abcGlobal Research
A reality check in Guangdong. We visited Tapai Group and TCCI in Meizhou and
Yingde on 11-12 October. Demand was stronger-than-expected – cement trucks and
carriers queued up in Yingde during our visit. Cement sales remained stable during the
national holidays, which is unusual, and then picked up quickly thereafter. Inventory level
fell rapidly to 50% from 70% (Guangdong/Guangxi) in one month. Producers in Yingde /
Pearl River Delta have no inventory, and thus asking prices have been hiked aggressively.
We underestimated the production disruption. Major cement plants in Yingde can only
operate 50-75% of their facilities, while some remain suspended six weeks after the
explosion accident on 27 August. The stricter controls on explosives are unlikely to loosen
in the coming few months. As a result, this reduced 8-10% of cement supply in
Guangdong during this peak season. Meanwhile, new capacity will be delayed (some still
need NDRC approval). There is about 10-12mt of cement capacity currently under
construction, but we think this will mostly come through in 2H13. This should be offset
by old capacity elimination and demand growth in 2013.
Lift our earnings by 4% in 2012 and 12% in 2013. CR Cement’s cement and clinker
ASPs in Guangdong have increased RMB75-100/t since September. Guangxi and Fujian
have also seen RMB20-40/t price increases. We expect another 2 price hikes by end-2012,
as the peak season in Southern China will last until end January 2013. We estimate GP/t
to recover to HKD70-80 in October, reaching more than HKD100/t in 4Q12. We estimate
net profit will recover strongly by 41% y/y to HKD2,745m in 2013. CRC is our top pick on greatest earnings visibility. Despite the recent share price rally,
CR Cement still dropped 21% ytd, underperforming cement peers by 23% due to
overcapacity concerns in Guangdong. At HKD4.59, the stock trades at 10.9x PE. Its EV/t
of USD80.6 is one standard deviation below its historical average. We think the current
valuation is not fully pricing in the improving profitability in Southern China. We lift our
PE-based target price to HKD5.6 from HKD4.2 and upgrade to OW(V). Catalyst:
Continuous ASP hike in 4Q12.
Overweight (V) Target price (HKD) 5.60 Share price (HKD) 4.59 Forecast dividend yield (%) 1.0 Potential return (%) 23.5
Note: Potential return equals the percentage difference between the current share price and the target price, plus the forecast dividend yield
Dec 2011 a 2012 e 2013 e
HSBC EPS 0.64 0.30 0.42 HSBC PE 7.2 15.4 10.9
Performance 1M 3M 12M
Absolute (%) 6.0 4.6 -19.0 Relative^ (%) 0.4 -7.1 -25.2
Note: (V) = volatile (please see disclosure appendix)
18 October 2012
Elaine Lam* Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2822 4398 [email protected]
View HSBC Global Research at: http://www.research.hsbc.com
*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations
Issuer of report:
The Hongkong and Shanghai Banking Corporation Limited
Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it
Industrials Construction Materials Equity – China
Company report
China Resources Cement (1313 HK)
Upgrade to OW(V): More to go
CRC offers the strongest ASP outlook thanks to pent-up demand and continuous supply disruption in Guangdong
New capacity added is likely delayed to 2H13; supply dynamics positive for ASP over the next six months
Raise our earnings by 12% in 2013; lift TP to HKD5.6 from HKD4.2 and upgrade to OW(V) from N(V)
Index^ HSCEIIndex level 10,375RIC 1313.HKBloomberg 1313 HK
Source: HSBC
Enterprise value (HKDm) 49271Free float (%) 27Market cap (USDm) 3,860Market cap (HKDm) 29,923
Source: HSBC
2
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Financials & valuation Financial statements
Year to 12/2011a 12/2012e 12/2013e 12/2014e
Profit & loss summary (HKDm)
Revenue 23,240 26,437 30,426 34,627EBITDA 6,019 4,665 5,884 6,936Depreciation & amortisation -1,348 -1,833 -1,946 -2,105Operating profit/EBIT 4,671 2,832 3,938 4,831Net interest -597 -809 -919 -970PBT 4,906 2,488 3,539 4,433HSBC PBT 4,906 2,488 3,539 4,433Taxation -562 -497 -723 -916Net profit 4,179 1,944 2,745 3,420HSBC net profit 4,179 1,944 2,745 3,420
Cash flow summary (HKDm)
Cash flow from operations 4,455 1,244 4,154 5,161Capex 11,861 6,500 3,500 3,500Cash flow from investment -12,769 -7,392 -3,510 -3,531Dividends 717 292 412 513Change in net debt 8,532 5,559 -232 -1,117FCF equity 16,722 9,858 7,742 8,550
Balance sheet summary (HKDm)
Intangible fixed assets 1,708 1,697 1,686 1,673Tangible fixed assets 33,664 38,372 39,967 41,405Current assets 10,815 10,387 13,659 17,902Cash & others 3,738 -884 748 3,265Total assets 50,458 54,954 60,063 66,001Operating liabilities 9,007 10,867 12,171 13,706Gross debt 21,375 22,312 23,712 25,112Net debt 17,637 23,197 22,964 21,847Shareholders funds 19,299 20,952 23,285 26,191Invested capital 33,442 40,473 42,392 44,010
Ratio, growth and per share analysis
Year to 12/2011a 12/2012e 12/2013e 12/2014e
Y-o-y % change
Revenue 64.3 13.8 15.1 13.8EBITDA 90.6 -22.5 26.1 17.9Operating profit 106.5 -39.4 39.0 22.7PBT 119.9 -49.3 42.3 25.3HSBC EPS 104.8 -53.5 41.2 24.6
Ratios (%)
Revenue/IC (x) 0.8 0.7 0.7 0.8ROIC 14.7 6.2 7.6 8.9ROE 21.7 9.3 11.8 13.1ROA 11.5 5.1 6.2 6.8EBITDA margin 25.9 17.6 19.3 20.0Operating profit margin 20.1 10.7 12.9 14.0EBITDA/net interest (x) 10.1 5.8 6.4 7.2Net debt/equity 91.4 110.7 98.6 80.9Net debt/EBITDA (x) 2.9 5.0 3.9 3.2CF from operations/net debt 25.3 5.4 18.1 23.6
Per share data (HKD)
EPS reported (fully diluted) 0.64 0.30 0.42 0.52HSBC EPS (fully diluted) 0.64 0.30 0.42 0.52DPS 0.11 0.04 0.06 0.08NAV 2.96 3.21 3.57 4.02
Key forecast drivers
Year to 12/2011a 12/2012e 12/2013e 12/2014e
Cement Capacity (mt) 69 73 78 87Total sales volume (mt) 51 65 73 82y-o-y growth (%) 55 29 11 13Blended ASP (HKD/t) 361 329 343 341y-o-y growth (%) 10 -9 4 -1GP/t (HKD) 119 71 82 85
Valuation data
Year to 12/2011a 12/2012e 12/2013e 12/2014e
EV/sales 1.9 1.9 1.6 1.4EV/EBITDA 7.3 10.5 8.3 6.8EV/IC 1.3 1.2 1.1 1.1PE* 7.1 15.3 10.9 8.7P/NAV 1.5 1.4 1.3 1.1FCF yield (%) 64.0 38.0 30.1 33.4Dividend yield (%) 2.4 1.0 1.4 1.7
Note: * = Based on HSBC EPS (fully diluted)
Price relative
23456789
10
2010 2011 2012 2013
2345678910
China Resources Cement Rel to HANG SENG CHINA ENTERPRISES INDEX
Source: HSBC Note: price at close of 15 Oct 2012
3
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
A reality check
We visited Tapai Group (002233 CH, Not rated)
and TCCI (1136 HK, HKD2.03, TP HKD1.5,
UW(V)) in Meizhou (梅州) and Yingde (英德) on
11-12 October as an on-the-ground check to the
demand/supply dynamics in Guangdong, which is
the most critical market in Southern China, as
well as an important sales contributor to CR
Cement (Guangdong/Guangxi accounted for 70%
of sales in 1H12).
