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Our views on the investment of Oriental cement enterprises. For cement enterprises in the east, although they are still at the bottom of the industry in the short term, the cement price in this area has begun to show signs of rising recently. If the upward trend from the bottom can be confirmed, the performance elasticity of such companies will be greater; Due to the large proportion of real estate in the east and the developed industrial economy, the recent reduction of project capital issued by the state is expected to stimulate the investment enthusiasm of private capital and have a positive impact on real estate and industry in economically developed areas, thus stimulating the demand for cement in economically developed areas; Conch, as a typical representative of Oriental cement enterprises, is undoubtedly the best investment variety.

The company's next development strategy: stabilize the east and expand the west. As the economy and infrastructure in the western region lag behind the eastern region, in the long run, the growth of cement industry in the western region will be better than that in the eastern region. In addition to intensive cultivation in the eastern and southern markets, the western region will become the key market of the company in the next stage, and the company finally plans to deploy 40-50 million tons of cement production capacity in the western region. In 2009-20 10, the company will put into operation 10 5,000 t/d clinker production lines in the west, of which: 4 5,000 t/d clinker production lines in Pingliang, Sichuan, Guangyuan and Chongqing will be put into operation at the end of 2009, and 3 5,000 t/d clinker production lines in Guizhou and Shaanxi will be put into operation at 20/kl.

The relationship between supply and demand in the second half of the company's dominant market will be better than that in the first half.

From the supply point of view, the new production capacity in the first half of the year is greater than that in the second half: the second half of 2008 to the first half of 2009 is the period of concentrated production capacity. For example, in September 2008, Jiangsu Jinfeng had three 5000t/d production lines, during which Conch had 1, 2/and 3 production lines in Guangxi, Jiangxi and Hunan respectively, but the number of production lines put into operation in the second half of 2009 decreased.

From the demand point of view, the demand in the first half of the year will be better than that in the first half. In the first three months of 2009, the demand for cement in the Yangtze River Delta and the Pearl River Delta was weak, which was obviously weaker than that in the western market, mainly because most of the infrastructure projects in the west were accelerated, while most of the eastern and southern parts were newly started, and the start-up period of new projects was relatively long. The reduction of project capital by the state is expected to accelerate the attraction of private capital, promote the economic and real estate recovery in the east and south, and then promote the recovery of cement demand in the market in the second half of the year. We think the company dominates the market.

The bottom of the company's operation has appeared, and the operation has gradually bottomed out.

From the cement price: in the first three months of 2009, the peak season in the eastern and southern markets was not prosperous. In the first three months of 2009, the company's cement price fell month by month, and the trend of cement price was obviously weak. Since April, cement prices in the eastern and southern markets have started to rise, and the company's cement prices stopped falling and rebounded in April. We expect the company's cement price to rebound slowly in May and June.

Judging from the company's cement sales, the company's sales began to show obvious heavy volume. Since April, the company has sold 350,000-400,000 tons of cement every day. In April, cement sales exceeded100000 tons. According to this sales trend, it is estimated that the company's cement sales in the second quarter will reach 32 million tons, up about 35% year-on-year, so that the annual sales will exceed our previous forecast of 654.38+0.170,000 tons.

Judging from the company's profitability, the gross profit per ton of cement increased by about 8.2 yuan in April, the cement price rebounded, and the coal price cost decreased month by month. Based on the above judgment of the company-led cement industry, we believe that the company's operation has gradually stepped out of the bottom, and the company's operation is expected to pick up quarter by quarter in the next stage.

Slightly raise the company's performance expectations and maintain the company's "recommended" rating. Generally speaking, the company's current operation is in line with our expectations, but the company's sales situation may be better than our expectations. In 2009, we increased the company's cement sales from1.1.70 billion tons to1.20 billion tons, and increased the company's EPS from 1.86 yuan to 1.9 yuan, and maintained1.

China Merchants Bank 1 Quarterly Comments:

In 2009 1 quarter, the company realized a net profit attributable to shareholders of the parent company of 4.208 billion yuan (EPS0.29), down 334 1% year-on-year, in line with our and market expectations. 1 quarterly report shows that all businesses are under pressure, including net interest income (down 20.2% year-on-year), commission and income handling fee income (down 9.9% year-on-year) and operating expenses (up 19.0% year-on-year). Even the quality of assets is under pressure (the balance of non-performing loans increased by 420 million compared with the beginning of the year). This is the most real embodiment of the operating pressure of market-oriented banks during the economic adjustment period.

The pressure of communication is obvious. The company announced that the 1 quarter interest margin was 2.47%, which was 95BP lower than that in 2008. We calculated that the interest margin of 1 quarter was 2.32%, which was lower than that of 2008 1 quarter 13 1bp and lower than that of 2008 103BP. The spread comes from its own asset-liability structure and the new deposit-loan structure.

The structural pressures on its own assets and liabilities are as follows: (65,438+0) The discount of bills and interbank assets account for a high proportion (accounting for about 35% of interest-bearing assets in total), and the interbank and discounted yields remain low in 2009; (2) The proportion of demand is high, and the decline of demand interest rate is small. China Merchants is a bank with obvious periodicity, which benefits most from raising interest rates and the vigorous development of the capital market.

The structural pressure of new deposits and loans is as follows: (1) new deposits are 200 billion yuan, much higher than new loans120 billion yuan; (2) 52.4% of new deposits are corporate time deposits, 65,438+03.8% are savings time deposits, and about 65% of new loans are bills (the proportion of bills in interest-bearing assets has increased from 65,438+065,438+0% at the beginning of the year to 65,438+0% at the end of the quarter.

1 has the quarterly spread bottomed out? We think it is hard to say that the spread of China Merchants Bank has bottomed out. As far as 1 quarter is concerned, the spread may also be a process of decreasing month by month. Assuming that the spread in the second quarter remains at March level, the spread in the second quarter will still be lower than 1 quarter.

The asset quality maintained a double decline, and the provision coverage ratio increased. The balance of NPLs increased by 420 million to 654.38+0.097 billion compared with the beginning of the year, and the NPL ratio was 654.38+0.065.438+0%, down 10BP compared with the beginning of the year. In this period, 790 million yuan was withdrawn, and the credit cost (annualized) was 0.37%. The provision coverage ratio further increased to 265,438+09.5438+0%.

How to treat the rise of poor balance? We believe that the bad balance of 1 quarter is closely related to factors such as collection and write-off, and we cannot judge its asset quality only by the increase of the balance. We expect that among the 420 million new defective products, Yonglong contributed 70 million, and credit cards accounted for a large part. The company's concern about loans may still decline.

Profit forecast and investment suggestion:

We maintained the diluted earnings forecast of 37 yuan in 2009/10, with year-on-year growth of-15.0% and 13.0%. At present, the stock price corresponds to 2.45x09Pb/ 13.29x09PE. Since the dividend yield in 2008 was only 7% and Yonglong's provision expectation was clear, the net assets increased to 6.5 compared with our initial expectation of 5.9, an increase of 10%, and the corresponding valuation reached a reasonable level. With the release of the performance pressure of 1 1 quarterly report, the market's expectations of the company may be revised in a good direction, and we maintain the "buy" rating of the company.