Anhui Conch outlook

HSBC has upgraded China-based Anhui Conch Cement to Overweight from Neutral, with an unchanged target price of HK$27.20. It tips "value emerging" for China cement sector, as recent price hikes in Hangzhou (in Zhejiang province) helps to stabilise cement prices in Eastern China. The house expects a gradual resumption of railway projects and acceleration of social housing construction to underpin demand in 2H12

Meanwhile, UBS has trimmed its target price for Conch to HK$31 from HK$36.5, and maintained its "neutral" call. The research house noted that cement prices in Conch's core Eastern and Southern market remained weak in 1H, and the current GP/t at Anhui Conch might have already dropped to the CNY60-70/t. Meanwhile, the share price has fallen 42% from its peak, which is more than enough to factor in the weak H112 ASP, according to UBS.

With a demand recovery and less supply side pressure, the house believes cement prices for the mid-downstream of the Yangtze River could pick up in 2H and remain strong in 2013.