Stronger demand, less supply
We found demand was much stronger than our
and market expectations – daily sales volume did
not fall much during the national holidays (as
what we seen in the past) and then recovered
quickly afterward. Inventory fell rapidly to only
50% from 70% a month ago, in Guangdong /
Guangxi. We saw cement trucks and bulk cement
carriers queued up at TCC (Yingde) during our
visit. Most producers in Yingde or the Pearl River
Delta regions have cleared clinker/cement
inventories after the holidays in October.
However, the impact from the explosion accident
in Yingde on 27 August was larger-than-expected.
Yingde is the largest cement production base in
Guangdong and we estimate it to account for 20-
25% of total cement supply in the province.
Investment summary
We should see the strongest ASP hikes in Southern China thanks
to pent-up demand and supply disruptions in Guangdong
Overcapacity concerns may be overdone; new capacity could be
delayed to 2H13 as per our on-the-ground checks in Guangdong
CR Cement offers the greatest earnings upside in 2013e; upgrade
to OW(V) from N(V) with new TP of HKD5.6 from HKD4.2
TCC (Yingde) : Cement trucks queue up at the entrance of cement plant
TCC (Yingde): Bulk cement carriers line up at berths in Beijiang (北江)
Source: HSBC Source: HSBC
4
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Currently, three clinker production lines (3x
5,000t/d) owned by TCCI remain suspended,
while the other eight lines under Anhui Conch and
TCCI (4x 5,000t/d and 4x 6,000/t ) can only
maintain 50% and 75% of normal operation
because of stricter regulations on explosives. Our
industry checks suggested that it could takes at
least another three months for all cement
producers to resume operations entirely. During
the period, we estimate an 8-10% reduction in
cement supply in Guangdong.
Delay in new capacity in Guangdong
Many new lines under construction, including
Tapai Group’s 2x 10,000t/d in Eastern
Guangdong, have not approved by the NDRC
(central level) and no concrete timetable is
available for commencing operations. Our
channel checks suggested that 5-6 clinker
production lines, with a total of 10-12mt cement
capacity, could be released by 2013, most of
which could complete in 2H13. In our view, this
new capacity could be offset by the 4-6mt of
vertical kiln capacity elimination in 2012e, as well
as 4-5% demand growth in 2013e. ASP hike in 4Q12
Cement retail prices have gone up by RMB95 and
RMB50 in Guangdong/Guangxi since early
September. We believe the uptrend will continue
given the rapid falling inventory in most regions.
Cement producers in Yingde lifted ASP
aggressively by RMB40-50/t in mid-October,
compared to only RMB10-20/t in Eastern China.
The peak season in Southern China should last
until late January next year; therefore we expect
another two price hikes by end-2012. That said,
we should see the greatest ASP and earnings
upside for Southern China players.
CR Cement is our top pick
We like CR Cement’s earnings visibility and
improved capital structure after the recent
USD400m bond issuance. We lift our earnings
estimates by 4% and 12% in 2012 and 2013 to
reflect higher ASPs in 4Q12. We estimate
earnings to grow 41% y/y to HKD2,745m, on the
back of 11% and 4% volume and ASP growth in
2013, respectively.
CR Cement’s cement and clinker ex-factory
prices have increased RMB75/t and RMB100/t in
Guangdong since early September. Other regions
such as Guangxi and Fujian also witnessed
RMB20-40/t price increases over the period. We
estimate ASP to improve HKD35/t m/m, and GP/t
to go back to HKD70-80/t in October (from the
low of HKD40-45/t in July-August).
Originally, management planned to raise ASP by
10% to HKD350-360/t by end-2012. We think
this can be exceeded given the better-than-
expected supply/demand dynamics in the coming
months. We expect another two price hikes
(RMB30/t each), lifting ASP to HKD400 by end-
2012. That said, we estimate GP/t will go up
further to HKD105/t in 4Q12.
Difference from consensus
Our earnings estimates are 10% and 5% below
consensus in 2012-13, respectively. In our view,
consensus is not a good benchmark for CR
Cement as the range of estimates is huge (for
instance, consensus earnings estimates range from
HKD1.8-3.2bn in 2013).
Valuation and target price
At HKD4.59, the stock trades at 10.9x PE, a 14%
discount to Anhui Conch. Its EV/t of USD80.6 is
one standard deviation below the historical
average. We think the current valuation is not
fully pricing in the improving profitability in
Southern China.
In our view, the market’s concern on overcapacity
in Guangdong is overdone and we see the stock
rerating given the stronger ASP outlook and
improved capital structure after the recent
bond issuance.
5
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
We maintain our PE pricing methodology, but lift
our target to HKD5.6 (from HKD4.2) with 23.5%
potential return. This reflects our earnings
upgrades, higher PE target multiple on stronger
ASP outlook and improved capacity structure.
We lift our target PE multiple from 11.1x to
13.1x, the same as Anhui Conch’s 10-year
historical average. We believe a 10-year time
horizon is enough to capture the different
investment cycle and the historical average can
serve as a mid-cycle PE of cement stock in China.
