[ET Net News Agency, 9 January 2018] BofA Merrill Lynch lifted its target price for
Anhui Conch (00914) to HK$45 from HK$35, and reiterated its "buy" rating, given strong
cost control, volume growth from overseas expansion & potential M&A with a strong balance
sheet, and undemanding valuation of 6.2x 2018 EV/EBITDA.
The research house said China cement price in East China rallied 44%y-y in FY2017 to a
near historical high of RMB530/t now. It continued to be optimistic on East cement price
in 2018 given limited capacity additions (+0.6%), strong coordination by the major
players, especially after CNBM/ Sinoma's (03323)(01893) merger, healthy demand (at least
in first 6-9months), low inventory and ongoing supply disruptions on frequent
environmental checks. Conch is the prime beneficiary of strong East China price hikes due
to its 48% exposure to the region.
BofAML raised its 2017-19 EPS forecasts by 8-16% given 6-10% higher ASP. Given strong
cash position, the research house sees upside risk to dividend payout and now assumed 35%
(versus FY2016's 30%). (KL)