Mention the concept of investing in a China cement company and the naysayers dismissively begin explaining why it is a bad idea. Topping their list of reasons is the mainland's macro-economic austerity measures, which target specifically the cement industry and its redundant, ill-equipped cement plants.
Such stereotypical reasoning often leads investors to turn down very competitive, entrenched companies which will actually benefit as competitors are wiped out by the credit tightening.
Last year China consumed 862 million tonnes of cement, up 19 per cent from the previous year. During the first half this year, consumption has increased 18 per cent to 425 million tonnes owing to robust demand from property and infrastructure projects.
Despite slowing demand in recent months, consumption may increase 16 per cent to one billion tonnes, as demand is seasonally the highest in the fourth quarter.
Anhui Conch Cement, the mainland's largest cement manufacturer, sold 20 million tonnes last year, an increase of 48 per cent over the previous year.
Clearly, Anhui Conch outperformed market growth to capture, probably at the expense of smaller competitors, a larger market share of 2.8 per cent, which implies substantial room for growth.