Cathay Securities and Haitong Securities: Cement demand in the region is expected to benefit from the China-Kyrgyzstan-Uzbekistan railway, recommending QSCC and others

According to the Zhitong Finance APP, Guotai Junan has released a research report stating that it gives the cement industry an "overweight" rating. Benefiting from the geographical advantage of "three mountains and two basins," the cement price maintenance capability in the Xinjiang region is better than the national average. At the same time, the China-Kyrgyzstan-Uzbekistan railway has officially started construction, which will help enhance the local cement demand in both Xinjiang and Kyrgyzstan. It recommends leading Xinjiang cement companies Qingsong Jianhua (600425.SH), Tianshan Co., Ltd. (000877.SZ), and Huaxin Cement (06655), which has cement production capacity in Kyrgyzstan.

Guotai Junan's main points are as follows:

Xinjiang: Supply structure is solid, cement prices lead the nation during the industry's low period

On the demand side, from January to June 2025, Xinjiang's fixed asset investment growth is 13.0%, with a cement output of 19.46 million tons, a year-on-year increase of 5.4%, outpacing the national growth by 9.7 percentage points. On the supply side, benefiting from the regional characteristics of Xinjiang's "three mountains and two basins" and oasis economy, the cross-regional cement flow in and out of Xinjiang is significantly lower than in other regions, with peak-shifting execution effects leading the nation. According to Digital Cement Network, in 2024, the cement price represented by Aksu in southern Xinjiang will maintain at 470 yuan/ton, while the cement prices in the East China region will fluctuate between 350-430 yuan.

The China-Kyrgyzstan-Uzbekistan railway has officially entered the implementation phase, with the Kyrgyz section + Chinese section expected to generate cement demand of 4-6 million tons

The China-Kyrgyzstan-Uzbekistan railway, planned for nearly 30 years, has officially started construction, with the longest and most challenging section in Kyrgyzstan (Kyrgyz section) being the first to commence. The Kyrgyz section spans 341 kilometers, with the pilot project for sections 1-3 starting in April 2025, and the main line project for sections 4-11 fully completing the bidding announcement in July, with all winning construction companies being Chinese enterprises. In addition to the most challenging Kyrgyz section, the China section of the China-Kyrgyzstan-Uzbekistan railway, which is 213 kilometers long, is entirely located within Xinjiang, expected to follow the Kyrgyz section. According to the bank's calculations, the total cement demand for the Kyrgyz section of the railway is approximately 3.05-4.27 million tons, and the total cement demand for the Chinese section is approximately 1.49-2.13 million tons, with a combined total cement demand of approximately 4.54-6.4 million tons, resulting in an annualized cement demand of 810,000-1.14 million tons.

Positive for Xinjiang cement and Chinese cement companies expanding into Central Asia

The bank predicts that as the construction of the China-Kyrgyzstan-Uzbekistan railway continues to advance, it will benefit two types of companies: 1) Benefiting local production capacity in Kyrgyzstan: According to data from the Cement Network, by the end of 2024, the main Chinese production capacities in Kyrgyzstan will be Huaxin Cement and Shaanxi Fufeng Cement Plant; 2) Benefiting Xinjiang cement: Due to insufficient local cement production capacity in Kyrgyzstan, it still relies on imports, and nearby supply benefits Xinjiang cement. In 2025, Qingsong Jianhua has already exported its first batch of 42,000 tons of cement to Kyrgyzstan for railway construction. Additionally, if the subsequent Chinese section starts smoothly, the entire route from Kashgar will be located within Xinjiang, benefiting the capacity utilization rate of local cement enterprises.

Risk Warning: Project implementation progress is slow, and competition in Xinjiang's cement market is intensifying