To The Moon

$Anhui Conch Cement Company Limited(600585)$ $Anhui Conch Cement Co., Ltd.(AHCHF)$ $Anhui Conch Cement Co., Ltd.(AHCHY)$ 

Dividend payout ratio lifted

Anhui Conch is one of the largest cement producers globally with more than 200m metric tons (mt) of annual cement production. It has a leading position in eastern and southern China. Anhui has a track record of managing its costs well in the past, which should help in supporting margin pressures during downturns. Given its strong capital position (in net cash), the company is positioned to make strategic acquisitions, for which it is on the lookout given industry consolidation expected ahead. Key risks to monitor include cement demand trends, margin pressures and regulatory risks. While Anhui’s supportive dividend yield and strong balance sheet position are positives, its ESG track record has lagged industry peers. FY22 dividend payout ratio of 50% was increased from 38% and 32% in FY21 and FY20 respectively. Fair value is adjusted to HKD33 (914 HK) / CNY33.20 (600585 CH) which implies 0.8x (914 HK) / 0.9x (600585 CH) price-to-book (P/B).

There may be some downside risks at the moment given the recession concerns. Also, growth in Mainland China is expected to remain weak this year despite its reopening.

@TigerStars 

DYODD