bank believes that smaller players are losing market share as they can no longer compete with Conch's superior production costs (10-20 per cent below its peers) and low-priced strategy to clear inventory in the slow season.

 "Effectively, smaller players have become price takers while Conch has become the ultimate price setter. We believe this unique advantage will continue to widen and allow Conch to deliver strong earnings growth (29 per cent CAGR FY13-15) in an over-supplied environment," Deutsche Bank writes.

It further adds that it sees Conch achieivng “more stable earnings growth through greater pricing power, superior production costs and a strong balance sheet to grow through M&A."

Deutsche Bank has raised Anhui Conch Cement to Buy from Hold, and target price to HK$33.70 vs HK$25.27.

Published under Cement News

Tagged Under: Conch Pricing China