Nomura lifted its target price for China National Building Material (CNBM)(03323) to HK$3.77 from HK$2.9, and maintained its "reduce" rating.
The research house raised its EPS forecast by 26-35%, mainly by raising cement price assumptions. But it thinks the stock looks expensive at 13x FY2018 P/E, substantially higher than its historical mean of 10x and peers' average of 12x.
Nomura prefers Yanzhou Coal (01171) for its more attractive valuation and stronger cash flows. The company's cement ASP was +27% y/y in the first 9 months of 2017, higher than Nomura's previous forecast of 12% for FY2017.
The management remained bullish on cement price at the earnings call on 20 October. However, Nomura expects industry average cement price (#42.5 type) to remain unchanged at CNY340/t in FY2018-19 as both demand and supply become "stable".