The April sales volume of Shanshui Cement (0691.HK/ HK$4.53, holding) increased sharply by 44% month-on-month to 6.5 million tons (average daily shipment volume of 220,000 tons), the second highest level since May 2012 (6.8 million tons). Since May, the daily shipment volume has remained at a high level of 23-250,000 tons, while the daily shipments in the Shandong and Liaoning markets are 150,000 tons and 60,000 tons, respectively. The current inventory level is around 55%, the inventory level in Shandong has declined, and the inventory level in Liaoning has remained stable. In April, the average sales price of cement (excluding tax) increased by 10 yuan/ton to 260 yuan/ton over the same period last month. The average cement sales price for January-April this year was 255 yuan/ton, which is 25 yuan/ton lower than the same period last year. The gross profit per ton should have bottomed out and rebounded since the first quarter. In January-April this year, the gross profit per ton was 55 yuan (down 21% from the previous year). According to our estimates, the gross profit per ton in April should have reached 65 yuan (up 8% year on year), and is expected to exceed 70 yuan in May. Meeting minutes: The company expects the average cement sales price for fiscal year 2013 to be 270 yuan/ton (our forecast is 267 yuan/ton), and the production cost is 195-205 yuan/ton, or the gross profit per ton is 65-75 yuan (our forecast is 73 yuan, up 1% year on year). From the beginning of this year to April 13, coal prices fell by 46 yuan/ton. It is expected that this year coal prices will stabilize at current levels. For every 100 yuan/ton drop in coal prices, the company's production cost per ton will be reduced by 15 yuan. In the first quarter of this year, the company's coal purchase price dropped 153 yuan/ton year on year to 699 yuan/ton (tax included). The company also stated that it expects sales volume of 60,000-62 million tons for the full year of 2013, which is lower than our forecast of 64.5 million tons. The company said the capital expenditure budget for 2013 was about 4 billion yuan, of which 3 billion yuan will be used to build 11 new production lines. Capital expenditure is expected to fall below RMB 3.2 billion in 2014. Maintaining holding ratings: Although we saw a month-on-month improvement in the company's profitability in April, and at the same time, the expected price-earnings ratio for FY2013 was only 5.8 times, and valuation appeal is gradually becoming apparent, we are more concerned about the release of new production capacity in the second half of the year. Furthermore, the Shanxi market should still face oversupply pressure. We kept our full-year profit forecast of RMB 1.8 billion (up 16% year over year) unchanged. At the same time, maintain the target price of HK$5.20.