Citi cuts CNBM, Conch target price, China

Citi Group has cut the target price of Chinese players CNBM to Sell and Anhui Conch to Neutral and outlines the latter's latest moves in terms of suspended and new capacity.

“We think the industry affiliation in East China market is breaking down. Mills are restarting suspended production lines to recoup volume. Demand is recovering, as we expected, however not as fast as the supply resumption. Price pressure should materialize in the next one to two quarters,” the house said in a statement.

It has cut prices for 12E by 4% for Conch & 7% for CNBM South Cement. “We trim 12E profit forecasts by 19%% and 30% for the two companies respectively,” it said.

Citi also confirmed that Conch plans to restart 13 suspended lines comprising all five lines in Jiangsu and Zhejiang plus eight in Anhui, amounting to almost 18% of its clinker capacity in the East.

It adds that Conch is sticking sticks to the original plan to launch three more new lines by May end to June. “One has daily capacity of 12,000t. The other two have 5000tpd each. Additional capacity amounts to 6.8Mta of clinker (9.5Mt of cement), representing about 2% of total demand in the East, estimated at 430-440Mt.