HK Stock Market Move | CNBM (03323) fell more than 4% in early trading as rising coal prices squeeze cement profits; UBS says the cement business is dragging down the company's earnings.

CNBM (03323) fell more than 4% in early trading. As of press time, it was down 3.46% at HK$3.065, with a turnover of HK$18.794 million. On the news front, cement prices in many regions have recently seen calls for increases, with national cement prices continuing to be raised. Analysts pointed out that this round of price increases is not driven by demand, but is a passive pass-through from the sharp rise in upstream coal prices. Industry profitability has not substantially improved, and the room for downstream profit recovery is limited. It is understood that coal, as the largest cost in cement production, accounts for about 50%. UBS released a research report stating that CNBM's cement business is still expected to record a loss this year, dragging down the company's overall profitability. The cement cycle remains hit by rising costs and weak demand. Year to date, the average price of Qinhuangdao 5500 thermal coal has risen 20% year-on-year. Affected by disruptions from the Middle East situation and tighter domestic supply after safety inspections at Shanxi coal mines, cement production costs have increased by about RMB 20 per tonne. At the same time, real estate and infrastructure demand continues to be weak, making it difficult for producers to pass on costs. The bank lowered its target price from HK$7.64 to HK$7, and cut its earnings forecasts for this year and next by 95% and 30%, respectively.