China Building Materials cement asset integration has begun, and the northwest cement supply pattern is expected to optimize the Ningxia building materials announcement. The controlling shareholder China Building Materials cement asset integration kicks off. In the first phase, Tianshan Co., Ltd. acquired cement sector assets that are not independently listed internally, such as Zhonglian Cement, Southern Cement, North Cement, Southwest Cement, and Sinoma Cement. The company's asset integration has not yet been involved in this stage. China Building Materials previously promised to resolve competition among its cement companies. This announcement indicates that the integration of cement companies in the northwest region is expected to accelerate in the future, and the industry pattern may usher in further improvements. Ningxia Building Materials achieved rapid growth in the first half of the year. With the implementation of the Mengxi Cuofeng replacement, it is conducive to medium- to long-term improvement in the company's core market supply and demand pattern, and is expected to break the regional price ceiling. We raised the company's EPS for 20-22 to 2.30/2.66/2.88 yuan (2.00/2.32/2.55 yuan before adjustment) to maintain the “gain” rating. Benefiting from better regional demand and increased company profitability, the first half of the year's performance achieved rapid growth. According to the company's pre-performance increase announcement, net profit to mother was 0.41-0.44 billion yuan in the first half of the year, an increase of 51%-61% over the previous year. The reduction in the company's costs and expenses led to an increase in profitability. Affected by the epidemic in Q1, the company lost 0.055 billion yuan. We estimate that in Q2, the company achieved a profit of 0.465-0.495 billion yuan in a single quarter, an increase of 42%-51% year-on-year, and achieved a relatively rapid recovery in Q2. According to the Digital Cement Network, the company's production capacity is mainly distributed in Ningxia, Inner Mongolia and Gansu, with a ratio of 5:3: 2. According to the National Bureau of Statistics, only 6 provinces achieved positive year-on-year growth in cement production in the first half of the year. Ningxia/Neimeng/Gansu, where the company is located, +3%/-1%/+8% year-on-year, fixed asset investment in Ningxia in the first half of the year, and 4.6% year-on-year growth in June. We expect improved downstream investment demand to drive the company's sales growth in the first half of the year. The effect of the Mengxi Cuofeng replacement was evident. According to the Digital Cement Network, the average price of cement in Ningxia in the first half of the year was 347 yuan/ton, an increase of 9.4% over the previous year, and the effect of the Cuofeng replacement in Mengxi was evident. In the long run, it will help the company's core market supply and demand pattern to continue to improve, and is expected to break the regional price ceiling. As of last Friday, the price of high-standard cement in Ningxia and Gansu was 360 yuan/445 yuan, up 50 yuan/30 yuan from the beginning of the year. Compared with East China, South China, etc., the northwest region was less affected by the weather. Demand continued to be strong during the off-season, and prices remained strong. As of last Friday, the storage ratio was 50%. Compared with the national average inventory level of 69%, shipping pressure is low. We believe that looking at the second half of the year, the combined demand for low storage levels in northwest China will start, and prices are expected to continue to rise. The 20-22 performance forecast was raised. The company that maintained the “increase in holdings” rating is the largest cement manufacturer in Ningxia. Benefiting from improved regional supply and demand patterns and increased profitability due to lower costs and expenses, the first half of the year's performance achieved relatively rapid growth. We believe that with the beginning of the consolidation of China Building Materials cement assets, the subsequent process is expected to accelerate, the supply pattern will further improve, and at the same time, the effects of the Mengxi Cuofeng replacement will gradually become apparent, and the price ceiling in the company's core region is expected to be broken. The company's net profit from 20-22 was raised to 1.1/1.27/1.38 billion yuan (before adjustment: 0.96/1.11/1.22 billion), which currently corresponds to 7.3xPE and 1.2xPb in 2020. Referring to the comparable company's 2020 Wind consensus forecast average of 9xPE, the company was approved to give the company a 20-year 9-10xPE, with a target price of 20.7-23.0 yuan (previous value: 16.0-18.0 yuan), maintaining the “gain” rating. Risk warning: Ningxia Mengxi cement prices have dropped sharply, and accounts receivable have risen sharply.