Cement: The Leaping Development of Xinjiang

Inverse method: The additional 11.85 million tons of production capacity needs 30% of fixed asset investment growth to digest.

Statistics show that Xinjiang Autonomous Region has 13 new production lines from 2010 to early 2011, with a total capacity of 11.85 million tons, eliminating 1.4 million tons of backward production capacity, considering that 80% of capacity utilization rate will release 8.36 million tons of production in 2011; using an empirical model to measure, 2011 In Xinjiang, the need for 30% growth in investment in fixed assets caused cement demand to absorb the impact of new production capacity on the industry climate; therefore, the key to the study was whether the growth rate of fixed asset investment in the Xinjiang Autonomous Region could reach more than 30% in 2011.

The first year of leap-forward development will see 40% growth in investment in fixed assets.

On the demand side, we combined the government's work objectives with the historical experience of Inner Mongolia and Sichuan provinces to calculate that the growth rate of fixed asset investment in the Xinjiang Autonomous Region in 2011 was more than 30%, and optimism could see 40%, which could completely absorb the release of new production capacity. The supply and demand of cement will still be in a tight balance; if the growth rate of solid investment is more than 35%, the probability that the industry's profit level will rise to a higher level will not be ruled out.

In recent years, Xinjiang’s overcapacity has been lingering, its performance has continued to increase, and demand is the first reason.

In 2007-09, the cement production capacity in Xinjiang continued to grow at a high rate, with growth rates of 28%, 57%, and 38%, respectively; therefore, the market and the real economy continued to fear overcapacity in Xinjiang's cement production in 2008 and the industry's economic climate declined; but the final result However, the performance continues to increase rapidly! The strong demand in the region is the first reason. The economic characteristics of the oasis also ensure that even if there is a phased surplus in the local area, it will not affect the overall situation. In the sub-region, the momentum of new production capacity in 2011 will shift from high to low in the order of East Xinjiang, North Xinjiang and South Xinjiang. The prosperity of southern Xinjiang in 2011 should be higher than this year. Since the start of key projects in the province in June this year, the industrial boom pattern of northeastern China should be reduced somewhat next year, but the scope is limited because key projects in Xinjiang are mostly concentrated in the east. Xinjiang and northern Xinjiang, the economic center of the Urumqi region can not ignore the demand for growth.

Investment advice: Tianshan shares (29.36, 0.55, 1.91%), Qingsong Jianhua (21.49, -0.13, -0.60%), "Buy" rating, preferred Tianshan.

Cement companies in Xinjiang, Tianshan Stock, and Qingsong Jianhua, Xinjiang's Xinganfa cement production capacity accounted for 38.2% and 21.2% respectively in 2009, accounting for 60% of the total; Tianshan, Qingsong and Nangang Building Materials accounted for 78% of cement production in 2009. Industry concentration in the region is high! From 2010 to early 2011, Xinjiang's 13 production lines, Zhongshan Tianshan and Qingsong, put into production 6, with a production capacity of 5.4 million tons, accounting for 46%. The market share in Xinjiang remains highly concentrated; the company's production capacity is in an orderly manner, the demand for benefits is high, and the performance is high. Growth, and higher than expected probability. Maintaining a “buy” rating on Tianshan Stock and Qing Songsong differs from the market in that we devaluate Tianshan Stocks.