According to the Zhitong Finance APP, CITIC Securities released a research report stating that in the first half of 2025, the transaction area of residential land (including comprehensive plots) nationwide is expected to turn positive year-on-year, with companies gradually restoring their enthusiasm for land acquisition, which is likely to drive an improvement in new construction area. CITIC Securities recommends the waterproof sector at this time, firstly because waterproofing is related to the construction end, and secondly because the concentration in the waterproof industry has significantly increased. In addition, under the trend of reducing competition, the prices of waterproof products in China are gradually stabilizing.
CITIC Securities' main viewpoints are as follows:
Why now: The demand turning point is approaching.
Since 2020, the area of real estate construction in China has been declining continuously, with the new construction area in 2024 only 33% of the peak in 2019. We predict that the decline in new construction area will narrow in 2025. After the United States and Japan entered the era of residential stock demand, the per capita new construction area remained at 0.4-0.8 square meters, while in 2024, China's per capita demand rapidly shrank to 0.4 square meters, indicating an overshoot. According to the China Index Academy, the transaction area of residential land (including comprehensive plots) nationwide in Q1/Q2 2025 is expected to be 42.36 million and 50.12 million square meters, respectively, with year-on-year growth of 2.4%/2.3%. Based on the land acquisition area of sample companies from January to July 2025, which is 16.17 million square meters, a year-on-year increase of 39%, the land acquisition data has turned from negative to positive. Considering that it takes 3-9 months from land acquisition to construction commencement, we expect the new construction area to turn positive year-on-year in the second half of this year, showing a monthly turning point.
Why now: The competitive landscape is optimizing.
The continuous decline in real estate investment demand, coupled with the debt pressure on real estate companies, has led upstream companies to form bad debts in accounts receivable, resulting in a reshuffling in the building materials consumption industry, with a reduction in the number of companies in many sub-sectors and a significant increase in concentration. According to data from Wubroke, from 2021 to 2024, the number of bankruptcies in the real estate, construction, and home decoration industries increased to 1,878, 1,085, and 440 companies, respectively, accounting for approximately 1.9%/1.6%/2.2%. Looking ahead, as the demand for &#34;good houses&#34; increases, the survival space for small enterprises with low-priced and low-quality products will gradually diminish, while the rich product matrix and R&amp;D advantages of leading enterprises will become more prominent.
Why now: Valuation is cost-effective.
As of September 10, 2025, the PB of the building materials (CITIC) index is 1.3x, which is at the 10th percentile since its listing, placing it in the bottom 20% of the valuation levels among CITIC's primary industry indices. As of the end of June 2025, the fund holding ratio for decorative materials (CITIC) was 0.13%, which is 0.11 percentage points lower than the benchmark ratio. Therefore, from both valuation and fund holding perspectives, the consumption building materials industry is at a bottom position, possessing elasticity and space.
Why waterproofing: An early-cycle product in the real estate industry chain.
Waterproof materials are divided into waterproof membranes and waterproof coatings, with waterproof membranes having a larger market capacity and generally used in the construction phase to prevent the underground parts of buildings from being eroded by water, thereby extending their service life. The market capacity of China's waterproof materials industry has faced greater pressure compared to other consumption building materials industries due to the significant decline in real estate construction. According to the China Waterproofing Association, the output of waterproof materials is expected to decline by 38% in 2024 compared to the peak in 2021
Compared to the United States, there is still room for improvement in per capita waterproof market demand in China. According to the announcement from the American waterproof giant Carlisle, the market size of waterproof materials in the U.S. is approximately $14 billion in 2024, corresponding to a per capita market demand of 288 yuan; while currently, China's per capita waterproof market demand is only 64 yuan.
Why waterproofing: The pattern is already favorable, prices have risen, and the profit inflection point for leading companies has emerged.
Waterproof materials have the property of low value but high cost of error, making the quality assurance and brand endorsement of leading companies extremely important, and they should have a high concentration. According to Principia, the CR6 for commercial roofing waterproofing in North America reached 54% in 2018. In July 2025, companies such as ORIENTAL YUHONG, Keshun, Beixin Waterproof, Hongyuan Waterproof, and Zhuobao Technology successively issued price increase notices, indicating that the price inflection point for waterproof materials has emerged. The year-on-year decline in revenue for leading companies in Q2 2025 has significantly narrowed compared to Q1, which is strong evidence that industry demand has bottomed out.
Risk factors.
Weak demand in housing construction and infrastructure; significant increase in raw material costs; market share growth of waterproof companies not meeting expectations; diversification of waterproof companies not meeting expectations; risk control of receivables not meeting expectations.
Investment strategy.
In the first half of 2025, the transaction area of residential land nationwide (including comprehensive plots) turned positive year-on-year, and companies' enthusiasm for land acquisition is gradually recovering, which is expected to drive improvement in new construction area. Over the past few years, under significant operational pressure, the pace of clearing for small and medium-sized enterprises has accelerated, and under the demand for &#34;good houses,&#34; the product advantages of leading companies have become more apparent. We recommend the waterproof sector at this point, firstly because waterproofing is related to the construction start side, and secondly because the concentration in the waterproof industry has significantly increased. The continuous price war in the waterproof industry over the past two years has led to a decline in overall profit margins, forcing many companies to exit, and after a prolonged painful period, signs of price stabilization have emerged

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CITIC Securities released a research report recommending the waterproof sector, as companies' enthusiasm for land acquisition has recovered, and it is expected that the decline in new construction area will narrow in 2025. The concentration in the waterproof industry is increasing, and product prices are stabilizing. The transaction area of residential land nationwide is expected to turn positive year-on-year in 2025, with companies' land acquisition area growing by 39%. It is anticipated that the new construction area will turn positive year-on-year in the second half of the year, optimizing the competitive landscape and highlighting the advantages of leading enterprises

Zhitong

Keshun

ORIENTAL YUHONG

CITIC Securities: The enthusiasm of enterprises to acquire land is gradually recovering. At the current point in time, we recommend the waterproof sector