Potential return equals the percentage difference
between the current share price and the target
price, plus the forecast dividend yield.
Catalysts
ASP hikes in Guangdong/Guangxi in 4Q12
Accelerating property construction in
Southern China
Softening coal cost in China
Faster capacity expansion through M&A
Risks
Single-market risk, as 70% of sales are from
Guangdong/Guangxi
Poor supply discipline in Southern China
Larger-than-expected new capacity added in
Guangdong
Slowing shut-down of vertical kilns in
Southern China
Increasing contribution from Shanxi, which
would dilute per-tonne profit
TCCI (1136 HK, UW(V), HKD2.03, TP: HKD1.5)
Our PE-based target price is based on Anhui
Conch’s (914 HK, N(V), HKD25.55, TP:
HKD26.4) average PE (13.1x) over the past 10
years with a discount of 45%. This is in line with
the historical trading discount over the past 12
months. Therefore, we set our target PE at 7.2x.
Applying this to the 12-month forward EPS, we
derive a target price of HKD1.5.
Upside risks: ASP to rebound in Southern China
(TCCI is a top-three player in Guangdong /
Guangxi and these regions could account for 46%
of total capacity by end-2012e); faster
consolidation in Southwest China (we expect at
least 12-18 months for markets to consolidate or
major players to start to gain pricing power, given
the very fragmented structure and serious
overcapacity problem).
CR Cement: Share price performance relative to HSCEI
-20%
0%
20%
40%
60%
80%
100%
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12
Conch
CNBM
CR Cement
Shanshui
2.7%
-5.5%
-21.1%
-5.5%
-19.5%
Out-performance
Under-performance
Relative performance vs
HSCEI (%)
HSCEI
Since 2011
Source: Thomson Reuters Datastream, HSBC estimates
6
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Southern China: Incremental demand from newly approved project is yet to filter through, stronger-than-expected cement sales is likely due to pent-up demand in July/Aug and rural consumption
11.0%
1.0%
17%
12%
3%
-3%
-0.1%
-1.7% -2.0%
6.3% 6.7% 8.8% 6.5%
-20%
-10%
0%
10%
20%
30%
40%
Jul-11 Sep-11 Nov -11 J-F 12 Apr-12 Jun-12 Aug-12
Guangdong/Guangx i Central China Eastern ChinaY/Y Clinker production
Clinker production in Guangdong/Guangx i w as disappointing in Jul/Aug
and w e attribute this to the delay ed in construction under heav y rainfall
Source: China Cement Association, HSBC
Southern China: We expect another two price hikes in Guangdong/Guangxi by end-2012, bringing cement price to the level in early 2012
250
300
350
400
450
500
1Q11 2Q11 3Q11 4Q11 Jan-12 Feb-12 Mar-12 Apr-12 May -
12
Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Current
Guangdong/Guangx i
Central China
Eastern China
RMB/t Cement retail price (with VAT) Jan Current Diff
380 335 -45 (-12%)
405 340 -65 (-16%)
417 325 -92 (-22%)
Source: China Cement Association, HSBC
CR Cement (1313 HK): Gaining market share with higher ASP after the explosion in Yingde, Guangdong
250
270
290
310
330
350
370
390
1Q12 2Q12 3Q12e 4Q12e 1Q13e 2Q13e 3Q13e 4Q13e
40
50
60
70
80
90
100
110ASP GP/t
HKD/t CR Cement (1313 HK)
ASP has risen HKD35 since mid-Sep; w e
ex pect another 2 price hikes in Nov /Dec,
lifting ASP by HKD75/t, and GP/t w ould
reach HKD105/t in 4Q12
Source: HSBC estimates
7
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Key findings from our Guangdong trip
Cement sales did well during and after the
national holidays in most regions. CR
Cement’s daily sales volume dipped to 21k
tonnes then recovered quickly to 23-24k
tonnes; Tapai and TCC (Yingde) did indicate
any meaningful decline in cement sales
during the holidays.
Cement producers’ capacity is not meeting
daily sales; therefore, inventory levels have
fallen since late September. Currently, there is
no inventory left in Yingde and the Pearl
River Delta region; Tapai and CR Cement’s
inventory are in the range of 40-50%.
TCC (Yingde)’s ASP has gone up from a low
of RMB200/t to RMB330/t since early
September; management expects pricing to go
up further by year-end. We estimate its GP/t
to improve substantially from RMB20/t to
RMB70-80/t over the period.
The impact from the explosion in Yingde
Dragon Mountain is larger than we thought. As
of 12 October, Yingde Dragon Mountain (3x
5000t/d) was still suspended as it was running
out of limestone; TCC (Yingde) (4x 6,000t/d)
and Yingde Conch (4x 5,000t/d) can only
maintain 75% and 50% of operations under the
stricter regulations on explosives in the region.
Other smaller cement producers in the region
face a similar situation. This reduced 8-10% of
cement supply in Guangdong.
New capacity under construction (including
Tapie’s 2x 10,000t/d in Eastern Guangdong)
may be delayed on licensing issues, as those
not approved by the NDRC (central level)
cannot start the main construction. We
estimate 5-6 clinker production lines (with
10-12mt of cement capacity) will commence
operations next year, largely in 2H13. This
new capacity should be offset by the 4-6mt of
vertical kiln capacity elimination by 2012e, as
well as 4-5% demand growth in Guangdong
in 2013e.
Guangdong is the first province to implement
a lower nitrogen emission standard of 550mg
(from 800mg/m3) for cement producers in
China. Most of them have to install de-
nitrification equipment by end-2012; this
incurs an additional investment of RMB3m
for a 5,000t/d clinker production line, and
also RMB3-5/t of operating cost among
producers (some even as high as RMB10/t).
