Caitong Securities released a research report stating that China's cement supply-demand dynamics may stabilize in the long term, with supply contraction being the key factor. A new round of supply-side reform policies focusing on capacity control and anti-internal competition could become a limiting factor for cement supply. Incremental growth will primarily rely on overseas markets, with Africa holding advantages in competitive landscape, profit margins, and demand potential. Cement offers high-dividend allocation logic, supported by incremental overseas contributions and a stabilizing domestic price recovery.
Key views from Caitong Securities are as follows:
**Glass**: The industry is at the bottom of its cycle, with cost advantages helping companies weather the downturn. Demand, heavily influenced by completed construction areas (80.8% share), has declined sharply in the real estate sector, while growth in automotive, electronics, and photovoltaics (19.2% combined) fails to offset the drop. On the supply side, active production lines have decreased from a peak of 266 in September 2021 to 224 currently, yet capacity remains high relative to demand. As losses deepen, high-cost and uncompetitive capacities will exit permanently, leaving only leading firms with strong cost control, diversified operations, and financial strength to endure. **Kibing Group** is recommended for attention.
**Fiberglass**: Traditional sectors focus on anti-internal competition, while high-end segments rely on technological upgrades. Fiberglass, widely used in industries like construction materials (25%), transportation (24%), electronics (18%), energy/environment (14%), and consumer goods (8%), is seeing a shift. In September, the China Fiberglass Industry Association introduced anti-internal competition policies, potentially stabilizing coarse yarn prices. Meanwhile, AI server demand is driving adoption of low-dielectric (Low-Dk) fiberglass, replacing traditional electronic fabrics. This technological shift enhances product value and profitability.
**Building Materials**: Price recovery is underway, with a turning point in distress reversal emerging. Reduced competition is inevitable as smaller firms exit due to unsustainable price wars, while leaders consolidate market share. Companies are shifting from volume-driven to quality-driven strategies: 1) Improved channel structures, with higher retail share; 2) Price stabilization reflecting true value; 3) Cost-cutting to prioritize profits. Post-consolidation, the Matthew Effect will intensify, benefiting segments like coatings and waterproofing. **Skshu Paint**, **Oriental Yuhong**, **Tubaobao**, and **Keshun Waterproof** are recommended.
**Risks**: Macroeconomic downturn, unexpected real estate market declines, and rising raw material costs.
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