According to the Zhitong Finance APP, Guojin Securities released a research report stating that in June and July, price increase notices for waterproof materials were frequent, with the civil construction channel (C-end) and engineering channel (B-end) both experiencing price adjustments. The waterproof industry has undergone significant clearing in recent years and has entered a relatively stable competitive phase. Currently, the entire industry is under profit pressure, and the profit margins of leading companies are at historically low levels. Compared to the price increase background in the architectural coatings industry in the first half of the year, the waterproof industry currently also has the same opportunity for price increases driven by the improvement in the competitive landscape and the profit demands of leading companies. The &#34;anti-involution&#34; in the waterproof industry is being realized (price increases), and corporate profits are expected to recover, suggesting attention to leading waterproof companies.
<h2>The main points of Guojin Securities are as follows:</h2>
Event: In June and July, price increase notices for waterproof materials were frequent, with the civil construction channel (C-end) and engineering channel (B-end) both experiencing price adjustments. On June 16, ORIENTAL YUHONG's civil construction company issued a product price adjustment notice, raising the prices of certain waterproof coatings, sealants, and tile adhesives starting from July 1, with increases of up to 13%. Subsequently, Keshun, Beixin Waterproof's civil construction business department, Alpha New Materials, Saint-Gobain China, and others issued product price adjustment notices for various products in the retail channel. On July 2, Keshun's engineering construction group issued a product price adjustment notice, raising the prices of certain waterproof membranes and coatings starting from July 10, with increases of up to 13%. Following this, ORIENTAL YUHONG's engineering construction group, Beixin Waterproof, Hongyuan Waterproof, Dayu Waterproof, and others issued product price adjustment notices for various products in the engineering channel.
How is the consensus on waterproof price increases formed?
(1) The weakness on the demand side is already a consensus, with a significant cumulative decline in new construction starts. The demand for waterproof materials is strongly correlated with real estate and infrastructure. From 2021 to 2024, the growth rates of new construction area in real estate are -11.4%, -39.4%, -20.4%, and -23.0%, with a cumulative growth rate of -22.8% from January to May 2025, marking a continuous decline for 46 months since July 2021. In 2024, the new construction area in real estate is 740 million square meters, only 32.5% of the peak (2019), having cumulatively declined by 67.5%. According to data from the China Waterproof Association, the total production of waterproof materials in the country in 2024 is 2.538 billion square meters, down 16.8% year-on-year, and has cumulatively declined by about 38% from the peak in 2021, with the demand side still seeking a bottom, experiencing a significant and prolonged decline in new construction starts.
(2) The intense changes on the supply side are more noteworthy, with market share first concentrating towards the leaders. Compared to the nearly 40% cumulative decline in national waterproof material production from its peak, leading companies have demonstrated strong operational resilience, with ORIENTAL YUHONG and Keshun's waterproof material revenues cumulatively declining by 19% and 14% respectively from their peak, far lower than the industry's decline. After completing prior integration, Beixin Waterproof's waterproof membrane revenue is expected to grow against the trend by 29% and 19% in 2023 and 2024 respectively. Relying on comprehensive competitive advantages such as channel expansion, cost leadership, and brand recognition, leading companies are accelerating their market share increase during the demand downturn.
In contrast, second- and third-tier waterproof companies generally face survival pressure and urgently need transformation. Canlon has completed a cross-border acquisition of Suzhou Jiazhi Color, entering the new display detection and semiconductor business, seeking diversified development;
Sankeshu and Asia Paints are cross-industry leaders in coatings, no longer focusing on expanding waterproofing scale; Zhuobao has introduced strategic investor Decheng Holdings Group to inject capital and alleviate financial pressure; Yuzhongqing faced obstacles in its initial public offering (IPO) earlier. Changes on the supply side, especially among top companies, are significant and more pronounced than in other consumer building materials industries.
(3) Low-quality, low-priced products impact the market, putting pressure on profitability across the industry; &#34;anti-involution&#34; is beneficial for the long-term development of the industry. The waterproofing industry has experienced a vicious cycle of &#34;bad money driving out good,&#34; with prices and profit levels significantly lower than in the past, currently putting pressure on the entire industry. Taking listed companies as examples, Oriental Yuhong's gross margin in 2024 is 25.8%, further dropping to 23.7% in Q1 2025, while before 2021, its gross margin was generally above 35%, with some years exceeding 40%; Keshun's gross margin in 2024 is 21.8%, recovering to 24.4% in Q1 2025, still at a historically low level; Beixin's waterproof membrane business has a gross margin of 17.1% in 2024, down 1.6 percentage points year-on-year; Sankeshu's waterproof membrane business has a gross margin of 14.2% in 2024, down 1.1 percentage points year-on-year, with its holding subsidiary Shanghai Sankeshu Waterproof Technology Co., Ltd. reporting an annual loss of 100 million yuan.
Will it be successfully implemented? What positive changes will it bring?
The waterproofing industry has undergone significant clearing in recent years and has entered a relatively stable competitive phase. Currently, the entire industry is under pressure, and leading companies' profit margins are at historical lows. Compared to the price increase background in the architectural coatings industry in the first half of the year, under the dual drive of improved competitive landscape and leading companies' profit demands, the waterproofing industry currently also has the same opportunity for price increases. Moreover, the current price competition in waterproofing is more intense than in the previous coatings industry, with leading companies experiencing a greater decline in gross margins. Under the unified demand for reasonable profits, the waterproofing industry is expected to successfully achieve price increases.
Risk Warning
Demand in the waterproofing industry declines more than expected; price increases in the waterproofing industry do not meet expectations; fluctuations in raw material prices exceed expectations

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Guojin Securities released a research report indicating that in June and July, the waterproof industry frequently issued price increase notices, with both the civil construction and engineering channels experiencing price adjustments. After several years of industry clearing, it has entered a relatively stable competitive phase. Although the entire industry's profitability is under pressure and leading companies' profit margins are at historical lows, the waterproof industry has the opportunity for price increases driven by the improvement in the competitive landscape and the profit demands of leading companies, and corporate profitability is expected to recover

Guojin Securities: Waterproof "anti-involution" is put into practice, with frequent price increase letters in June and July