Conch Cement [914 HK; ADD; TP: HK$60.90] - Sluggish sales volume dragged down 2Q21 results

■   Conch Cement’s 2Q21 sales volume (ex-trading) dropped 24.0% yoy because of weak production volume in May.

■   However, recurring net profit was down 17.3% yoy to Rmb9.35bn in 2Q21 and dropped 6.9% yoy to Rmb14.9bn in 1H21, thanks to the high cement ASP.

■   Production volume may not be as strong yoy in 2H21, but the gross margin may still record an increase because of the upward cement ASP trend.

■   We lowered our FY21F/22F/23F net profit estimate by 3.1%/4.3%/4.0%, respectively, to reflect lower production volume growth and a higher ASP in the core operating regions. Cement price increases will be a near-term share price catalyst for Conch Cement. We change our TP to HK$60.90 (1.5x 2021F P/Bv). Reiterate ADD.