Dongfang Securities: The New Tibet Railway has far-reaching impacts, and regional cement investment opportunities are promising

According to the Zhitong Finance APP, Dongfang Securities released a research report stating that the impact of the completion of the Xinjiang-Tibet Railway on regional construction demand is more profound, thereby continuously supporting the consumption of cement and other building materials. Some market views suggest that the investment opportunities brought by the Xinjiang-Tibet Railway may have passed, leaning more towards short-term sentiment. However, in the long run, railway construction and the subsequent stimulation of regional economic vitality will continue to drive cement demand. Given the favorable market structure for cement in southern Xinjiang, further price increases can be anticipated, enhancing corporate profit elasticity and creating investment opportunities reflected in the fundamentals. It is recommended to pay attention to cement companies with production capacity layouts in Xinjiang, such as QSCC (600425.SH), TSM (000877.SZ), and CONCH CEMENT (600585.SH).

The main viewpoints of Dongfang Securities are as follows:

The Xinjiang-Tibet Railway is expected to start construction, directly driving regional cement demand

On August 7, 2025, Xinjiang-Tibet Railway Co., Ltd. was officially established, and the construction of the Xinjiang-Tibet Railway is expected to commence. According to reports from Caijing, the Xinjiang-Tibet Railway starts from Hotan, Xinjiang, and ends in Lhasa, Tibet, with a total length of approximately 2,000 kilometers. According to data from China Cement Network, for railway projects with a bridge-tunnel ratio of 80%-90%, the amount of cement required for construction is generally around 15,000 tons per kilometer. Due to the complex geological conditions from Xinjiang to Tibet, assuming a cement demand of 15,000 tons per kilometer, 30 million tons of cement will be needed for the 2,000-kilometer route. Based on a ten-year construction period, an average of 3 million tons of cement will be needed each year. In 2024, the cement production in Xinjiang and Tibet is expected to be 45.59 million tons and 13.33 million tons, respectively, thus the construction of the Xinjiang-Tibet Railway will generally drive cement demand in Xinjiang and Tibet by about 5%.

Infrastructure gradually improves, stimulating economic vitality in Xinjiang and Tibet, and promoting construction demand

The construction of the Xinjiang-Tibet Railway not only brings significant short-term boosts to infrastructure investment but, more importantly, stimulates regional economic vitality by reducing logistics costs and promoting industrial structure optimization. Increased regional economic activity will lead to greater demand for infrastructure network upgrades, expansion of productive industries, and construction driven by population aggregation. Therefore, the impact of the completion of the Xinjiang-Tibet Railway on regional construction demand is more profound, continuously supporting the consumption of cement and other building materials.

The performance elasticity of regional cement leaders may be underestimated

The market generally believes that the investment opportunities brought by the construction of the Xinjiang-Tibet Railway are more short-term sentiment, but it underestimates the boost to the profit elasticity of regional cement companies from railway construction and subsequent infrastructure efforts. The starting point of the Xinjiang-Tibet Railway is Hotan, and due to regional and transportation limitations, the southern Xinjiang cement market is relatively closed, with little impact from external cement. Therefore, if demand is released, local companies will benefit significantly. QSCC is the leader in southern Xinjiang's cement market, with a cement production capacity of 15 million tons and a production volume of 8.08 million tons, with a capacity utilization rate of only 54%. However, the company's cement business gross profit margin can reach 31%, mainly benefiting from good regional synergy effects and significant price stabilization results.

Since the railway section in Xinjiang is mainly in southern Xinjiang, the regional cement boost is not limited to 5%. Coupled with other supporting infrastructure construction, it is highly likely to further drive up regional cement prices. Therefore, the impact on the performance of regional cement companies is not only about quantity but also about price. Taking QSCC as an example, based on the cement sales forecast for 2024, if the product price increases by 50 yuan/ton, assuming other costs remain unchanged, considering corporate income tax, The net profit elasticity is around 300 million.

Risk Warning

The demand for Xinjiang cement is lower than expected, industry supply exceeds expectations, raw material prices are rising, and changes in assumptions affect the calculation results