GTHT released a research report stating that it maintains an "Overweight" rating on the building materials sector. The strategy involves seeking independent growth highlights or valuation advantages under weak macro assumptions; when expectations are revised upwards from the bottom, excess returns become more pronounced, which aligns with the principle of "heaven helps those who help themselves." While the static data for total physical volume is still in a phase of year-on-year decline, many leading listed companies in the building materials industry have already achieved growth in both revenue and profitability. This growth in revenue and profit stems from: further market share gains; expansion and an increased proportion of overseas business; material upgrades driven by advancements in AI/new energy/aerospace industries; cost reductions following eased competition; platform-based attempts at category expansion; and key construction projects in the prosperous Northwest region. Against the backdrop of cautious macro assumptions, the endogenous growth capabilities or attractive dividend valuations of leading building materials companies already present investment value; furthermore, once macro expectations are revised upwards from the bottom, the potential for excess returns is expected to become more evident. GTHT's main views are as follows: Cement industry: Governance of overcapacity optimizes supply-demand dynamics, and overseas expansion growth remains scarce. Reviewing 2025, cement prices showed a high-then-low trend, essentially reflecting quarterly fluctuations between declining demand and production curtailment博弈. Looking ahead to 2026, the firm believes the decline in cement demand may narrow, and governance of overcapacity is expected to achieve regional supply-demand optimization; however, a full reversal in supply-demand dynamics still relies on consolidation within the industry's long tail, leading to a judgment of low-volatility, gradually rising domestic cement prices. Additionally, the firm believes that against a backdrop of a weak US dollar channel and a generally slower pace of capacity expansion in Africa, exchange rate risks are expected to moderate somewhat, allowing for maintained optimism regarding assumptions for overseas price and volume growth; the certainty of profitability from cement overseas expansion in 2026 remains relatively high. In the domestic context, focus on overseas expansion and rising expectations for cement dividends. Consumer building materials: High divergence in strategy and financial reports, weak macro assumptions create investment appeal. In 2025, the impact of macro factors on the sector weakened, and company-specific changes began to dominate. On one hand, the focus is on finding leading companies in sub-sectors that are independent of the demand environment and are expected to achieve endogenous growth in 2026 based on their own operations, such as in waterproofing, coatings, and home hardware. Core growth drivers originate from diverse, independent factors like channel penetration, category broadening, overseas expansion, and price increases/cost reductions, allowing them to deliver performance independently while benefiting from overall low expectations. On the other hand, the focus is on recommending companies where operational resilience highlights advantages in dividends and valuation: leaders in sectors like gypsum board, artificial board, and piping, where industry structure has stabilized, leading companies maintain relatively robust profitability, dividend yields are considerable, and valuations already fully reflect quite cautious assumptions. Therefore, even if macro assumptions remain low, their operational resilience and valuation safety margin still provide outstanding investment appeal; if subsequent policy support leads to an upward revision of macro expectations, it could further open up space for earnings and valuation recovery, potentially fully unleashing their excess return elasticity. Glass and Fiberglass: Fiberglass continues structural differentiation, glass cold repairs accelerate. 1) Fiberglass: For 2026, the firm judges that the fiberglass industry will continue to show structural differentiation. Within roving, demand from wind power, thermoplastic, and exports is expected to remain stable to strong, with support from high-end demand likely to continue alleviating low-end competitive pressure. For electronic yarn, low-dielectric cloth for AI is expected to enter a year of volume and profit realization in 2026; simultaneously, driven by production shifts to specialty cloth, the spillover effect of strong electronic yarn demand onto ordinary cloth is expected to become more apparent. 2) Glass: After a supply-demand stalemate in 2025 for float glass, signals for cold repairs gradually emerged from late 2025 into 2026, beginning to show the advantages of market-driven clearing in the glass sector. The firm believes the initiation of cold repairs indicates further confirmation of bottom-level profitability, but the duration of the bottom will still depend on the subsequent博弈 between cold repairs and demand. For 2026, focus on leading float glass companies + glass companies with differentiated processing capabilities. Risk warnings: Risks related to domestic monetary/fiscal and real estate macro policies; risks associated with raw material costs.
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