1、 Review of market performance of building materials
Last week, the Shenwan Building Materials Index rose 2.32 percentage points, and the CSI 300 Index rose 0.56 percentage points. The building materials index outperformed the CSI 300 Index by 1.76 percentage points. In terms of sub industries, the cement index increased by+0.20%, the glass fiber index increased by+1.67%, and the decoration and building materials index increased by+4.75%.
2、 Recent tracking of industry trends and key sub industries
In 2023, listed companies in the building materials industry will achieve a revenue of 786.299 billion yuan, a year-on-year decrease of 1.24%; The net profit attributable to the parent company was 34.741 billion yuan, a year-on-year decrease of 33.54%. In the first quarter of 2024, listed companies in the building materials industry achieved a revenue of 133.468 billion yuan, a year-on-year decrease of 18.09%; The net profit attributable to the parent company was 433 million yuan, a year-on-year decrease of 90.61%. The demand of the building materials industry is greatly affected by infrastructure investment and real estate construction. In recent years, the downturn of the real estate industry has led to a decline in the demand of the building materials industry, resulting in a double decline in revenue and profits.
In terms of sub industries, listed companies in the cement industry will achieve a revenue of 504.188 billion yuan in 2023, a year-on-year decrease of 4.17%; The net profit attributable to the parent company was 14.437 billion yuan, a year-on-year decrease of 45.21%. In the first quarter of 2024, listed companies in the cement industry achieved revenue of 75.236 billion yuan, a year-on-year decrease of 28.61%; The net profit attributable to the parent company was RMB-2781 million, a year-on-year decrease of 505.67%. With the continuous decline of cement prices since 2023, the performance of the cement sector is under pressure. Affected by the downturn of the real estate market, the growth rate of cement demand slowed down, and the number of off peak production days at the supply side increased, which put some pressure on the overall profitability of the industry. In the short term, the cement industry may continue to face the problems of insufficient demand and overcapacity, and the performance improvement space is limited. In the medium and long term, with the deepening of supply side structural reform and the increase of industry concentration, leading enterprises are expected to improve their performance through scale advantages and cost control.
In terms of sub industries, listed companies in the glass and glass fiber industry will achieve a revenue of 115.09 billion yuan in 2023, an increase of 5.37% year on year; The net profit attributable to the parent company was 10.132 billion yuan, a year-on-year decrease of 38.46%. In the first quarter of 2024, the listed companies in the glass fiber industry achieved a revenue of 24.357 billion yuan, an increase of 0.40% year on year; The net profit attributable to the parent company was 1.428 billion yuan, a year-on-year decrease of 32.36%. Due to the decline in product prices, although the revenue of glass fiber plate kept growing, the net profit declined. Real estate market regulation policies affect the demand for building glass, but the development of automobile and photovoltaic industries has brought new growth points to the glass industry. At present, the entire glass fiber industry may face inventory pressure and price competition, but leading enterprises still have growth potential through product innovation and market expansion.
In terms of sub industries, listed companies in the decoration and building materials industry will achieve a revenue of 166.903 billion yuan in 2023, up 3.87% year on year; The net profit attributable to the parent company was 10.171 billion yuan, up 7.57% year on year. In the first quarter of 2024, listed companies in the decoration and building materials industry achieved a revenue of 33.875 billion yuan, an increase of 1.71% year on year; The net profit attributable to the parent company was 1.786 billion yuan, down 1.59% year on year. In 2023, the performance of the decoration and building materials sector remained stable, and the income performance of the decoration and building materials industry in 2024Q1 remained stable. With the gradual recovery of the real estate market and the improvement of consumers' requirements for home quality, the market demand for decoration materials will continue to increase. At the same time, leading companies enhance market share and profitability by strengthening brand building, improving product quality and service level. In the medium and long term, with the gradual recovery of the real estate market and the promotion of new urbanization, the decoration and building materials sector is expected to usher in new growth opportunities.
3、 Core investment perspective
Cement: Recently, the cement industry as a whole has shown a trend of little price fluctuation, declining output and increasing inventory. The national average cement price in April was basically the same as that in March, but regional price changes were significant, with the largest increase in southwest China and the deepest decline in north China, leading to further differentiation of price ranges across regions. Cement production decreased significantly in March on a year-on-year basis, reflecting the weakening of market demand. At the same time, the inventory level of cement and clinker rose to a medium high level, which may aggravate the contradiction between supply and demand in the market. Under the dual pressure of overcapacity and downward market demand, the industry competition is intensified, and the benefit growth is limited. The cement industry will continue to be at the bottom.
Glass: recently, the price of float glass industry has dropped, the output has increased, and the inventory has been reduced. In April, the national average price of 5mm float glass experienced a certain decline, especially in the northwest region. At the same time, the production of float glass increased year on year in March, showing the growth trend of production. In terms of inventory, the float glass inventory was reduced in April, indicating that the market is gradually digesting the inventory. In summary, the float glass industry is currently facing downward pressure on prices, but the growth of output and the reduction of inventory indicate that the industry is adjusting supply and demand and gradually adapting to market changes.
Decoration building materials: the demand of plastic pipe industry is growing, and the coating industry is improving in the medium and long term.
With the acceleration of urbanization and the increase of demand for infrastructure construction, the market demand for plastic pipes is also growing. Relevant policies and plans launched by the government, such as sponge city, water network construction and old residential reconstruction, have provided active support for the development of the plastic pipe industry. The plastic pipe industry is still in the pattern of large industries and small companies, and companies with brand and channel advantages will have great development space.
China's coating industry is an important chemical industry. Its market scale has been expanding in recent years, and the market space of building coatings is more than 100 billion yuan. The concentration of the coating industry is low, with the top ten cities accounting for only 18%. The industry echelon is relatively obvious, and there is huge room for high-quality enterprises to increase their market share in the future. In the medium and long term, listed companies in the paint industry are still in a good development path.
4、 Key recommended stocks this week
Weixing New Material (002372): Weixing New Material, as the leading enterprise of domestic plastic pipeline, has achieved remarkable results in both retail and engineering business segments by virtue of its deep channel foundation, excellent brand influence and high-quality service system. In terms of retail business, the company continued to focus on channel sinking, intensive cultivation and continued to expand market share; In terms of engineering business, the company optimized the customer structure, actively expanded large-scale engineering projects, and achieved steady growth of business. It is estimated that the net profit attributable to the parent company from 2024 to 2026 will be 1.292 billion yuan, 1.374 billion yuan and 1.463 billion yuan respectively, and the corresponding PE will be 22 times, 20 times and 19 times respectively, so the recommendation rating will be given.
Qibin Group (601636): Qibin Group is one of the two leading enterprises in the domestic float glass industry. It has established float glass production bases in Zhangzhou, Fujian, Heyuan, Guangdong, Liling, Hunan, Shaoxing, Zhejiang, Changxing, Zhejiang, Pinghu, Zhejiang, Malaysia and other places. In addition, the company actively cultivates emerging businesses. Photovoltaic glass, electronic glass and pharmaceutical glass are expected to exert their power and bring about growth in the company's performance. It is estimated that the company's net profit attributable to the parent company in 2024-2026 will be 1.712 billion yuan, 1.948 billion yuan and 2.178 billion yuan respectively, and the corresponding PE will be 12 times, 11 times and 10 times respectively, so the recommendation rating will be given.
5、 Risk warning
Downstream industry demand is less than expected, raw material or fuel prices fluctuate, and market competition intensifies.
