GS 高盛：：八个降低风险的主题，行业依然处在甜蜜期---中国金属矿产 [English]

September 27, 2007 47页

China: Metals & Mining

Eight risk reduction themes; sector is in a sweet spot

Sector remains in a sweet spot even as global demand slows
Although global demand continues to slow, we believe China’s commodity
sector is still in a “sweet spot”. We see more room for the government to
boost internal demand without creating inflationary pressure. However,
with the sector facing new valuation highs, we become more selective and
use eight criteria to screen for still-compelling ideas.
Eight risk reduction themes
1. Domestic-oriented sectors (e.g., coal, cement) as demand “safe havens”
2. De-bottlenecking plays; demand resilience helped by the government
3. Stay with the “sweet spot” in the capex cycle for steel and aluminum
4. Pollution crackdown another supply anchor, good for soda ash and cement
5. Restraints on energy-intensive sectors such as aluminum and steel,
leading to extra supply discipline
6. Infrastructure bottleneck – key positive for coal
7. Small players in coal/steel sector being squeezed, sustainability boost
8. Stay with “national champions” (top three players in the industry)
Top picks: Shenhua, Zhejiang Glass, Angang, Chalco
Shenhua Energy (1088.HK, Buy): Firing on all cylinders (price, volume,
cost, asset injections). We raise 2008-09E earnings by 20-21% (EPS +9-
10%) and SOTP-based target 58% to HK$60.
Zhejiang Glass (0739.HK, Buy): Both cement and soda ash, two key
earnings drivers, are domestic-oriented. Both are in cyclical “sweet spots”.
Angang (0347.HK, Buy): High iron ore self-sufficiency, climbing up the
learning curve on product-mix and optionality from a potential merger