On-the-ground checks
We visited Tapai Group and TCCI in Meizhou (梅州) and Yingde
(英德) in Eastern/Northern Guangdong on 11-12 October
Key takeaways are demand is stronger-than-expected while
supply disruptions in Yingde could last another three months
ASP will continue to go up before peak season ends in early 2013
8
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Guangdong cement trip 11-12 October 2012 1. Tapai’s 1x 5,000t/d clinker production line Day 1: Jaoling of Meizhou City, Guangdong (梅州蕉岭县)
This is the first 5,000t/d clinker production line in Guangdong built by Tapai Group (002233 CH) back in 2002
Tapai plans to construct 2x10,000t/d clinker lines close to this old plant, but the project is still pending NDRC (central level) approval
The new project has started construction but the main part cannot kick-off before approval; no timetable given as to when the project can complete and commence operations
Management admitted the difficulty in getting approval and we believe this is not an exceptional case in Guangdong
We believe many new lines under construction face a similar situation and therefore new capacity added in 2013 is likely to be much less than thought
Source: HSBC
2. A vertical kiln clinker production line owned by YouKen Group (油坑集团), a local cement operator
Day 1: Jaoling of Meizhou City, Guangdong (梅州蕉岭县)
There is 7-8mt of vertical kiln cement capacity in Eastern Guangdong (粤东) which have to close down during the 12th Five-Year Period (by 2015)
Tapai’s 2x 10,000t/d clinker production lines will replace the local vertical kiln, not targeting the Pearl River Delta or Western Guangdong which are the key markets for CR Cement
The elimination of old capacity has been slightly behind schedule over the past few years, but many vertical kiln factories are already shut due to the inefficient and costly operation
Source: HSBC
3. TCC (Yingde): 4x 6,000t/d clinker production lines Day 2: Yingde City, Guangdong (英德市)
The first two phases (4x 6,000t/d or 10mt annual cement capacity) commenced operation in 2006-07; TCCI reserved the land and limestone resources for extension (3-4th phases) but is unlikely to get approval in foreseeable future
Impact from the explosive accident (27 Aug) in Yingde Dragon Mountain (英德龙山), which is 100% owned by TCCI but operated by Conch, is larger than we thought
As of 12 Oct, Yingde Dragon Mountain (3x 5000t/d) was still suspended as running out of limestone; TCC (Yingde) and Yingde Conch can only maintain 75% and 50% of operations under the stricter regulations on explosives in the region
Other cement producers in the region face a similar problem; we estimate the cement daily supply is reduced 8-10% in Guangdong
Source: HSBC
9
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Guangdong cement trip 11-12 October 2012 (cont’d) 4. De-nitrification facilities in TCC (Yingde) Day 2: Yingde City, Guangdong (英德市)
Guangdong is the first province to implement a lower nitrogen
emission standard of 550mg (from 800mg/m3) for the cement industry in China
Cement plants have to install de-nitrification equipment in most regions by end-2012; this incurs an additional investment of RMB3m for a 5,000t/d clinker production line, and also RMB3-5/t of operating cost among producers (some even as high as RMB10/t)
Source: HSBC
5. Bulk cement carriers line up at berths in Beijiang (北江) Day 2: Yingde City, Guangdong (英德市)
Beijiang is the main waterway for transport from Yingde to
Pearl River Delta Region Transportation cost per tonne of cement is RMB20/t for cement,
similar to CR Cement’s from Fengkai (封开) via Xijiang (西江)
Source: HSBC
6. Cement trucks queue up at the entrance of cement plant Day 2: Yingde City, Guangdong (英德市)
Cement sales did not fall much during the national holidays and
then picked up quickly afterward; management said stronger than expected demand came from accelerating infrastructure construction and rural consumption
Regulation of explosives in Yingde remains very strict and cement producers’ inventory has already cleared
TCC (Yingde) plans for another price hike of RMB50/t in Pearl River Delta Region in mid Oct; its ASP has gone up from a low of RMB200/t to RMB330/t recently (+RMB130/t) since early Sept; management expects pricing to go up further by the end of this year
We estimate its GP/t to improve substantially from RMB20/t to RMB70-80/t over the period
Source: HSBC
10
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Our key assumptions
Cement capacity to grow 6% and 7% to
77.7m tonnes by 2013. This does not include
any potential M&A.
Sales volume to grow 11% y/y to 72.6mt in
2013, the blended utilization rate (clinker and
cement) to reach 93% in 2013.
Another 2-3 price hikes (RMB30/t each) in
the coming months, lifting ASP to HKD405
by end-2012. We estimate a 4% ASP growth
in 2013 because of the high base set in 4Q12.
GP/t to improve substantially from HKD46/t
(3Q12) to HKD105/t in 4Q12. GP/t to then
remain stable at HKD82/t in 2013.
Earnings revisions
We lift our earnings estimates by 4% in 2012 and 12% in 2013 to
reflect higher ASP in 4Q12
We estimate earnings to grow 41% y/y to HKD2,745m, on the
back of 11% and 4% volume and ASP growth in 2013
CR Cement: H/H breakdown
Year-end Dec (HKDm) 1H11 2H11 1H12 2H12e 1H13e 2H13e
Total sales volume ('000t) 21,676 28,942 27,327 37,969 30,506 42,127 H/H 8.5% 33.5% -5.6% 38.9% -19.7% 38.1% Y/Y 70.0% 44.8% 26.1% 31.2% 11.6% 11.0% as % of total 42.8% 57.2% 41.9% 58.1% 42.0% 58.0% Blended ASP 364 359 324 333 350 338 H/H 4.1% -1.3% -9.9% 2.9% 5.2% -3.5% Y/Y 21.7% 2.8% -11.1% -7.3% 8.2% 1.4% Clinker & cement sales 7,894 10,403 8,848 12,645 10,684 14,232 H/H 13.0% 31.8% -14.9% 42.9% -15.5% 33.2% Y/Y 106.9% 48.9% 12.1% 21.6% 20.7% 12.5% as % of total 78.5% 78.9% 80.2% 82.1% 42.9% 57.1% Turnover 10,052 13,188 11,034 15,403 13,101 17,324 H/H 11.1% 31.2% -16.3% 39.6% -14.9% 32.2% Y/Y 97.3% 45.8% 9.8% 16.8% 18.7% 12.5% - as a % of full yr 43.3% 56.7% 41.7% 58.3% 43.1% 56.9% Net profit 2,045 2,134 635 1,309 1,022 1,723 H/H 42.7% 4.3% -70.2% 106.1% -22.0% 68.7% Y/Y 236.8% 48.8% -68.9% -38.6% 60.8% 31.6% - as a % of full yr 48.9% 51.1% 32.7% 67.3% 37.2% 62.8% GP/t (HKD) 130.8 110.7 63.7 76.3 80.2 84.0 SG&A as % of Sales 10.6% 11.3% 11.9% 11.3% 11.2% 11.3% SG&A/t 48.9 51.6 47.9 45.7 47.9 46.5 Effective tax Rate 8.3% 14.3% 20.0% 20.0% 25.5% 17.0% Net margin 20.3% 16.2% 5.8% 8.5% 7.8% 9.9%
