CGS: Anti-Involution + Domestic Demand Expansion Reshapes Landscape, Overseas Expansion Drives Valuation Recovery

According to a research report by China Galaxy Securities (CGS), under the deepening "anti-involution" policy in 2026, the effects of capacity reduction are expected to materialize, improving supply-demand dynamics in the industry. Cement prices are projected to rebound, leading to a gradual recovery in corporate profitability.

The government is actively promoting the development of new productive forces, with downstream industries of fiberglass—such as new energy and electronics—showing strong growth momentum. Demand for mid-to-high-end fiberglass products is expected to remain robust in 2026, benefiting leading fiberglass producers with strategic capacity layouts and technological barriers.

Urban renewal initiatives are driving demand for consumer building materials in renovation and repair markets. Leading companies with strong distribution networks and brand advantages are poised to solidify their market positions. The "anti-involution" policy is also expected to accelerate supply-side optimization in the glass industry, potentially improving competitive dynamics.

Key takeaways from the Central Economic Work Conference (December 10–11, 2025) include: 1. **Expanding Domestic Demand**: Policies aim to boost consumption and investment. Housing purchase restrictions are likely to ease, supporting a recovery in home improvement demand. Infrastructure projects under the "dual-key" initiative will stabilize demand for traditional building materials like cement. 2. **Urban Renewal & Quality Upgrades**: High-quality urban renewal and housing construction will drive demand for premium building materials, benefiting branded leaders. 3. **Anti-Involution Policy**: Unified market regulations will curb excessive competition. Cement has seen tangible regulatory progress, while other sectors (e.g., glass, consumer materials) may follow with capacity cuts in 2026. 4. **Green Transition**: Carbon trading and energy structure optimization will accelerate the exit of inefficient capacity.

**Overseas Expansion**: The "Belt and Road" initiative offers growth opportunities in emerging markets. Chinese building material companies are actively expanding overseas to offset domestic pressures, with new capacities expected to boost earnings in 2026.

**Risks**: Volatile raw material costs, slower-than-expected demand recovery, inadequate capacity control, new product setbacks, and policy delays.