HSBC Global Research raised its target price for Asia Cement China (ACC)(00743) to HK$11.5 from HK$10 and maintained its "buy" rating.
The research house believes China's cement sector is a defensive play amid the trade war turmoil, given that its business is domestic and it would benefit from more investment in infrastructure.
Yet HSBC thinks cement demand and prices could start declining from early June due to seasonality, putting pressure on share prices. The sector's valuation is close to its historical average PB multiple, so HSBC believes further correction could present a buying opportunity.
HSBC likes ACC for its strong earnings growth and a dividend yield of 9%. It prefers ACC over Taiwan Cement given its better geographical exposure. The cement sector's catalysts include new infrastructure investment and elimination of PC32.5R grade cement in October.
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