Source: Company data, HSBC estimates
11
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
CR Cement: Earnings revisions
Yr end Dec (HKDm) Actual _________________ New ________________ ________________ Change _______________ 2011 2012e 2013e 2014e 2012e 2013e 2014e
Cement capacity ('000t) 68,744 72,744 77,744 86,744 0.0% 0.0% 0.0% Y/Y 43.7% 5.8% 6.9% 11.6% Total sales vol ('000 tonnes) 50,618 65,296 72,633 82,296 3.4% 0.6% 0.2% Y/Y 54.6% 29.0% 11.2% 13.3% Blended ASP 361.5 329.2 343.0 341.2 -0.2% 3.2% 4.4% Y/Y 9.5% -8.9% 4.2% -0.5% Clinker & cement sales 18,297 21,493 24,915 28,079 3.3% 3.8% 4.6% Y/Y 69.3% 17.5% 15.9% 12.7% Concrete sales 4,943 4,943 5,510 6,548 0.0% -7.2% -8.6% Y/Y 48.1% 0.0% 11.5% 18.8% Turnover 23,240 26,437 30,426 34,627 2.6% 1.6% 1.8% Y/Y 64.3% 13.8% 15.1% 13.8% Gr profit 7,224 5,876 7,360 8,613 1.8% 6.1% 8.1% Y/Y 61.9% -18.7% 25.3% 17.0% SG&A -2,553 -3,043 -3,422 -3,782 0.6% 1.1% 1.2% Y/Y 16.0% 19.2% 12.4% 10.5% EBIT 4,671 2,832 3,938 4,831 3.1% 10.9% 14.1% Y/Y 106.5% -39.4% 39.0% 22.7% Net finance cost -597 -809 -919 -970 -4.3% -6.3% -6.7% Y/Y -14.3% -30.5% -23.9% -20.1% Share of results of associates 134 130 140 140 -14.5% -20.8% -24.6% Y/Y -71597.9% -3.3% 7.8% 0.0% Share of profit from JCE 155 97 113 130 11.1% -11.0% -4.9% Y/Y -37.3% 16.7% 14.3% Net profit 4,179 1,944 2,745 3,420 4.4% 11.7% 15.1% Y/Y 104.8% -53.5% 41.2% 24.6% Against cons -10.0% -4.8% GP/t (HKD) 119.3 71.1 82.4 84.8 -1.1% 9.1% 12.7% Blended gr margin 31.1% 22.2% 24.2% 24.9% -0.2%-pt 1.0%-pt 1.4%-pt SG&A as % of sales 11.0% 11.5% 11.2% 10.9% -0.2%-pt -0.1%-pt -0.1%-pt EBIT margin 20.1% 10.7% 12.9% 14.0% 0.0%-pt 1.1%-pt 1.5%-pt Net margin 18.0% 7.4% 9.0% 9.9% 0.1%-pt 0.8%-pt 1.1%-pt Operating cash flow 4,455 1,244 4,154 5,161 10.2% 4.5% 9.7% Capex -11,861 -6,500 -3,500 -3,500 0.0% 0.0% 0.0% Net gearing 91.6% 110.7% 98.6% 83.4% -0.9%-pt -2.3%-pt -4.5%-pt Cash cycle (96) (40) (40) (40) 0 0 0 ROE 21.7% 9.3% 11.8% 13.1% 0.4%-pt 1.1%-pt 1.4%-pt
Source: Company data, HSBC estimates
CR Cement: Sales volume in 2011-13e CR Cement: Sales volume breakdown by region
0
5,000
10,000
15,000
20,000
25,000
30,000
2011 2012e 2013e
Guangdong Guanx i FujianHainan Shanx i Yunan
Sales vol ('000t)
Guangdong
25.3%
Fujian
13.1%
Hainan
6.1%
Shanx i
14.8%
Yunan
6.1%
Guanx i
34.5%
Sales volume (2013)
Source: Company data, HSBC estimates Source: HSBC estimates
12
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
PE-based target price
We maintain our PE-based pricing methodology,
but lift our target PE multiple from 11.1x to
13.1x, the same as Anhui Conch’s 10-year
historical average. We believe a 10-year time
horizon is enough to capture the different
investment cycle and the historical average can
serve as a mid-cycle PE of cement stocks in
China. Coupled with a 12% earnings upgrade in
2013 EPS, we raise our target price from HKD4.2
to HKD5.6.
1) Stronger ASP outlook in Southern China
Cement retail prices increased RMB95/t and
RMB50/t in Guangdong/Guangxi since early
September compared to RMB30/t in Eastern
China. We attribute this to stronger seasonality in
Southern China due to pent-up demand in 3Q12,
as well as the supply disruption in Yingde, the
largest clinker production base in Guangdong.
Currently, the cement price in Guangdong /
Guangxi is only RMB45/t (12%) lower than
earlier this year, while Eastern China’s is still
RMB92/t below (22%). In our view, the high ASP
in Southern China will sustain through 2013, as
peak season lasts until January and new capacity
coming through is likely delayed to 2013. 2) Improved capital structure
CR Cement issued a five-year USD400m senior
bond to refinance its existing short-term bank
borrowing in China. We estimate HKD60m interest
cost savings, given the 2.125% coupon rate versus
about 6% for short-term borrowing in China. CR
Cement’s short-term debt percentage will also lower
from 50% to only 36% by end-2013.
Upgrade to OW(V)
Under our research model, for stocks with a
volatility indicator, the Neutral band is 10ppts
above and below the hurdle rate for China stocks
of 10%. Our target price of HKD5.6 implies a
potential return of 23.5% (including a forecast
dividend yield of 1.0%); therefore, we are upgrade
the stock from N(V) to OW(V). Potential return
equals the percentage difference between the
current share price and the target price, including
the forecast dividend yield when indicated.
Target price
CR Cement becomes our top pick in China cement on its earnings
visibility
We maintain our PE pricing methodology, but lift our target to
HKD5.6 (from HKD4.2) for 23.5% potential return
This reflects our earnings upgrade, higher PE target multiple on
stronger ASP outlook and improved capacity structure
13
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
CR Cement – Key valuation charts CR Cement (1313 HK) - PE band chart
3
5
7
9
11
13
15
17
19
21
23
Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12
Fw d PEFwd PE (x)
Av e + 2 x SD
Av e + 1 x SD
Av e
Av e - 1 x SD
Av e - 2 x SD
Max Min Avg Current
21.9x 6.7x 12.7x 11.6x
Source: Datastream, HSBC estimates
CR Cement (1313 HK) - EV/tonne
60
70
80
90
100
110
120
130
140
Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov -11 Apr-12 Sep-12
Since listing Max Min Average Current
EV/tonne (USD) 132 74 100 89EV/t (USD/Cement capacity )
+ 2 s.d.
