The Zhitong Finance App learned that Huatai Securities released a research report saying that on May 29, the State Council issued the “2024-2025 Energy Saving and Carbon Reduction Action Plan”, which requires specific energy saving and carbon reduction actions by sector and industry to do their best to complete the “14th Five-Year Plan” binding targets for energy saving and carbon reduction. This action plan puts forward clear task requirements for energy saving and carbon reduction in building materials and buildings. The overall goal is consistent with the relevant policies previously issued, and for the first time mentioned strengthening the regulation of production capacity and output in the building materials industry.

The bank believes that the release of this action plan is expected to strengthen the regulation of production capacity in the building materials industry, promote the implementation of energy-saving transformation in the building materials and construction industry, and accelerate the integration of photovoltaics in buildings and the construction of large scenic bases. It is recommended to focus on companies related to cement, engineering transformation, and power engineering.

The main views of Huatai Securities are as follows:

The goal of the plan reflects continuity. The first proposal is to strengthen the regulation of production capacity and output in the building materials industry

Following the release of the “Pre-2030 Carbon Peak Action Plan” in '21, the implementation plans for the urban and rural construction sector and the building materials industry were both released in '22. The “Implementation Guidelines for Energy Conservation and Carbon Reduction in Key Areas of the High Energy Consumption Industry” and the “14th Five-Year Plan”, which were released in '22, all proposed energy saving and carbon reduction goals for related industries. The completion goals mentioned in this action plan are consistent with previous policies, reflecting the continuity of the plan. At the same time, this plan first mentions strengthening capacity and output regulation in the building materials industry and strengthening production monitoring and early warning. In conjunction with the “Enterprise Greenhouse Gas Emissions Accounting and Reporting Guidelines for Cement Clinker Production” issued in April 24, we believe that future carbon emissions are expected to become an important basis for capacity regulation in cement and other industries, and are expected to promote supply-side optimization and adjustment in the building materials industry.

Strict admission to new building materials projects, energy-saving and carbon-reduction transformation of building materials is expected to accelerate

The action plan mentions continuing to strictly implement the replacement of cement and flat glass production capacity. New construction and expansion of cement/ceramic/flat glass projects must reach the energy efficiency benchmark level and environmental performance grade A level. By the end of 25, the cement/ceramic/flat glass industry will account for 30%/30%/20% of production capacity above the energy efficiency benchmark level, and production capacity below the energy efficiency benchmark level in the building materials industry has completed technical transformation or phased out. According to the “Implementation Guidelines for Energy-saving and Carbon-Reduction Transformation and Upgrading in the Cement Industry” issued in '22, the cement industry's energy efficiency was about 5% at the end of 2020, while the “Building Materials Industry Steady Growth Work Plan” released in '23 only required the cement/glass/ceramics industry to account for more than 15% of production capacity above the energy efficiency benchmark level. We believe that the energy efficiency transformation of the industry is expected to accelerate, but under pressure on industry profits for three consecutive years, we need to pay attention to funding sources related to transformation.

Promote the renovation of existing buildings, and the integration of photovoltaic buildings and the construction of large scenic bases are expected to speed up construction

The Energy Saving and Carbon Reduction Action for Buildings proposed the construction area with ultra-low energy consumption at the end of '25, an increase of more than 0.2 billion square meters over 23, and the energy-saving renovation area of existing buildings increased by more than 200 million square meters compared to '23. The PV coverage rate for newly built public buildings and factory roofs reached 50%, all in line with the March '14th Five-Year Five-Year Plan for Building Energy Conservation and Green Building Development Plan', the June '22 Carbon Peak Implementation Plan for Urban and Rural Construction', and the “Work Plan for Accelerating Energy Conservation and Carbon Reduction in the Construction Sector” in March '24. At the same time, the action plan calls for speeding up the construction of large-scale wind power photovoltaic bases focusing on deserts, Gobi, and deserts, and speeding up the construction of delivery channels for large-scale wind power photovoltaic bases. We believe that orders for new energy projects from central enterprises in power infrastructure have continued to grow rapidly since this year, and it is expected to form an important revenue growth point in the future.

Risk warning:

Production capacity regulation fell short of expectations, demand fell sharply, and raw energy costs rose sharply.