Conch Cement (600585): Looking at the long-term value of Conch from PB-ROE
PB-ROE seeks the value margin of conch.
ROE can comprehensively predict the company’s operating quality, and PB reflects the market’s recognition of the company’s value.
According to these two correlation formulas, PB and ROE theoretically show a clear positive correlation.
Therefore, we can calculate the company’s theoretically reasonable value by calculating the ROE level of the company under different circumstances and combining the experience of mature overseas markets, giving a corresponding PB estimate.
Taking into account the increase in assets brought about by profitability, the net assets attributable to the parent at the end of 2019 is expected to be about 145 billion yuan, with reference to the company’s lowest monetary funds since 2010, and about 90 billion yuan after cash replacement.
Assume that the sales volume of cement clinker remains 300 million tons, and the value is calculated by scenario: 1) Pessimistic scenario: Assuming that the market expects the net profit of ton to be the lowest since 2010, the corresponding performance is about 10 billion, and the corresponding ROE is 11%.
Refer to overseas faucets 1 to 1.
4 times interval, give 1.
2x PB estimate.
The corresponding reasonable value at the end of 2019 is 1.
2 * 900 + 550 = 163 billion.
2) Neutral scenario: Assume that the market expects net profit per ton since 2010, and further considers the dilution caused by the increase in volume in recent years and the increase in profits in other regions outside East China. Assume about 70 yuan, corresponding performance is 21 billion, and ROE is 23%.
Refer to overseas faucet 1.
8 to 2.
4 PB interval, give 2.
The corresponding reasonable value at the end of 2019 is 2.
2 * 900 + 550 = 253 billion.
3) Optimistic scenario: Suppose that the expected net profit per ton is the 2018 level, about 100 yuan, the corresponding performance is 30 billion, and the corresponding ROE is 33%.
Historically, the ROE of overseas cement companies exceeds at least 25%. With reference to the engine leader Cummins, which maintains a high level and is stable at the same time, the corresponding PB is estimated to be more than 3 times. The conservative calculation at the end of 2019 is 3 * 900 + 550 = 325 billion.
The above calculation is the reasonable value of Conch at the end of 2019. If the average performance achieved in future years is included in the assets as redundant cash (assuming depreciation is equivalent to capital expenditure), the reasonable value of Conch needs to increase the corresponding performance every year, such as the neutral assumptionConch will add 21 billion in value each year.
Conch ROE is more stable compared to 杭州桑拿 overseas leaders.
World cement sees China, China cement sees conch.
The comparison found that the ROE of Conch Cement is significantly higher and more stable than the leading overseas companies, mainly due to the cost advantages of the company’s T-type strategic layout and excellent management level.
With reference to the same high and stable ROE Cummins, Conch Cement is expected to enjoy a certain premium.
Looking back, can the Conch ROE remain stable?
The premium is the stability of performance.
From the perspective of industrial development, the optimization of the layout and the improvement of the profit center have been achieved in 2017 and 2018. From the perspective of supply, it is prohibited to increase the capacity of the implementation industry into the stock game, and the capacity replacement project in East China is relatively replaced; from the perspective of demand, if the futureEast China’s demand performance is poor, you can find the market value safety margin through pessimistic scenarios.
Instead, look for market cap space through neutral and optimistic scenarios.
Risk Warning: 1.
Capacity replacement projects have increased significantly; 2.
The prosperity of the real estate industry broke through.