The world is becoming a more metropolitan place, especially in Asia, with a high urbanization rate and more people moving into the concrete jungles called cities in an attempt to find work. As this happens, the most basic element of construction – cement – becomes more and more important.
Not only are urban locations spawning and expanding at a rapid rate, industrial zones are also being built continuously to provide an output sufficient to meet a rising demand for products and services.
As long as the topic is on urbanization and factories, one country that will be held up as a model example at least for the next few decades is China. The country with the largest population, China also features one of the world’s fastest urbanization rates and despite typical media coverage, is among the most robust economies on earth with a GDP growth rate of over 6%.
Therefore, the topic for today is a Chinese company specializing in cement.
Anhui Conch: The Literal Building Block of Chinese Society
Founded in 1997, Anhui Conch (SHA:600585) is a pioneer in the Chinese cement industry. The company is primarily involved in the production and sale of cement and commodity clinker, and is also the single largest brand supplier in the world. The firm’s leading products are its high-grade cement and commodity clinker by the name of “Conch”.
InvestAsian believes that it is the time that Anhui is a solid choice for those wanting to invest in China for several reasons.
First, and looking at the big picture, even though the company’s share price may have dropped by nearly 40%, this can be attributed to the recent decline of the overall market the pessimism that comes with it. Therefore, as the economy recovers, shares of Anhui will be higher.
Secondly, there is no doubt that the company will be doing better in the near future. Not only are the fundamentals of the company solid, but its performance over the years has been phenomenal.
With a current ratio of 1.28, it is the only cement company in China with the ability to pay back its obligations right away, should it ever be needed. Not only that but with its relatively low long term debt to asset ratio, it is also able to take on more debt should the company wish to expand more aggressively
Its net profit margin is second to none in this industry at 14.96% in 2015, which has remained stable for the past few years. This has also in turn led to its high returns on investment, assets, and equity.
With a low P/E ratio of 11.98, a strong dividend yield of 4.17%, and a selling price of 16.99 CNY which is about 35% lower than what it used to be just a few months ago, Anhui shares are the right choice to add to your portfolio.