+1 s.d.
-1 s.d.
-2 s.d.
Source: Datastream, HSBC estimates
2012e EV/tonne against 2013 EPS y/y growth
HK-listed peers
PRC-listed peersCNBM CR Cement
ConchAC ChinaShanshui
TCCI
Sinoma
All cement peers
Indian peers Global peers
0
50
100
150
200
250
0 10 20 30 40 50 60 70
2012e EV/t (USD)
2013e EPS y/y (%)
Source: Datastream, HSBC estimates
Ch
ina R
esou
rces Cem
ent (1313 H
K)
Co
nstru
ction
Materials
18 Octo
ber 2012
14
ab
c
HSBC China Cement valuation comparison
Company Bloomberg ticker
Mkt cap (USDm)
Rating Price (Local)
Targetprice
Pot'l return*
2011 -13e EPS
CAGR (%)
_ EPS y/y __ _____________________ 2012e _____________________ ______________________ 2013e ______________________2012e 2013e PE (x) PB (x) GP/t
(RMB)EV/t (USD) N gearing
(%) RoE (%) PE (x) PB (x) GP/t
(RMB)EV/t (USD) N gearing
(%) RoE (%)
Anhui Conch 914 HK 14,432 N(V) 25.55 26.40 4.5% -13.4 -43.4 32.4 16.8 2.2 64.0 79.7 38.1 13.1 12.7 1.9 73.3 75.9 32.9 15.2 CNBM 3323 HK 6,011 UW (V) 8.63 6.80 -19.9% -12.6 -38.0 23.1 7.6 1.2 58.4 71.4 351.1 16.1 6.2 1.0 58.8 75.0 343.9 16.9 CRC 1313 HK 3,861 OW(V) 4.59 5.60 22.9% -19.0 -53.5 41.2 15.3 1.4 57.8 86.8 110.7 9.3 10.9 1.3 67.0 80.6 98.6 11.8 Shanshui Cement 691 HK 1,936 OW (V) 5.33 5.40 3.3% -8.6 -26.5 13.6 7.5 1.3 71.9 37.0 122.1 18.0 6.6 1.1 68.0 35.0 109.3 17.4 Sinoma 1893 HK 981 N(V) 2.21 2.00 -8.4% -38.6 -66.4 12.1 13.1 0.6 54.5 56.4 277.3 4.4 11.7 0.5 55.0 55.4 313.5 4.7 TCCI 1136 HK 863 UW (V) 2.03 1.50 -24.5% -31.1 -59.5 17.3 10.8 0.5 33.5 31.7 68.3 4.6 9.2 0.5 33.2 30.1 60.7 5.1 AC China 743 HK 677 N(V) 3.37 3.20 -2.0% -27.8 -61.9 36.9 8.4 0.5 55.3 82.2 63.5 5.8 6.1 0.5 59.2 64.7 65.0 7.4 BBMG 2009 HK 3,728 NR 5.91 N/a N/a 8.9 3.7 14.3 5.7 0.9 N/a N/a N/a 14.2 5.0 0.8 N/a N/a N/a 14.9 West China Cement 2233 HK 763 NR 1.30 N/a N/a 4.7 -29.0 54.5 9.6 1.0 N/a N/a N/a 12.3 6.2 0.9 N/a N/a N/a 15.7 PRC peers (HK-listed) (9 companies) -12.2 -38.5 28.2 12.6 1.6 61.1 73.9 128.6 13.0 9.7 1.4 66.9 71.2 123.0 14.5 Conch A 600585 CH 14,432 N/a 15.91 N/a N/a -15.5 -44.7 28.9 13.1 1.7 N/a 83.4 N/a 13.7 10.2 1.5 N/a 81.5 N/a 15.2 Tangshan Jidong Cmt.'A'
000401 CH 2,508 N/a 11.67 N/a N/a -10.9 -50.6 60.7 19.1 1.3 N/a 57.6 N/a 5.1 11.9 1.2 N/a 58.1 N/a 8.2
Jilin Tatai Cement 600881 CH 1,414 N/a 4.68 N/a N/a 18.3 7.5 30.2 10.9 N/a N/a N/a N/a 11.5 8.4 N/a N/a N/a N/a NA Huaxin Cement 'B' 600801 CH 1,598 N/a 1.35 N/a N/a 6.3 -11.3 27.5 8.3 N/a N/a N/a N/a NA 6.5 N/a N/a N/a N/a NA Gansu Qilianshan Cmt 600720 CH 798 N/a 10.54 N/a N/a -1.4 -24.3 28.3 19.9 1.7 N/a N/a N/a 5.8 15.5 1.4 N/a N/a N/a 8.5 Xinjiang Tianshan Cmt 000877 CH 1,211 N/a 8.63 N/a N/a -26.6 -44.9 -2.2 9.7 1.1 N/a N/a N/a 6.7 9.9 1.0 N/a N/a N/a 10.0 Ningxia Saima Ind. 'A' 600449 CH 644 N/a 8.44 N/a N/a -16.1 2.8 -31.6 11.1 1.0 N/a N/a N/a 1.4 16.2 1.0 N/a N/a N/a 3.8 BBMG Corp 'A' 601992 CH 3,728 N/a 5.71 N/a N/a 1.2 -13.6 18.6 8.2 1.1 N/a N/a N/a 11.7 6.9 0.9 N/a N/a N/a 12.6 PRC peers (8 companies) -9.7 -34.2 27.5 12.6 1.5 N/a 79.6 N/a 16.9 9.9 1.3 N/a 78.1 N/a 23.1 Grasim Industries GRASIM IN 5,921 N/a 3,422.65 N/a N/a 8.9 4.4 13.5 11.4 1.6 N/a 265.6 N/a 14.7 10.0 1.4 N/a 244.8 N/a 14.8 Ambuja Cements ACEM IN 6,229 UW 214.60 140.00 -34.8% 16.5 4.7 29.6 25.2 3.7 N/a 203.6 -42.0 15.5 19.4 3.4 N/a 194.6 -50.8 18.3 ACC ACC IN 5,273 UW 1,489.20 1,190.00 -20.1% 10.4 -8.5 33.1 23.5 3.8 N/a 146.8 -54.8 16.5 17.7 3.5 N/a 139.9 -64.4 20.5 India Cement ICEM IN 587 N/a 101.30 N/a N/a 14.0 5.7 23.0 9.9 0.8 N/a 64.1 N/a 7.6 8.1 0.7 N/a 61.3 N/a 8.9 Madras Cement MC IN 842 N/a 187.70 N/a N/a 6.3 -1.9 15.2 12.0 1.9 N/a N/a N/a 16.7 10.4 1.6 N/a N/a N/a 16.6 Indian peers (7 companies) 13.9 12.3 18.1 23.0 3.7 N/a 208.3 -5.8 16.6 20.4 3.6 N/a 198.9 -26.6 17.8 Holcim 'R' HOLN VX 22,202 OW 63.40 71.00 12.0% 24.4 11.9 38.4 17.3 1.2 N/a 167.2 51.2 7.0 12.5 1.1 N/a 161.3 41.1 9.1 Lafarge LG FP 16,208 OW (V) 43.62 55.00 26.1% 31.2 13.2 52.0 16.2 0.8 N/a 152.6 59.9 4.8 10.7 0.7 N/a 146.5 51.0 7.0 Cemex CX US 9,718 N(V) 8.80 8.50 -3.4% N/a -46.7 -55.3 N/a 0.9 N/a 370.3 139.5 N/a N/a 0.9 N/a 361.3 139.8 N/a Heidelbergcement HEI GR 9,791 OW 40.36 60.00 48.6% 29.0 14.4 45.5 12.0 0.6 N/a 168.3 52.1 4.9 8.2 0.5 N/a 161.4 43.3 6.8 Ciments Francais CMA FP 2,100 N/a 45.35 N/a N/a 15.4 13.2 17.6 12.3 0.5 N/a N/a N/a 3.9 10.4 0.5 N/a 62.6 N/a 4.6 Buzzi Unicem BZU IM 2,190 N/a 9.12 N/a N/a 100.0 116.7 84.6 35.1 0.7 N/a N/a N/a 2.0 19.0 0.7 N/a 80.4 N/a 3.6 Italcementi IT IM 1,201 N/a 4.05 N/a N/a -43.6 -98.5 2,000.0 404.8 0.3 N/a N/a N/a 0.4 19.3 0.3 N/a 52.4 N/a 1.7 Pretoria Por.Cmt. PPC SJ 1,948 N/a 28.38 N/a N/a 12.5 15.3 9.6 13.0 9.2 N/a 29.2 N/a 79.8 11.9 7.7 N/a 29.3 N/a 59.8 Titan Cement TITK GA 1,454 N/a 13.95 N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a Adelaide Brighton ABC AU 2,054 N/a 3.15 N/a N/a 5.9 3.4 8.3 13.1 2.0 N/a N/a N/a 15.4 12.1 1.9 N/a N/a N/a 15.9 Cimsa CIMSA TI 598 OW 8.02 11.70 45.9% 12.7 6.7 19.1 8.0 1.2 N/a 69.7 18.0 15.5 6.7 1.2 N/a 75.1 25.6 17.7 Adana Cimento ADANA TI 334 OW 3.35 5.15 53.9% -3.8 -9.6 2.5 4.2 1.2 N/a 37.6 13.9 15.3 4.1 1.1 N/a 42.2 22.7 15.3 Global Cement peers (12 companies) 26.8 5.4 62.5 16.8 1.1 N/a 189.9 67.8 8.4 11.4 1.1 N/a 174.0 60.2 9.6 All Cement peers (43 companies) 9.3 -9.0 41.9 17.0 1.9 N/a 156.3 67.2 12.6 13.1 1.7 N/a 147.4 57.2 14.9
