The Zhitong Finance App learned that Galaxy Securities released a research report saying that in 2024, under steady growth expectations and positive macro-control transmission effects, demand for building materials in the investment sector is expected to rise steadily, the industrial consumer market is expected to increase steadily, foreign trade continues to grow, industrial transformation and green development will further stimulate the endogenous motivation of the industry, the quality of economic operation of the building materials industry is expected to further improve, and industry sentiment will improve markedly. According to the forecast of the China Building Materials Federation, in 2024, the building materials industry sentiment index is expected to be 103.0 points, up 9.5 points from 2023, and rebounding to the boom range. The operating environment of the building materials industry will improve markedly compared to 2023, and the industry's operating situation will stabilize.

Galaxy Securities's views are as follows:

Industry situation in 2023: cement, glass, and consumer building materials all declined year-on-year.

1) Cement: In 2023, cement production was 2,023 million tons, down 0.7% year on year. The decline was 0.2 percentage points narrower than in January-November. Among them, cement production in a single month in December was 158 million tons, down 0.9% year on year and 16.79% month on month. Demand for cement is weak in the short term. It is expected that after the temperature warms up in February, downstream construction is expected to usher in a peak season, and demand for cement is expected to increase; in the long run, the industry is overcapacity, and erroneous peak production is the norm. Infrastructure is expected to maintain high growth this year, real estate starts are expected to pick up, and demand for cement will improve.

2) Glass: The cumulative production of flat glass in 2023 was 969 million weight boxes, down 3.9% year on year. The decline was 2.1 percentage points narrower than in January-November. Among them, the monthly output in December was 85 million weight, up 5.7% year on year, up 3.84% month on month, and monthly production increased slightly.

3) Consumer building materials: Retail sales of construction and decoration materials fell 7.8% year on year in 2023, and the decline was the same as in January-November. Among them, the single month of December fell 7.5% year on year, and the monthly decline narrowed by 2.9 percentage points, up 10.39% month on month. Affected by a sharp increase in the completed area of real estate in December, there was a significant month-on-month improvement in the retail side of consumer building materials. Recently, favorable real estate policies have continued to be strengthened, an urban real estate financing coordination mechanism has been established, and Shenzhen has proposed new regulations to promote the construction of urban villages, which is expected to drive demand for consumer building materials.

2023 performance forecast: Performance differentiation is obvious.

Judging from the 2023 performance forecasts of listed companies in the building materials industry, the performance of various sectors is clearly divided. The performance of the cement and glass fiber industries all declined to varying degrees; only Tapai Group's net profit increased. The net profit of some companies in the consumer building materials sector, such as Gongyuan Shares, Karen Shares, and Jianlang Hardware, increased significantly, indicating that the company's performance recovered after the industry cleared, and subsequent growth is worth looking forward to.

The industry is expected to return to the boom zone in 2024.

In 2024, under steady growth expectations and positive macro-control transmission effects, demand for building materials in the investment sector is expected to rise steadily, the industrial consumer market is expected to increase steadily, foreign trade continues to grow, industrial transformation and green development will further stimulate the endogenous motivation of the industry, the quality of economic operation of the building materials industry is expected to rise further, and industry prosperity will improve markedly. According to the forecast of the China Building Materials Federation, in 2024, the building materials industry sentiment index is expected to be 103.0 points, up 9.5 points from 2023, and rebounding to the boom range. The operating environment of the building materials industry will improve markedly compared to 2023, and the industry's operating situation will stabilize.

2024 industry investment strategy:

1) New materials: Focus on the two main lines of accelerated domestic substitution and continuous technological upgrading, and recommend quartz shares (603688.SH) with increased production capacity of high-purity quartz sand.

2) Construction materials: Focus on sectors that are expected to benefit from increased demand for housing stock, urban renewal, and regional infrastructure in the post-real estate cycle, and recommend leading consumer building materials companies with increased industry concentration: Beixin Building Materials (000786.SZ), Dongfang Yuhong (002271.SZ), Gongyuan Co., Ltd. (002641.SZ); leading companies in the cement industry where demand is expected to pick up, as well as regional leaders Huaxin Cement (600801.SH) and Shangfeng Cement (000672.SZ).

Risk warning: Risk of rising raw material prices; risk of downstream demand and new product expansion falling short of expectations.