Zhongtong Finance APP has learned that Tianfeng Securities has released a research report stating that the current real estate industry has introduced policies on both the supply and demand sides, which may have a positive impact on improving the basic fundamentals of the real estate chain, and the price recovery of cement, fiberglass, and other varieties may have reflected the bottom of the stage. The current point may still be a temporary low point for the traditional basic fundamentals of building materials; the growth potential of downstream demand for new materials is better, and the performance of pharmaceutical glass is excellent. It is recommended to pay active attention.

Tianfeng Securities' main points are as follows:

The prosperity of the building materials industry may have bottomed out, and the growth potential of new material varieties is expected to be realized.

In the first half of 24, a total of 288 billion yuan in revenue was achieved by listed companies in the building materials industry tracked, a year-on-year decrease of 13.4%. The Q2 quarter-on-quarter decrease was slightly larger than Q1. The net profit attributable to shareholders in the first half of 24 was 11.5 billion yuan, a year-on-year decrease of 51.6%. The Q2 quarter-on-quarter decrease was larger than Q1. The simultaneous decline in revenue and profit in the first half of the year was mainly due to continued weak demand in the real estate sector and overall decline in both volume and price. The bank believes that policies have been intensively introduced on both the supply and demand sides of the real estate industry, which may have a positive impact on improving the basic fundamentals of the real estate chain. The recovery of prices for cement, fiberglass, and other varieties may have reflected the bottom of the stage, and the current point may still be a temporary low point for the traditional basic fundamentals of building materials; the growth potential of downstream demand for new materials is better, and the performance of pharmaceutical glass is excellent. It is recommended to pay active attention.

Traditional building materials: Gypsum boards shine in the consumption building materials sector, and the profitability margin of cement and fiberglass has improved in Q2 24.

1) Cement: In the first half of 24, the revenue/net profit attributable to shareholders were 127.9/0.3 billion yuan, a year-on-year decrease of 24.1%/-96.2%, and the ROE was 0.1%, a year-on-year decrease of 2.3 percentage points. The net profit margin decreased by 4.9 percentage points to 0.3% compared to the same period. It was mainly dragged down by price decline. The average cement price in the first half of 24 was about 362 yuan/ton, a year-on-year decrease of 64 yuan/ton (-15%). Since April, the cement industry has started to rebound in prices. The average cement price in Q2 has increased by 6 yuan/ton to 365 yuan/ton. The net profit margin in Q2 has turned positive compared to negative, and there is relative optimism about future cement prices. The leverage ratio of the cement industry has decreased in the first half of the year. The bank believes that as capital expenditure decreases, the ability of cement companies to distribute dividends gradually increases, and the dividend attributes are still prominent. It can be laid out through three main lines: 1) The cement business has a thick profit bottom, strong dividend distribution capability, and a high dividend yield. It is recommended to pay attention to Conch Cement (00914) and Tapai Group (002233.SZ), and recommend paying attention to CR Building Materials Technology (01313). 2) The second growth curve driven by non-cement businesses and overseas cement businesses. It is recommended to pay attention to West China Cement (02233) and Huaxin Cement (06655). 3) There is catalytic demand in the regional market. It is recommended to pay attention to Tibet Tianlu (600326.SH).

2) Consumer building materials: In 24H1, the revenue/net profit attributable to the parent company were 69.6/5 billion yuan, with a year-on-year change of -2.5%/-25.2%. The ROE decreased by 1.6 percentage points to 4.3%, and the net profit margin dropped by 3.2 percentage points to 4.0%. The performance was mainly affected by the decline in product prices and fluctuation in raw material costs. Among the sub-sectors, the revenue/profit of gypsum boards in 24H1 increased by 19%/17% YoY, with Beijing New Building Materials showing strength and demonstrating its pricing power. The performance of other sectors declined, with a YoY decrease of 5.8%/-45.4% in coatings revenue/net profit, mainly due to price decline and an increase in raw material costs. With the growth of renovation projects for existing stock houses and second-hand houses, the coatings sector is expected to present a better pattern. Waterproofing revenue/net profit decreased by 11.5%/-27.9% YoY, mainly due to the decline in demand from new real estate projects. Ceramic tiles decreased by 16.5%/-46.5% YoY, and revenue/net profit of pipe products decreased by 6.4%/-30.1% YoY. However, Weixing New Materials, which has strong retail characteristics in PPR pipes, continued to grow. The bank believes that if sales in the real estate industry stabilize, it will first benefit the improvement of the capital chain. Enterprises with a large amount of accounts receivable and a significant amount of provisions for impairment are expected to benefit first. In the medium to long term, leading companies with advantages in channels and categories will continue to enhance their competitiveness, and their performance growth is still worth looking forward to. Recommended stocks include Beijing New Building Materials (000786.SZ), Skshu Paint (603737.SH), Beijing Oriental Yuhong Waterproof Technology (002271).

3) Fiberglass: In 24H1, the revenue/net profit attributable to the parent company decreased by -9.9%/-60.0% YoY, with ROE decreasing by 4.1 percentage points to 2.6%, and the net profit margin decreased by 8.7 percentage points to 6.9% YoY. Since Q2, the industry has actively increased prices, and the net profit margin in Q2 increased by 2.0 percentage points compared to the previous quarter. Looking at the second half of the year, demand may show marginal recovery, but supply-side pressure still exists. In the field of electronic yarns, Grace Fabric Technology has recovered from losses in Q2 and has a better industry position. Recommended stocks include China Jushi Co., Ltd. and Grace Fabric Technology.

4) Glass: In 24H1, the revenue/net profit of photovoltaic glass increased by 9.1%/16.3% YoY, and float glass increased by 4.0%/9.1% YoY. Looking at Q2, photovoltaic glass performed better, and float glass profitability was under pressure. The current market value of leading glass companies is at historically low levels. Photovoltaic glass is expected to benefit from the recovery of the industry chain. Recommended stocks include Zhuzhou Kibing Group, Xinyi Glass, Flat Glass Group (covered jointly with Beijing Orient Securities). New materials: Demand for pharmaceutical glass is still relatively high, and the leading companies in the pharmaceutical glass industry have seen an increase in profits on a year-on-year basis in 24Q2/24H1. The bank believes that a) pharmaceutical glass is expected to continue to benefit from the increased boron-silicon penetration rate, and the current valuation advantage may be gradually emerging. Recommended stocks include Shandong Pharmaceutical Glass (covered jointly with the pharmaceutical team); b) downstream demand in the consumer electronics sector is expected to gradually recover, and the domestic market for electronic glass, including foldable screens and other new products, is expected to benefit. Recommended stocks include Triumph Science & Technology (covered jointly with the electronics team); c) with the promotion of the "dual-carbon" policy, the growth pace of high-quality refractory insulation material demand may accelerate. It is recommended to pay attention to Luyang Energy-Saving Materials and Beijing Lirr High Temperature Materials.

Risk warning: Downside risks include a more significant decline in downstream demand, higher-than-expected raw material price increases, and unexpected increases in production capacity.