Anhui Conch Cement Earnings: Recovery To Be Supported by Real Estate Rebound, Shares Undervalued

We keep narrow-moat Anhui Conch Cement’s fair value estimate unchanged at HKD 45 per H-share (CNY 40 per A-share) after its in-line first-quarter results. While net profit was down 48% year on year to CNY 2.6 billion and only accounts for 14.9% of our full-year forecast, we view the result as largely in line, as the first quarter is a seasonally weak quarter. We think Conch remains undervalued and we see stronger momentum in following quarters, with meaningful recovery supported by improving housing starts through the second half of 2023. Having said that, it might lack positive catalysts in the near term due to the slow year-to-date demand recovery, partly affected by adverse weather conditions.