The Zhitong Finance App learned that Tianfeng Securities released a research report saying that the building materials index achieved a cumulative absolute profit of 3.96% in the two weeks after the 24-year festival, but it still outperformed the 1.18pct market. Judging from the resumption of work in the previous two weeks, the physical workload of infrastructure and housing construction fell short of previous years, leading to a year-on-year decline in consumption of building materials. In the short term, the building materials sector may still need to observe the resumption of work and physical volume progress during the peak season. On the cement side, cement prices declined year-on-year after the 24-year holiday season, and the recovery in March is expected to drive up prices across the board. Short-term focus is on price increases. Profit is also expected to form in the first quarter compared to the bottom. Last year, profits in the cement industry fell to a new low in the past ten years. The bank expects that there is little room for further decline in 24 years, and if demand recovery accelerates during the peak season, the flexibility of cement price increases is still worth looking forward to. Conch Cement (600585.SH) and Huaxin Cement (600801.SH) are recommended.
Tianfeng Securities's main views are as follows:
Post-holiday performance has clearly weakened in recent years, and cement has an advantage in the real estate chain
In the past 10 years, the 7/9 Building Materials Index obtained positive absolute and relative returns after the holiday season until the end of March. The average positive return was 11.6%/6.8%, respectively. The performance of the building materials index has clearly weakened after the holiday season in the past three years. The bank is expected to be mainly affected by the decline in real estate sentiment. In the sub-sector, the China-Africa real estate chain has seen the highest increase, and cement has the dominant performance among the real estate chain categories.
The building materials index achieved a cumulative absolute return of 3.96% in the two weeks after the 24-year holiday season, but it still outperformed the 1.18pct market. Judging from the resumption of work in the previous two weeks, the physical infrastructure and housing construction workload fell short of previous years, leading to a year-on-year decline in building materials consumption. In the short term, the building materials sector may catalyze the resumption of work during the peak season and progress in physical volume.
Cement: The effect of post-holiday agitation is obvious. Short-term focus on catalyzing price increases
1) Index performance: In the past 10 years, the cement index achieved positive absolute/relative returns after the 9/10 holiday season until the end of March, with an average positive return of 12%/9.7%, respectively.
2) Influencing factors: The increase after the cement festival is related to infrastructure and real estate sentiment. In the past, it was relatively more affected by infrastructure sentiment, but sensitivity to real estate began to gradually increase in '23, and revenue performance in the first quarter of the past three years increased. The bank expects mainly that the demand side has entered a downward channel, and price elasticity during peak seasons has weakened, so the off-season price base often underpins annual results.
3) Sector view: Cement prices declined year-on-year after the 24-year holiday season. The recovery in March is expected to drive up prices across the board. The bank determines that profits are expected to form in the first quarter compared to the bottom. Last year, the cement industry profit fell to a new low in the past ten years. The bank expects that there is little room for further decline in 24 years, and if demand recovery accelerates during the peak season, the flexibility of cement price increases is still worth looking forward to. Conch Cement (600585.SH) and Huaxin Cement (600801.SH) are recommended.
Glass: The post-holiday agitation effect is not strong, completion expectations or the main influencing factor
1) Index performance: In the past 7 years, the Glass Index achieved positive absolute/relative returns after 1/4 of the holiday season until the end of March, with average returns of 28.8%/6.9%, respectively.
2) Influencing factors: The correlation between the relative earnings of the glass sector after the holiday season was weak, while the correlation with completion expectations was strong. In 19-21, due to high demand for completion at the beginning of the year and the market's relatively optimistic expectations for the whole year, the index achieved good relative returns at the beginning of the year.
3) Sector view: The average price/gross profit of a single box of flat glass increased by 23/31 yuan, respectively. As of the end of February, manufacturers' inventory was 19.3 million lower than the previous year. The bank expects glass company performance to grow better year over year in the first quarter of '24. In the medium term, there is still downward pressure on completion, and demand side support may be insufficient. At the same time, the supply side is high (the overall daily melting volume of the industry at the end of February was 17,6565T/D, up 10.3% year on year). The bank determined that future glass companies' prices and profits may be under downward pressure.
Consumer building materials: Fluctuations are stronger than cement, focus on changes in real estate sales sentiment, and promote first-tier leading varieties
1) Index performance: In the past 10 years, the consumer building materials index achieved positive absolute and relative returns after the holiday season until the end of March. The average positive return was 17.2%/11.2%, respectively. The overall elasticity was better than that of cement, but the retracement was also greater.
2) Influencing factors: During the market period, Q1 revenue and commercial housing sales had relatively little impact on the rise and fall rate of the sector, while during the downturn of the market, Q1 revenue performance had a weak impact on the sector, and commercial housing sales sentiment was more important.
3) Individual stock performance: During the market period (2019), second-tier products rose higher, while first-tier leaders declined less during the downturn period (22 and 23 years).
4) Sector view: The bank expects commercial housing sales to still bottom out in the first quarter, but the year-on-year revenue growth trend is expected to rise. Refer to 18 (sales sentiment trend downward, revenue growth rate did not slow significantly). In the short term, leading companies are relatively superior. In the medium to long term, the 24-year cost dividend or marginal weakening. At the same time, considering that if price competition occurs due to fluctuations in raw material prices and lower demand in 24 years, segment leaders with strong pricing power and obvious cost advantages are expected to maintain greater profitability and resilience., Weixing New Materials ( 002372.SZ), Oriental Yuhong (002271.SZ), etc.
Risk warning: Demand for infrastructure and real estate fell beyond expectations, affecting the upward trend in cement and glass prices; bad debt impairment losses in the real estate industry chain exceeded expectations; cement price increases fell short of expectations after the holiday season.