Source: Thomson Reuters Datastream, Corporate information; Note: average excludes negative ratios, except for EPS growth. For average calculation ratios over 50, growth rates over 50% are taken as 50 and PEG greater than 2.5 are taken as 2.5. Price at 16 Oct 2012. (*) CRC, AC (China), CNBM, Shanshui, Sinoma, Anhui Conch ('H'share), Titan Cement, Pretorial Por. Cmt., Lafarge, Holcim, Adana Cimento, Cimsa, Cemex, Heidelberg Cement, Ambuja Cement, ACC are HSBC estimates
*Potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated.
15
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Disclosure appendix Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Elaine Lam
Important disclosures
Stock ratings and basis for financial analysis
HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations. Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon; and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative, technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating. HSBC has assigned ratings for its long-term investment opportunities as described below.
This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this website.
HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research report. In addition, because research reports contain more complete information concerning the analysts' views, investors should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not be used or relied on in isolation as investment advice.
Rating definitions for long-term investment opportunities
Stock ratings HSBC assigns ratings to its stocks in this sector on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review, expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily triggering a rating change.
16
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12 months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However, stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
Rating distribution for long-term investment opportunities
As of 17 October 2012, the distribution of all ratings published is as follows: Overweight (Buy) 46% (27% of these provided with Investment Banking Services)
Neutral (Hold) 39% (26% of these provided with Investment Banking Services)
Underweight (Sell) 15% (20% of these provided with Investment Banking Services)
Share price and rating changes for long-term investment opportunities
TCC Intl (1136.HK) Share Price performance HKD Vs HSBC rating history Recommendation & price target history
From To Date
N/A Neutral (V) 14 January 2010 Neutral (V) Underweight (V) 14 November 2011 Underweight (V) Neutral (V) 19 March 2012 Neutral (V) Underweight (V) 08 August 2012 Target Price Value Date
Price 1 4.03 14 January 2010 Price 2 3.60 18 January 2010 Price 3 3.42 25 March 2010 Price 4 2.40 20 May 2010 Price 5 2.60 10 June 2010 Price 6 3.30 13 September 2010 Price 7 3.60 25 January 2011 Price 8 4.70 23 June 2011 Price 9 5.60 03 August 2011 Price 10 3.00 14 November 2011 Price 11 2.70 27 January 2012 Price 12 3.50 19 March 2012 Price 13 1.50 08 August 2012
Source: HSBC
0
2
4
6
8
10
12
Oct
-07
Oct
-08
Oct
-09
Oct
-10
Oct
-11
Oct
-12
Source: HSBC
China Resources Cement (1313.HK) Share Price performance HKD Vs HSBC
rating history
Recommendation & price target history
From To Date
N/A Overweight (V) 14 January 2010 Overweight (V) Overweight 29 November 2010 Overweight Overweight (V) 14 November 2011 Overweight (V) Neutral (V) 28 June 2012 Target Price Value Date
Price 1 4.80 14 January 2010 Price 2 5.00 22 March 2010 Price 3 5.30 23 August 2010 Price 4 6.60 13 September 2010 Price 5 7.20 29 November 2010 Price 6 7.40 06 December 2010 Price 7 7.50 25 January 2011 Price 8 8.00 06 March 2011 Price 9 9.80 05 May 2011 Price 10 7.70 14 November 2011 Price 11 7.40 12 December 2011 Price 12 7.90 19 March 2012 Price 13 5.50 28 June 2012 Price 14 4.20 13 August 2012
Source: HSBC
3
4
5
6
7
8
9
10
Oct
-07
Oct
-08
Oct
-09
Oct
-10
Oct
-11
Oct
-12
Source: HSBC
17
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
HSBC & Analyst disclosures Disclosure checklist
Company Ticker Recent price Price Date Disclosure
CHINA RESOURCES CEMENT 1313.HK 4.59 16-Oct-2012 4, 6, 7TCC INTL 1136.HK 2.03 16-Oct-2012 2, 7
Source: HSBC
1 HSBC* has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next
3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company. 4 As of 30 September 2012 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 31 August 2012, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of investment banking services. 6 As of 31 August 2012, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of non-investment banking securities-related services. 7 As of 31 August 2012, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research.
