By simultaneously implementing industry policies, the industry structure will be optimized and the total supply of the industry will be controlled and reduced, which will rebuild a new balance between industry supply and demand.
According to the research report released by Dongxing Securities, the trend of long-term concentration in the building materials industry has not changed and is accelerating under the current historical downturn. The current industry prosperity is at an all-time low, and the duration of the downturn is unprecedented, which will make the strength and effectiveness of industry elimination more and more obvious. Looking ahead, by simultaneously implementing industry policies, the industry structure will be optimized and the total supply of the industry will be controlled and reduced, which will rebuild a new balance between industry supply and demand. Waiting for the new balance of supply and demand brought by the clearing of industry supply and real estate risks, the performance improvement of leading and excellent companies will bring about a double hit of valuation and performance of Davis.
The main viewpoints of Dongxing Securities are as follows:
The drag of the negative cycle of real estate on the economy and industry demand continues in the first half of 2024.
In the first half of 2024, with the weakening of local government investment in infrastructure due to the 'debt-for-bond' swap and the centralized construction period of previous projects, the Central Government will take over the investment in infrastructure, guaranteeing a stable and slightly lower growth rate. With the further improvement of external demand, the upgrading and transformation of manufacturing equipment and technology, and the impact of inventory cycles, the investment growth rate of the manufacturing industry will improve in the first half of 2024 compared with 2023. In the first half of 2024, fixed asset investment in real estate continued to decline for the third year, and the negative cycle of real estate had no sign of convergence, which was the biggest drag in more than a decade, leading to weak economic and industry demand.
The improvement of exports driving demand under weak consumption and the return of real estate to the long-term healthy development track in the context of declining real estate wealth effects is of great significance.
The low stability of the European economy, the still good state of the US economy, and the impact of low inventory, coupled with the promotion of China's 'Belt and Road' initiative and the depreciation of the renminbi exchange rate, have become a positive driving force for GDP growth in the first half of the year. Under the decline in real estate wealth effects, consumption in the first half of 2024 is expected to be affected and the driving force of consumption on GDP will weaken.
The negative cycle without convergence of real estate will affect the related real economy industry chain and real estate financial institutions. It will affect the confidence and ability of residents to invest in housing and consume, the production and investment willingness of real estate enterprises, the investment and consumption capacity of local governments, as well as the investment and borrowing willingness of financial institutions, which will affect economic vitality. Finally, it will affect the total demand for investment and consumption, the improvement of asset and commodity service prices, and the confidence and expectations of various economic entities.
In addition, the constraints of external economic policies and the implementation and effectiveness of monetary and fiscal policies are affected, making it extremely important to prevent real estate risks. Particularly under the influence of the external environment such as trade protection and decoupling in countries such as the United States and Europe, the prevention and control of real estate risks is of great significance.
The policy will continue to promote the return of real estate to a long-term healthy development track.
In the first half of 2024, real estate policies will be gradually introduced to regulate both the supply and demand sides, to a certain extent, to prevent the impact of real estate downturn. In the second half of 2024, real estate and fiscal and monetary policies will be introduced one after another, paving the way for real estate to return to a healthy development track. The goal of real estate policy is to make real estate return to the long-term healthy development track. The policy will continue to make efforts until the no-convergence cycle of real estate is improved. The return of China's real estate to a healthy development track has many favorable conditions. At the same time, there is still great potential for fiscal and monetary policies over time.
The focus on improving new production forces will improve input-output and asset value, and policy efforts will improve domestic demand and weaken the current situation of strong output but weak pricing in the economy.
Reducing costs and increasing efficiency can improve the input-output efficiency and fairness and justice of the market mechanism. Whether it is the updating of production equipment, technological transformation, or measures such as strict supervision and anti-corruption to improve the market mechanism and system, they all have the effect of reducing costs and increasing efficiency, improving production capacity, optimizing production relations, and creating new production forces. The Third Plenum of the Twentieth Congress comprehensively improved and reformed the social and economic system and mechanism, which will help to improve the input-output efficiency and fair justice. In terms of asset value enhancement, it not only includes the transformation of urban villages and the optimization of state-owned enterprises, but also the optimization and value enhancement of various asset resources such as agricultural and rural production and resource factors, etc., and the improvement of asset and resource value will enable new production forces to develop better. The Central Government will actively respond, and the monetary policy will coordinate to hedge against the drag of real estate. At the same time, the long-term development of new production forces is expected to be conducive to the control of real estate risks.
Concentrated efforts to improve new production forces can increase input-output and asset value, and policy efforts can improve domestic demand, weakening the current situation of strong quantity and weak pricing in the economy.
The trend of long-term concentration in the building materials industry has not changed and is accelerating under the current historical downturn. The current industry prosperity is at an all-time low, and the duration of the downturn is unprecedented. This will make the strength and effectiveness of industry elimination more and more obvious. By simultaneously implementing industry policies, the industry structure will be optimized and the total supply of the industry will be controlled and reduced, which will rebuild a new balance between industry supply and demand. This will provide development opportunities for leading and excellent companies.
According to the research report released by Dongxing Securities, the trend of long-term concentration in the building materials industry has not changed and is accelerating under the current historical downturn. The current industry prosperity is at an all-time low, and the duration of the downturn is unprecedented, which will make the strength and effectiveness of industry elimination more and more obvious. By simultaneously implementing industry policies, the industry structure will be optimized and the total supply of the industry will be controlled and reduced, which will rebuild a new balance between industry supply and demand.
Leading and excellent companies have strong risk resistance capabilities and rely on their own advantages in scale cost, location layout coverage, green intelligent production and quality technology, and instead usher in development opportunities in the current environment. The return of real estate to long-term healthy development and the company's own growth improvement bring about valuation improvement. Asset structure optimization and quality improvement bring about valuation improvement. Waiting for the industry to clear the supply and new supply and demand balance brought about after real estate risks are under control, the bottoming out and improvement of performance of leading and excellent companies will bring about double wear of valuation and performance Davis.
It is recommended to continue to focus on the following symbols: Beijing New Building Materials (000786.SZ), Zhejiang Weixing New Building Materials (002372.SZ), Guangdong Dongpeng Holdings (003012.SZ), Beijing Oriental Yuhong Waterproof Technology (002271.SZ), Shandong Pharmaceutical Glass (600529.SH), Yangling Metron New Material (300861.SZ), Conch Cement (600585.SH), China Jushi Co., Ltd. (600176.SH) and China Communications Construction (601800.SH).
Risk warning: real estate policy control effect is lower than expected, demand promotion policy effect is lower than expected, international trade protection develops beyond expectations, and energy and raw material cost impact exceeds expectations.
