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On Sunday, analysts at Goldman Sachs upgraded China Resources Cement Holdings (1313:HK) (OTC: CARCY) from a ’Neutral’ to a ’Buy’ rating, adjusting the price target to HK$2.10, up from the previous HK$1.90. The revised outlook comes with an increase in earnings estimates for the company, ranging from 9% to 19% for the years 2025 and 2026. Additionally, Goldman Sachs introduced their 2027 earnings per share (EPS) estimate of Rmb0.253. According to InvestingPro analysis, the company, currently valued at $1.56 billion, appears undervalued based on its Fair Value metrics.
The upgrade is based on several factors, including anticipated lower administrative costs per cement unit and an increase in concrete sales. However, these positive adjustments are partially balanced by expected lower margins in functional materials and aggregates. Goldman Sachs anticipates improved margins for China Resources Cement in the year 2025, driven by better supply dynamics and stable demand. The company currently generates $3.16 billion in revenue with an EBITDA of $422.62 million, and has maintained dividend payments for 14 consecutive years, as highlighted by InvestingPro.
Recent field research conducted by Goldman Sachs indicates a more favorable demand outlook in southern China, primarily fueled by infrastructure projects. The ongoing effort to eliminate unauthorized production capacity is expected to have a positive impact on the region, further supporting the optimistic margin forecast. Trading at a price-to-book ratio of 0.26, the stock offers an attractive valuation entry point despite its relatively high P/E ratio of 54x.
The company’s unit gross profit is projected to remain at Rmb60 per ton in 2025, consistent with initial estimates for the first quarter of the same year. The upgrade to a ’Buy’ rating reflects a target price that suggests a price-to-earnings (P/E) ratio of 8.3 times based on the expected earnings for 2025. Subscribers to InvestingPro can access additional insights, including 8 more ProTips and comprehensive financial metrics to better evaluate the investment opportunity.
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