* HSBC Legal Entities are listed in the Disclaimer below.
Additional disclosures 1 This report is dated as at 18 October 2012. 2 All market data included in this report are dated as at close 15 October 2012, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.
4 As of 30 September 2012, HSBC and/or its affiliates (including the funds, portfolios and investment clubs in securities managed by such entities) either, directly or indirectly, own or are involved in the acquisition, sale or intermediation of, 1% or more of the total capital of the subject companies securities in the market for the following Company(ies) :CHINA RESOURCES CEMENT
18
China Resources Cement (1313 HK) Construction Materials 18 October 2012
abc
Disclaimer * Legal entities as at 8 August 2012 ‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR
Issuer of report
The Hongkong and Shanghai Banking Corporation Limited Level 19, 1 Queen’s Road Central
Hong Kong SAR
Telephone: +852 2843 9111
Telex: 75100 CAPEL HX
Fax: +852 2596 0200
Website: www.research.hsbc.com
This document has been issued by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in the conduct of its Hong Kong regulated business for the information of its institutional and professional investor (as defined by Securities and Future Ordinance (Chapter 571)) customers; it is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited is regulated by the Hong Kong Monetary Authority. All enquires by recipients in Hong Kong must be directed to your HSBC contact in Hong Kong. If it is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. HSBC and its affiliates and/or their officers, directors and employees may have positions in any securities mentioned in thisdocument (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report. In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in the UK. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited, Singapore Branch" representative in respect of any matters arising from, or in connection with this report. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR. In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. It may not be further distributed in whole or in part for any purpose. In Korea, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. HBAP SLS is regulated by the Financial Services Commission and the Financial Supervisory Service of Korea. In Canada, this document has been distributed by HSBC Bank Canada and/or its affiliates. Where this document contains market updates/overviews, or similar materials (collectively deemed “Commentary” in Canada although other affiliate jurisdictions may term “Commentary” as either “macro-research” or “research”), the Commentary is not an offer to sell, or a solicitation of an offer to sell or subscribe for, any financial product or instrument (including, without limitation, any currencies, securities, commodities or other financial instruments). © Copyright 2012, The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited. MICA (P) 038/04/2012, MICA (P) 063/04/2012 and MICA (P) 206/01/2012
abc
Industrials Colin Gibson Global Sector Head, Industrials +44 20 7991 6592 [email protected]
Michael Hagmann Analyst +44 20 7991 2405 [email protected]
Mark Webb Analyst +852 2996 6574 [email protected]
Parash Jain Analyst +852 2996 6717 [email protected]
Shishir Singh Analyst +852 2822 4292 [email protected]
Walden Shing Analyst +852 2996 6751 [email protected]
Stephen Wan Analyst +852 2996 6566 [email protected]
Dandan Yu Analyst +852 2822 4202 [email protected]
Brian Cho Head of Research, Korea +822 3706 8750 [email protected]
Jinil Yoon Analyst +822 3706 8763 [email protected]
Paul Choi Analyst +822 3706 8758 [email protected]
Thilan Wickramasinghe Analyst +65 6658 0609 [email protected]
Rahul Garg Analyst +91 22 2268 1245 [email protected]
Puneet Gulati Analyst +91 22 2268 1235 [email protected]
Michele Olivier Analyst +27 11 6764208 [email protected]
Joerg-Andre Finke Analyst + 49 211 910 3722 [email protected]
Richard Schramm Analyst + 49 211 910 2837 [email protected]
Juergen Siebrecht Analyst + 49 211 910 3350 [email protected]
Christophe Quarante Analyst + 33 1 56 52 43 12 [email protected]
Autos Niels Fehre Analyst +49 211 910 3426 [email protected]
Horst Schneider Analyst +49 211 910 3285 [email protected]
Carson Ng Analyst +852 2822 4397 [email protected]
Yogesh Aggarwal Analyst +91 22 2268 1246 [email protected]
Transportation Andrew Lobbenberg Analyst +44 20 7991 6816 [email protected]
Julia Winarso Analyst +44 20 7991 2168 [email protected]
Joe Thomas Analyst +44 20 7992 3618 [email protected]
Zhe Wei Sim Analyst +852 2996 6602 [email protected]
Luciano T Campos +55 11 3371 8192 [email protected]
Shishir Singh +852 2822 4292 [email protected]
Valerie Law +65 6658 0616 [email protected]
Achal Kumar Analyst +91 80 3001 3722 [email protected]
Rajani Khetan Associate + 852 3941 0830 [email protected]
Construction & Engineering Neel Sinha Head of Equity Research, South East Asia +65 6658 0606 [email protected]
Tarun Bhatnagar Analyst +65 6658 0614 [email protected]
John Fraser-Andrews Analyst +44 20 7991 6732 [email protected]
Jeffrey Davis Analyst +44 207 991 6837 [email protected]
Francisco Suarez Analyst +52 55 5721 2173 [email protected]
Anderson Chow Analyst +852 2996 6669 [email protected]
Elaine Lam Analyst +852 2822 4398 [email protected]
Raj Sinha Analyst + 971 4423 6932 [email protected]
Levent Bayar Analyst +90 212 376 46 17 [email protected]
Ashutosh Narkar Analyst +91 22 2268 1474 [email protected]
Tobias Loskamp Analyst +49 211 910 2828 [email protected]
Specialist Sales
Rod Turnbull +44 20 7991 5363 [email protected]
Oliver Magis +49 21 1910 4402 [email protected]
Billal Ismail +44 20 7991 5362 [email protected]
Global Industrials Research Team