Credit Suisse: China cement sector has margin upside


Updated Sat, 12 Feb 2011 00:00:00 GMT

Credit Suisse estimates the current unit gross profit in China cement sector is CNY0-50/ton, higher than its 2011 assumptions.

While it believes there's is likely further softening in cement prices post the lunar new year, "upside risk remains in the margins," particularly for producers in regions with better pricing power, such as the Yangtze delta region and Southern China.

"We believe the industry is demonstrating improving ability to protect margins in a soft growth demand environment, and margin upside will drive positive earnings momentum in 2011," CS says, its most preferred sector names are CR cement (Hong Kong stock code 1313), underpinned by its ongoing M&A story, and CNBM (3323.HK), with higher beta to margin upside.