CICC has released a research report stating that CR BLDG MAT TEC (01313) reported third-quarter 2026 results that fell short of the firm's expectations. Taking into account coal costs rising more than anticipated, combined with continued pressure on cement and aggregate prices, the firm has revised its net profit attributable to shareholders forecasts for 2026 and 2027 down from RMB 803 million and RMB 823 million to negative RMB 794 million and RMB 115 million, respectively. The firm maintains its "outperform" rating but cuts its target price by 40% to HK$1.33.
Given that the company is currently at a historical cyclical bottom and product prices have already begun to recover, the firm believes that supply constraints in the South China region are intensifying, and as coal price pressure eases and supply governance continues, the company's profitability is expected to gradually recover.
Q3 2026 results missed expectations
The company reported third-quarter 2026 results, with quarterly revenue declining 13.9% year-on-year to RMB 4.189 billion; net profit attributable to shareholders was negative RMB 355 million, compared with RMB 24 million in the same period last year, turning from profit to loss.
Rising coal prices and weak demand weigh on cement clinker profitability
Year-to-date, the average price of Q5500 thermal coal at Qinhuangdao Port has risen 29.3% cumulatively, while the national average cement price fell 10.4% over the same period, significantly narrowing the purchase-to-sale price spread. The company's cement clinker sales volume fell 16% year-on-year to 11.86 million tonnes; average price per tonne declined by RMB 1 year-on-year to RMB 204, cost per tonne rose by RMB 27 year-on-year to approximately RMB 200, and gross profit per tonne fell by RMB 28 year-on-year to approximately RMB 4.
Concrete and aggregate profitability under pressure, period expenses rising
In the third quarter of 2026, the company's concrete sales volume grew 40% year-on-year, but gross profit per cubic metre fell by RMB 21 year-on-year to RMB 25; aggregate sales volume declined 21% year-on-year, with gross profit per tonne falling by RMB 4.7 year-on-year to approximately RMB 3.6. Total cement clinker cost per tonne increased by RMB 13 year-on-year to approximately RMB 63, with selling, administrative, and financial expense ratios collectively rising 3.2 percentage points year-on-year.
South China supply constraints intensifying, profit recovery expected
The firm observed that since late September, cement prices in South China have continued to rise by approximately 15%. This round of price increases in South China differs from previous years: overproduction governance has been upgraded from industry self-discipline production halts to daily output verification, combined with transportation restrictions during the dry season of the Xijiang River, with the capacity utilization ratio falling approximately 5 percentage points to 63%. The supply-side constraint represents a "hard constraint" rather than "soft production halts." The firm believes the company has the potential to turn profitable in the fourth quarter of 2026; in 2027, as coal price pressure eases and supply governance continues, cement clinker gross profit per tonne is expected to gradually recover from the current approximately RMB 4 to a level of RMB 15 to 20.
High-elasticity South China leader, valuation recovery on the horizon
The company's South China production capacity accounts for approximately 70%, with Guangdong capacity exceeding 30%, making it a direct beneficiary of this round of regional price recovery. At the same time, the company has an integrated layout across cement, commercial concrete, and aggregates, providing strong profit elasticity during periods of rising prices. As prices improve and coal cost pressure eases, the firm expects the company's valuation to gradually recover as the earnings cycle bottoms out.
Earnings forecast and valuation
Taking into account coal costs rising more than anticipated, combined with continued pressure on cement and aggregate prices, CICC has revised CR BLDG MAT TEC's net profit attributable to shareholders forecasts for 2026 and 2027 down from RMB 803 million and RMB 823 million to negative RMB 794 million and RMB 115 million, respectively. The current share price corresponds to a forecast price-to-book (P/B) ratio of 0.15 times for both 2026 and 2027.
Risk warnings
Overproduction governance and price increases may not be implemented as expected; coal prices may remain elevated.
Comments