As Spring Festival 2012 is approaching and earlier than last year, cement prices have experienced seasonal adjustments in some areas this week. Last week, Guangdong's cement price was lowered by RMB 30/t. Ningbo, Zhejiang, East China, Jiujiang, Jiangxi also appeared 15-30 yuan callback. In the next week, the east China region will begin to stop the kiln, and cement prices are expected to remain stable in the next few weeks.
The year-on-year changes in the price of cement in some regions recorded a year-on-year decrease of more than RMB 100/tonne in the first week of 2012. However, we must take into account the impact of the 12-year Spring Festival ahead of schedule and the higher cement price base at the end of 2010. If compared with the second week of 11 years, the current price of cement has basically fallen by less than RMB 70/ton, and the price decline is less than the fourth quarter of 11 years.
Earnings Trends Due to the seasonal weakness, we expect Q1 12Q11 earnings to decline month-on-month. However, we do not expect that despite the low utilization rate of capacity in the first quarter, we believe that as the year-on-year decline in cement prices may narrow, we believe that the negative growth rate of cement performance in 1Q12 will also slow down compared with 4Q11. We believe that as long as cement prices gradually stabilize in the first quarter of 12 years, the market sentiment for the cement industry may gradually improve in the first quarter.
The stock price has already reflected the negative factors. There is an upside risk. We believe that the current valuation of the cement stock is at the bottom (including PE and EV/t). The market has already considered the pessimistic assumption of negative growth for 12 years. Buying cement stocks in the off-season may be a potential option for investors. We recommend investors to look at the cement industry in the longer term and start buying in the first quarter of 1212.
The year-on-year changes in the price of cement in some regions recorded a year-on-year decrease of more than RMB 100/tonne in the first week of 2012. However, we must take into account the impact of the 12-year Spring Festival ahead of schedule and the higher cement price base at the end of 2010. If compared with the second week of 11 years, the current price of cement has basically fallen by less than RMB 70/ton, and the price decline is less than the fourth quarter of 11 years.
Earnings Trends Due to the seasonal weakness, we expect Q1 12Q11 earnings to decline month-on-month. However, we do not expect that despite the low utilization rate of capacity in the first quarter, we believe that as the year-on-year decline in cement prices may narrow, we believe that the negative growth rate of cement performance in 1Q12 will also slow down compared with 4Q11. We believe that as long as cement prices gradually stabilize in the first quarter of 12 years, the market sentiment for the cement industry may gradually improve in the first quarter.
The stock price has already reflected the negative factors. There is an upside risk. We believe that the current valuation of the cement stock is at the bottom (including PE and EV/t). The market has already considered the pessimistic assumption of negative growth for 12 years. Buying cement stocks in the off-season may be a potential option for investors. We recommend investors to look at the cement industry in the longer term and start buying in the first quarter of 1212.
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