China Metals & Mining Weekly：Mine Me The Money!

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website www.macquarie.com.au/disclosures. HONG KONG/CHINA Inside Coal – Operational data remained weak in March 5 Cement – Heavy rain affecting Central South 9 Steel, Paper and Metals 14 Key Weekly Research and News 19 Weekly China M&M Scorecard Source: Macquarie Research, April 2014 Key Metals & Mining Comps Source: Macquarie Research, April 2014 Analyst(s) Matty Zhao +852 3922 1293 matty.zhao@macquarie.com David Ching +852 3922 1160 david.ching@macquarie.com Robbie Li +852 3922 1283 robbie.li@macquarie.com 21 April 2014 Macquarie Capital Securities Limited Mine Me The Money! China Metals & Mining Weekly – 21 Apr 14 Cement – Heavy Rain Affecting Central South Average cement price is down 0.3% WoW, mainly in Guangxi due to the heavy rain, which could be negative for CRC’s shipment in the near term. We revised our earnings for BBMG, CNBM and Shanshui last week and TP to HK$7.5, HK$8.5 and HK$3.5 respectively. Our top pick for the sector remains Conch. CRC issued a positive profit alert for 1Q14 after market last Monday, stating that ASP for cement and clinker increased YoY for 1Q14 while GP margin also increased. As such, earnings for the quarter are expected to significantly increase. 1Q14 is the first time CRC is reporting quarterly results so there is no official 1Q13 EPS. Currently we estimate a 1Q14 EPS of 0.11/sh, which is estimated to be up 49% YoY. We hosted a post FY13 results NDR for CRC - CRC guided 1Q14 volume only -5% YoY. ASP is higher YoY at HK$350/t and cost is stable. We estimate GP/t of HK$110 and recurring EPS of HK$0.11, +49% YoY. CRC expects strong volume of 220-230kt/d and warehouse ratio falling to 60% from 75% in Feb. Yet we highlight a potential FX loss from RMB depreciation in 1Q14. RMB has depreciated 2.6% vs. the USD YTD. As at Dec 13, CRC had 6% of its borrowings in USD and 63% in HKD. We estimate every 1% depreciation of the RMB vs. the USD results in a HK$138m FX loss, or 3.2% of 14E NPAT. For more details on our recently raised earnings estimates for CRC, please see our report here. Coal – Operational data remained weak in March Benchmark thermal coal price, according to CCTD, was flat w-w at Rmb 535/t after rebounding 0.9% w-w last week. Liulin No.4 HCC price was flat w-w at Rmb920/t this week and YTD average HCC px was Rmb1,084/t (down 18% y-y). China released Mar/1Q activity data this week, which showed some improvements but demand generally still remained weak. This is in line with the operational data reported by Shenhua and China Coal, which both showed weak coal production/sales in Mar. Despite weak coal data, Shenhua’s integrated business model showed its strength again as Co.’s power generation/dispatch picked up in Mar, improving to 5.8% and 5.7% y-y, respectively, from 0.3% and 0.2% y-y in Jan-Feb. Steel & Metals – HRC margin continued upwards Steel: HRC price +0.1% WoW and iron ore price -0.3% WoW. HRC margin continued positive trend upwards to Rmb 148/t. CISA 10-day production for 10 Apr +3.8% to 2.15mnt/d vs. previous 10 days. Steel inventory at key cities dropped again by 3.7% WoW to 17.3mnt. Copper: SHFE price -0.2% WoW to Rmb47,180/t while LME price flat WoW at US$6,663/t. Gold – price is down 1.8% WoW to US$1,294/oz, vs our 2Q14 forecast of US$1,185/oz. Aluminium – LME price is down 0.7% to US$1,830/t. Paper – Market Remains Weak Benchmark linerboard and corrugating medium price was flat WoW but OCC is up 0.6% WoW. Demand remains weak esp. in Southern China. LM and ND have both cut prices in the South. Price could be under further pressure given we are stepping into the weak season in 2Q. We published our latest China Paper & packaging Update Report recently – please see our report here. PositiveNeutralNegativeWeekly OutlookCoalQHD 5500kcal/kg price flat WoW,Liulin No. 4 HCC price flat WoWCementPrice -0.3% WoW, Inventory -0.3% WoWSteelRebar px flat WoW and HRC price +0.1% WoWMetalsGold price down 1.8% WoW, Copper price up flat WoWPaperLinerboard, Corrugating medium px flat WoW. OCC px +0.6% WoW14E15E14E15E14E15EShenhua9.19.31.21.14.74.6China Coal17.224.20.50.510.511.3Yanzhou20.913.40.60.67.86.9Conch10.18.72.11.95.84.9CRC9.38.41.41.37.06.2CNBM5.44.40.80.77.16.6JXC13.815.10.80.88.08.3Angang147.2nmf0.60.67.98.7Maanshan185.8nmf0.50.57.48.1P/EP/BEV/EBITDAbarbarayy_tong@citickawahbank.com Barbara Tong 04/22/14 06:58:45 AM CITIC Bank International Macquarie Research Mine Me The Money! 21 April 2014 2 Fig 1 Comps Table – China Metals & Mining Coverage Source: Bloomberg, Company Data, Macquarie Research, April 2014. Prices as of 17 April 2014 Fig 2 Key Commodities Price Assumptions Source: LME, TEX Report, McCloskey, Platts, CRU, Metal Bulletin, UMPaper, Macquarie Research, April 2014 CompanyTickerRecoMkt CapClosingPriceUpsideP/E (x)P/B (x)EV/EBITDA (x)Dividend yield (%)ROE (%)Net Gearing (%)NameUSD $mPriceTarget(%)2013E