According to the Zhitong Finance APP, CITIC Construction Investment Securities released a research report stating that as of now in 2024, the CITIC Construction Materials Index has risen by 3.15%, the Shanghai Composite Index has risen by 14.4%, the Shenzhen Component Index has risen by 13.3%, and the CSI 300 has risen by 15.8%. Since the beginning of the year, the construction materials sector ranks 22nd among all industries in terms of gains and losses. Considering the sector's valuation for 2024, most companies in the consumer building materials sector are currently valued at a historically low level of 12-15 times. CITIC Construction Investment predicts that as the real estate market stabilizes, the current impairment risks in consumer building materials have been significantly alleviated, and as the large B-end business stops bleeding, the growth on the retail side will gradually become clearer in the financial statements.
CITIC Construction Investment is optimistic about SKSHU (603737.SH), DEHUA TB (002043.SZ), WEIXING NBM (002372), and Beixin Building Materials (000786.SZ), which has a clearly visible second growth curve, all of which have a high proportion of retail. Looking ahead to 2025, the current prices in the cement sector are at a low level, and policies restricting supply are expected in the future. With the data from the construction side warming up next year, the price center of cement is expected to rise.
CITIC Construction Investment's main viewpoints are as follows:
The prosperity still needs to be restored. As of now in 2024, the CITIC Construction Materials Index has risen by 3.15%, the Shanghai Composite Index has risen by 14.4%, the Shenzhen Component Index has risen by 13.3%, and the CSI 300 has risen by 15.8%. Since the beginning of the year, the construction materials sector ranks 22nd among all industries in terms of gains and losses. Among the sub-sectors, consumer building materials have decreased by 5.2% since the beginning of the year, the cement sector has risen by 10.8%, concrete and additives have risen by 13.3%, fiberglass has risen by 4.0%, glass has decreased by 6.5%, refractory materials have risen by 15.6%, and new materials have decreased by 17.2%.
Consumer building materials: Impairment risks alleviated, retail growth expected to drive performance realization. In the third quarter of 2024, the consumer building materials sector achieved a total revenue of 30.5 billion yuan, a year-on-year decline of 10.2% and a quarter-on-quarter decline of 12.4%; the net profit attributable to the parent company was 1.95 billion yuan, a year-on-year decline of 39.6% and a quarter-on-quarter decline of 33.6%. The revenue growth rate of consumer building materials companies generally worsened in the third quarter, corresponding to the gradually emerging pressure from project completions this year. We predict that as the real estate market stabilizes next year, the performance growth of consumer building materials will gradually manifest. On one hand, the retail sector will continue to grow, with C-end consumer building materials companies' revenue increasing by 2.1% year-on-year in the third quarter; B-end consumer building materials companies' revenue decreased by 20.5% year-on-year, with C-end performance significantly better than B-end; on the other hand, we believe that credit impairment risks have been significantly alleviated, with credit impairment losses accounting for 46.5% of net profit in the third quarter of 2024, a decrease of 16.2 percentage points compared to the second quarter and a decrease of 10.2 percentage points compared to the same period last year.
Cement: Price center expected to gradually rise. In the third quarter of 2024, the cement sector achieved revenue of 97.1 billion yuan, a year-on-year decline of 9.0% and a quarter-on-quarter decline of 5.7%; the net profit attributable to the parent company was 2.43 billion yuan, a year-on-year decline of 19.0% and a quarter-on-quarter increase of 166.6%. From the situation in the first three quarters of this year, the revenue and performance of the cement sector bottomed out in Q1 2024. Due to the improvement in the macro environment and the arrival of the peak season, cement prices have continued to rise since September. By the end of November, the national average price of bulk P.O42.5 cement reached 428.2 yuan/ton, an increase of 13.2% compared to the average price at the end of August
We believe that the current cement sector has undergone more than three years of adjustment. Although the industry still faces issues of overcapacity and insufficient demand, prices have already fallen to the bottom range. Next year, with the optimization of supply-side capacity, the price center is expected to gradually rise.
Glass: The sector is still bottoming out, pay attention to changes on the supply side. In the third quarter of 2024, operating revenue reached 25.8 billion yuan, a year-on-year decline of 15.8% and a quarter-on-quarter decline of 8.5%; net profit attributable to the parent company was 1.53 billion yuan, a year-on-year decline of 56.4% and a quarter-on-quarter decline of 57.6%. The revenue and net profit of glass companies in the third quarter both deteriorated, mainly due to the pressure from the completion end beginning to show. Although the pressure from completions will still exist next year, the daily melting volume of glass has already decreased by 9.9% from its peak to 159,000 tons, and the current prices correspond to relatively thin profits (as of December 16, the weekly average profit of float glass using natural gas as fuel was -106.0 yuan/ton, the weekly average profit of float glass using coal gas as fuel was 78.7 yuan/ton, and the weekly average profit of float glass using petroleum coke as fuel was 171.2 yuan/ton). We judge that as the willingness of glass manufacturers to undergo cold repairs continues to grow, there is hope for a new upward trend after capacity clearance next year.
Glass Fiber: Supply still has incremental growth, pay attention to changes in downstream demand. In the third quarter of 2024, six glass fiber companies achieved a total revenue of 11.53 billion yuan, a year-on-year increase of 6.4% and a quarter-on-quarter decline of 2.6%; net profit attributable to the parent company was 670 million yuan, a year-on-year increase of 9.4% and a quarter-on-quarter increase of 3.3%, marking the first positive growth in single-quarter net profit for 2024. In Q1 2024, the product prices in the glass fiber industry continued to operate at low levels, and manufacturers suffered severe losses on some products. Therefore, at the end of March 2024, a comprehensive price recovery was initiated, and the downstream response to the industry's joint price recovery was relatively good, with effects gradually reflected in Q2-Q3 of 2024. As of now, glass fiber prices have stabilized at mainstream levels. By early December, the average quotation from glass fiber companies was 4,745.8 yuan/ton, up 19.4% from the lowest point at the beginning of the year; among them, the average price of winding direct yarn reached 3,783 yuan/ton, up 22.0% from the lowest point at the beginning of the year. Looking ahead to the supply-demand pattern, there is still an expectation of 500,000 tons of capacity being ignited recently, and the short-term industry supply-demand inflection point has not yet arrived, which will still take time.
Investment Advice: Considering the valuation of the sector in 2024, most companies in the consumer building materials sector are currently valued at historically low levels of 12-15 times. We judge that next year, as the real estate market stabilizes, the current impairment risks in consumer building materials have been significantly alleviated, and as the large B-end business stops bleeding, the growth on the retail side will gradually become clearer in the financial statements. Looking ahead to 2025, the current prices in the cement sector are at low levels, and policies constraining supply are expected in the future. With the data from the construction side warming up next year, the price center of cement is expected to rise

603737

002043

002372

CITIC Construction Investment Securities released a research report indicating that the building materials sector will perform relatively steadily in 2024, with consumer building materials valuations at historical lows. Year-to-date, the building materials sector ranks 22nd among all industries in terms of price fluctuations, with consumer building materials down 5.2%. As the real estate market stabilizes and impairment risks ease, growth at the retail end will gradually become apparent. The report is optimistic about companies such as SKSHU, DEHUA TB, and WEIXING NBM, and expects cement prices to rise due to policy constraints and improving construction data

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CITIC Construction Investment: Intensive Policy Introductions, Stability in the Building Materials Sector is Imminent