Anhui Conch Cement: Weaker Earnings Expected on Slow Housing Recovery; Shares Remain Undervalued

We cut narrow-moat Anhui Conch Cement’s fair value estimate to HKD 29.00 per H-share (CNY 26.50 per A-share) from HKD 33.00 (CNY 31.00) after factoring in a slower recovery in the real estate sector, which results in weak cement demand and lower cement prices. We now expect 2023 and 2024 net profit to fall 29% and 9% year on year, respectively, before growing 4% in 2025. With H-shares trading at 0.4 times 2024 price/book, we think Conch is currently undervalued based on our view that China’s real estate market will gradually recover through 2026. However, we believe investors eyeing Conch may stay sidelined until there are signs of a price recovery in China’s housing market.