Cement industry: Relatively low prices caused by climate and policy factors

Last week, the national cement price fell in the areas of Changsha and Yinchuan, and the prices were reduced by 40-50 yuan/ton, respectively. The price of Jiangxi Lushan and Jiujiang was lowered by 20-30 yuan/ton. Shenyang prices rose slightly by 5 yuan/ton. The national average cement price fell 0.52%. The prices of companies other than Conch in Changsha have fallen by RMB 40-50/t. The main reasons for the price cuts are as follows: First, the production lines in the previous period have all returned to normal. Second, the purchase of downstream mixing stations due to lack of funds has led to an increase in the company's inventories. With the higher cement prices, companies have begun to dive to increase their shipments. .

The price of Yinchuan was reduced by 40-50 yuan/ton compared with June. The market was greatly affected by the entry of low-priced cement in Shaanxi and Gansu, and due to the impact of macro-control policies, downstream demand declined, so prices fell. On the whole, in July, the cement market in all regions of the country was under greater pressure. In particular, due to the monetary tightening policy, shortage of funds at the mixing plant has become a common phenomenon.

Industry news and reviews:

In July, all parts of the country entered the hot and rainy season. At this stage, the demand for cement was affected to a certain extent, forming a relatively low season during the year. In addition, this year's market was also affected by tightening monetary policy. Under the influence of the dual factors of the season and policy, cement prices have entered a relatively low phase.

Observing the historical trend of cement prices, we can see that in July-August each year, the cement price will decline slightly. Although the current cement price has declined, the average price in the country is still 15% higher than the same period of last year. And the prices in the Central South region are still 40%-50% higher than the same period of last year, and the regional differentiation of cement prices is very obvious. After August, project construction in various places is about to enter the most prosperous period of the year. The construction of affordable housing throughout the country will enter the phase of centralized start-up in the second half of the year and will effectively support cement demand. In addition, the implementation of water conservancy construction will also be implemented. Constitute a stable demand over a longer period of time,

Therefore, overall, the cement demand in the second half of the year can still remain basically stable. On the supply side, the overall supply and demand relationship and investment logic of the industry have not changed significantly under the circumstances that the new production capacity is still under control and the elimination is more backward than expected.

At present, the overall valuation of the cement sector in 2011 is about 14 times, slightly higher than the overall valuation of A shares. The regional differentiation of cement prices is very obvious. The overall market in East China and Central and South China is relatively mature. Affected by new capacity, the price remains relatively good, and the high growth of relevant companies in the region this year is a foregone conclusion. The southwest and northwest regions are greatly affected by the new production capacity, and the relative change in cement prices is relatively large. At present, attention needs to be paid to changes in downstream demand in the future. In the selection of investment targets, we recommend companies with valuation advantages, growth in performance, and good regional prices, such as Conch Cement, Huaxin Cement and Tianshan.