Zhongjiang Securities released a research report revealing that since May, strategic changes in leading cement companies have been combined with continuing losses in small businesses in the first half of the year. The self-help mindset of the enterprises has been strengthened, and the willingness to cooperate has significantly increased. From the price performance in the past two months, staggered price increases are still useful, and bottom signals are gradually becoming clear. At present, the overall cash flow of cement companies is relatively abundant and dividend has bottom support. The sector has value from a dividend perspective. On the fundamental side, glass inventory continues to rise, fiberglass prices have decreased slightly, and electronic wire continues to rise. We continue to recommend retail building materials and fiberglass, and we are bullish on sub-sectors such as overseas and medicinal glass.

Cement continues to collaborate and push up, and the bottom dividend value is showing.

Cooperation willingness has increased, and cement prices continue to rise. By early July, the rainy weather gradually weakened, and cement demand was recovering. The average shipment rate of key cement enterprises in the country was about 47%, up 1.5 percentage points month-on-month and down 7.9 percentage points year-on-year. In terms of prices, although prices in some regions have fallen slightly this week, most regions have scheduled staggered production for the third quarter. Beijing, Tianjin, Inner Mongolia, Liaoning and Guizhou continue to rise, with a range of 30-60 yuan/ton, and the cement clinker prices in the Yangtze River Delta region have also risen again. Since May, strategic changes in leading companies combined with continuing losses in small businesses in the first half of the year have strengthened the self-help mindset of enterprises and significantly enhanced the willingness to cooperate. From the price performance in the past two months, staggered price increases are still useful, and bottom signals are gradually becoming clear.

At present, the overall cash flow of cement companies is relatively abundant and dividend has bottom support. 1)Immediate cash flow is good, generally cash sales, and almost no accounts receivable; 2)Capital expenditure is restrained, and the expansion of raw materials under declining profitability is gradually coming to an end, and the investment in technological transformation has slowed down; 3)Cash reserves are sufficient and the last round of prosperity cycle lasted a long time, maintaining a relatively good level of profitability from 2016 to 2021; 4)State-owned enterprises are the mainstay, and dividends have power. Under the pressure of the overall financial background and the increased scrutiny of state-owned enterprises on listed companies, dividend motivation may increase. Taking into account the current prosperity cycle, our calculations show that the main stocks with high dividend yields corresponding to bottom profits are: Huaxin Cement H shares, West China Cement, Shangfeng Cement, Tapai Group, and Conch Cement H shares. Considering that the industry marginal decline in the next two years may be limited, the current bottom dividend yield has strong support properties, and there may also be unexpected space in the future.

On the fundamental side, glass inventory continues to rise, fiberglass prices have decreased slightly, and electronic wire continues to rise.

Real estate high-frequency sales: In the past week, the rolling average sales area of ​​30 large and medium-sized cities was -1% year-on-year (2% last week), and the rolling average sales area of ​​12 second-hand house cities was +24% year-on-year (54% last week). Since July, real estate high-frequency sales have remained relatively good year-on-year.

Glass: The mainstream domestic glass prices fell this week. After the price cut in North China, the enthusiasm of traders to replenish goods increased, and the daily production and sales of sample enterprises improved. Due to the impact of rainy weather in some areas of Central China, East China, and South China, coupled with financial pressure factors, most downstreams mainly purchase against demand, and the market sentiment is generally bearish. The production capacity remained stable this week, with a total of 301 float glass production lines nationwide, 249 of which are in production, and a daily melting amount of 169,565 tons. There were no changes in production lines during the week. The total inventory of production enterprises in key monitoring provinces this week was 55.49 million weight boxes, an increase of 0.7 million weight boxes or 1.28% month-on-month, and the inventory period was about 27.11 days, an increase of 0.34 days month-on-month. The total output of production companies in key monitoring provinces this week was 13.1246 million weight boxes, the total consumption was 12.4246 million weight boxes, and the production-sales ratio was 94.67%.

Fiberglass: 1)Non-alkali rough yarn: The market price of non-alkali rough yarn in China ran steadily weakly this week, and the price of some factories has been adjusted to some extent compared with the previous period. However, the prices of major factories are basically stable, and the short-term market has a strong intention to raise prices. At present, the subsequent orders of deep-processing factories are limited, and the weak performance of the off-season demand, combined with multiple factors such as temperature and rainfall, pays attention to the recovery of demand after the peak season in the second half of the year. 2)Electronic yarn: The market price of electronic wire rose slightly this week, with an overall increase of 100-300 yuan/ton, and the current mainstream offer of 7628 electronic cloth rose slightly by 0.1 yuan/meter. Downstream CCL manufacturers have relatively stable orders, and the shortage of goods is still there. It is expected that there will still be upward flexibility in the future.

Investment Perspective: We continue to recommend retail building materials and fiberglass, and we are bullish on sub-sectors such as overseas and medicinal glass.

1)Bottom opportunity in the real estate chain, allocating back-end consumer building materials.

Due to good cash flow and less pressure in the industry's downturn, retail enterprises have gradually emerged from the bottom of the operation, among which Beijing New Building Materials has achieved accelerated operation with a high degree of strategy, dehua tb new decoration material benefits from rational consumption, and skshu paint has performance elasticity. 2) Pay attention to the turning point of fiberglass. The basic point of the fiberglass industry's fundamentals has been reached, and the supply and demand of fiberglass is expected to reverse in 2024. Focus on the resilience of electronic cloth and emerging demand (such as photovoltaic frames), and recommend China Jushi Co., Ltd., Jiangsu Changhai Composite Materials, Sinoma Science & Technology and others. 3) Bullish on subdivisions in the economic field. Recommended targets include Keda Industrial Group for overseas business, Huaxin Cement and Shandong pharmaceutical glass with increased penetration of boron silicon, and Zhejiang Xiantong Rubber&Plastic, etc.

Risk warning

1. Real estate demand repair is lower than expected; 2. Raw material prices have risen sharply.