What's new
　　Entering August, prices of clinker and cement along the Yangtze Riverin Eastern China began rising half a month earlier than usual. Notably,clinker prices in the Yangtze River Delta have increased by a total ofRmb50/t after two rounds of price hikes, and cement prices haveincreased by Rmb20-30/t after the first round of price hikes.
　　Comments
　　Rapid rebound in regional shipments; price hikes started earlier.
　　Demand in the core market recovered rapidly as construction workaccelerated after the rainy season ended. We note that the shipmentratio has rebounded to peak-season levels. We expect infrastructureprojects to materialize in 2H20, and construction demand to growsignificantly in 4Q20. Given continuous price hikes in Eastern China,we estimate the cement price in September may improve YoY and thefirm may enjoy rising sales volume and selling prices in 4Q20. Weestimate the cement peak season in 2020 may last longer and pricesmay rise faster than expected, which bodes well for valuationrecovery. We suggest overweighting Conch Cement.
　　Medium-term resilience at high levels; strong cash. In the next 2–3years, we think the firm will see a rerating given its stable earningsand strong cash flow. We estimate its 2020 operating and free cashflow may rise to Rmb45bn and Rmb34bn, and end-2020 net cash mayapproach Rmb82bn (end-2023 net cash estimated at Rmb150bn).
　　Upstream resources are increasingly important; improvingcompetitive edges as a market leader. Aggregate business: We thinkthe firm’s aggregate business will maintain rapid growth, and itsmedium-term capacity may reach 200–300mnt. Rerating for mineresources: We see rising value for the firm’s mine resources amidtightening regulations on mines and the firm has 15bnt of limestoneresources that may be worth Rmb150bn (based on Rmb10/t). Inaddition, the firm has ample cash on hand (end-2023 net cashestimated at Rmb150bn). We thus think the firm is undervalued. Weare upbeat on the rerating opportunity for Conch Cement, given itshigh-quality core assets, mine resources and ample cash.
　　Valuation and recommendation
　　We maintain earnings forecasts. ACC A-share is trading at 8.5x and8.7x 2020–2021e P/E, and H-share at 7.5x and 7.6x P/E. MaintainOUTPERFORM with A-share and H-share TPs unchanged at Rmb70(10.1x and 10.3x 2020–2021e P/E with 18.6% upside) and HK$77 (10xand 10.2x 2020–2021e P/E with 31.8% upside).
　　Risks: Heavy rainfall in peak season; disappointing demand.