金隅集团(601992)

Key points

BBMG just hiked prices by Rmb20/t - Xiongan demand has accelerated

Property revenue could see further growth in 2019-20E

Good entry point for LT investors at 9x PE, 0.6x PB, 2% div yield

Event

At BBMG’s reverse road show today (6 Nov) �C Mgmt hiked prices by Rmb20/tin Tangshan and sees Oct cement shipments +45% YoY, thus lowering fixedcosts/t. The construction pace of Xiongan has picked up in recent months fromgovt stimulus. BBMG sees both volume and GP/t to improve in 2019-20E.BBMG guided 2019-20 to be big years for property revenue given the projectpipeline, while the low cost land bank from industrial land conversion shouldoffset net margin pressure �C despite near-term sentiment swings from theproperty market, we believe a great entry point has emerged for LT investorswith valuation near an all-time low of an 8.8x 19E PE (LT ave. 15x), 0.6x PB,and 2% dividend yield.

Impact

GP/t upside and demand pick-up from Xiongan: shipments in Oct were+45% YoY, and as there are no major conferences in Beijing this year, 10M18shipments were +2% YoY. Mgmt expected slight volume growth YoY in 2018-19, while GP margin can maintain at 38-40%. The Xiongan build-out couldboost cement demand by 10mnt pa, and BBMG could capture >90% of thesemajor infra projects �C there has been a noticeable pickup in Xiongan demandin recent months.

Merger with Jidong done by 1Q19: BBMG will finish injecting its 14 cementsubsidiaries into Jidong by 1Q19. While BBMG targets to consolidate the BTHmarket further through potential acquisitions, it has no plans to acquire CRC’sasset in Shanxi as it is not its core market. Although it plans to sell more of itsproducts to the South in an orderly manner during the weak season.

Strong property segment in 2019-2020: Mgmt maintained contracted salesguidance of Rmb27bn in FY18E and revenue booked guidance of Rmb21.4bnwith a 31% GP margin. BBMG sees revenue booked in FY19-20E significantlyimproving YoY due to the project pipeline.

Industrial land conversion acceleration: BBMG sees convertible industrialland resources reaching 2.5mn sqm in Beijing, 5.7mn sqm in Tianjin and 330ksqm in Tangshan �C conversion in Tangshan to be faster than Beijing/ Tianjinand net margin to also be higher.

Earnings and target price revision

No changes

Price catalyst

12-month price target: Rmb4.00 based on a Sum of Parts methodology.

Catalyst: 1) Cement price hikes in BTH; 2) Xiongan details announcement

Action and recommendation

Maintain OP on BBMG given it is a key beneficiary of strong cement pricemomentum in the BTH region (52% exposure) and has attractive valuation.