Guotai Haitong: The cement industry's fundamental advantages are highlighted, and profit recovery is expected to be fastest in 2025 Q1 and may gradually materialize.

Guotai Haitong released a research report stating to maintain a "buy" rating on the building materials industry. Under changes in the external environment, there are two expectations for the marginal changes in the building materials industry: 1. The building materials industry is mainly driven by domestic demand, and the pricing of options for internal demand to hedge against the external environment is expected to be price; 2. Bulk commodity prices represented by oil prices have adjusted, and the cost of raw materials anchored by oil prices is expected to decrease to benefit the industry. Overall, the relevance of the external environment to the fundamental expectations of the building materials industry in the short term is rather positive, with the advantage of certainty highlighted. The key words for the fundamental outlook of the building materials industry in 2025 are "the tortoise-rabbit race" - the accumulation of supply optimization and clearance, accompanied by stable demand and profit release. The repair of the sector's profitability may be gradually realized as early as 25Q1. Guotai Haitong's main points are as follows: Cement: Pricing of bulk commodities driven by domestic demand, staggered price increases implemented smoothly The bank predicts and observes that the pressure on the decline in cement demand within the year from the perspective of the industry chain balance sheet is high in certainty (see report "A New Perspective on Predicting Inflection Points of Physical Quantity from Industry Chain Balance Sheets"). From the observation of the industry front line, the "under construction" key projects have contributed significant potential for domestic demand hedging. Initiatives for hedging in major provinces such as Guangdong may have already started early. From a national perspective, the April staggered plans and further pricing for price stability have been successful. The bank's report "The Moment of the Tortoise-Rabbit Race in Cement" elaborates on the investment logic of the cement industry in 2025. This year, the cement industry's resilience and structure have been tested, the coal concession has provided the industry with the opportunity to improve the structure and turn it into profits, and the profitability improvement in 25Q1 is worth looking forward to. Recommended stocks include Anhui Conch Cement, Huaxin Cement, Guangdong Tapai Group, CR BLDG MAT TEC, Gansu Shangfeng Cement, and BBMG Corporation. Consumer Building Materials: Profit margin recovery is the main line, cost optimization is aided by expectations of lower raw materials prices With OPEC+ increasing production, the decline in bulk prices represented by crude oil is expected to further benefit the cost side of chemical building materials. The biggest highlight for consumer building materials in 2025, according to the bank, is not in price growth, but in the elasticity of net profit margin recovery. The bank's report "When Industry Expectations are Broadly Lowered, Industry Profits are Expected to Rise" explains the investment logic for consumer building materials in 2025: under the assumption of neutral industry demand, the industry's own slowdown in revenue growth expectations is expected to bring about a moderation in price competition and cautious budgeting of expenses, leading to an out-of-expectation recovery in net profit margin. In addition to the expectation of cost concessions on the cost side, the certainty of industry profitability repair is expected to further increase. Recommended stocks include Beijing Oriental Yuhong Waterproof Technology, Beijing New Building Materials Public, Zhejiang Weixing New Building Materials, SKSHU Paint, Dehua TB New Decoration Material, CHINA LESSO, Keshun Waterproof Technologies, Guangdong Dongpeng Holdings, and Monalisa Group. Fiberglass: Strong expectations for the industry's ability to pass on tariffs As a global traded commodity, there are concerns about the impact of tariff increases on the fiberglass market. However, the bank observes that the industry's expectations for downstream tariff pass-on are strong. At the current point in time, the wind power and other structural prosperity sectors have digested the pressure released from the supply side earlier, and the willingness and ability of major industry players to raise prices are at higher levels, with a strong certainty of profitability recovery. Recommended stocks include China Jushi Co., Ltd and Sinoma Science & Technology. Risk factors: macro-policy risks; raw material cost risks.