According to the Zhongtong Finance APP, Guotai Junan issued a research report stating that the building materials industry will digest pessimistic expectations in the 2024 interim report, and the leading companies will maintain stronger resilience, with increased returns for many corporate shareholders. Consumer building materials leaders are increasing market share and expanding product categories, maintaining profitability resilience based on their respective competitive advantages. Cement is returning to coordinated profitability with margin repairs, with short-term expectations of a surplus season in the supply side and long-term considerations of carbon trading and consolidation. The glass industry is still waiting for signals of bottoming out after the cooling-off period, with the focus on the advantages of the leading companies in receiving orders and expanding deep processing capabilities. The price of glass fiber is clearly at a profitable bottom, and the leading companies are focusing on differentiated delivery capabilities.

GTJA's main opinions include:

Consumer building materials leaders are increasing market share and expanding product categories, maintaining profitability resilience based on their respective competitive advantages.

Despite the increased pressure on demand in Q2, leading companies are maintaining revenue volume by focusing on three aspects: expanding market share using competitive advantages and increasing market share against the trend; expanding retail business through market penetration to adjust the revenue structure; expanding product categories through mergers and acquisitions and reusing channels to support growth in new product categories.

Intensified market competition is putting pressure on market prices, but leading companies are maintaining profitability resilience through different advantages: transmitting price pressure to downstream sales and upstream contract manufacturing; controlling factory price reduction through brand and market advantage; exploring cost reduction potential to achieve internal cost reduction.

The 2024 interim report is the most prominent period for mid-term dividends in the industry. On one hand, it is guided by regulatory environment, on the other hand, it is driven by the needs of listed companies. High dividend distribution is an irreversible trend for industry leaders. Looking at the 2024 interim report, the pressure of credit impairment losses in the industry is still evident, which is a drag on the liquidity of receivables from project mortgaged assets. The disposal of project mortgaged assets will remain a focus for the industry this year.

Cement 24Q2 returns to collaborative profitability, with continued attention to positive supply-side factors.

In the first half of the year, real estate continued to adjust, combined with the weakening effect of infrastructure supporting, the demand for cement continued to be under pressure, and the price and profitability reached a bottom. In 24Q2, with the leading enterprises shifting their price strategy from "increase to stabilize" to downward, the industry returns to collaborative pricing, and the profitability margin is restored, verifying the phased bottom. The key to the improvement in the 24H2 pattern still depends on the supply side. In the short term, cement companies may improve their self-discipline under operational pressure, and the staggered expectations for the peak season within this year are expected to help alleviate industry pressure. In the medium to long term, policies and industries continue to promote carbon trading, ultra-low emissions, industry consolidation and mergers and acquisitions, and other long-term effective mechanisms on the supply side. The expectation of the implementation of carbon trading and other relevant capacity policies within the year is growing, which is expected to drive the industry outlook towards rationality and speed up the clearance of outdated production capacity.

The glass is waiting for a cool-down to build a foundation, and the clear profitability bottom of glass fibreglass indicates differentiation in shipping capacity for leading enterprises.

Float glass, in 24Q2, the acceleration of profitability has narrowed, with the industry average entering an on-paper loss. In the downward period, the cost level, order capacity, and financial stability of large enterprises are higher than the industry average, and the glass industry is mainly composed of private enterprises with low concentration. The clearance mechanism is more market-oriented, and as the losses expand, we wait for a clear signal for concentrated cold repair and bottom building.

Photovoltaic glass, under extreme losses in the main industry chain, the price in 24Q2 quickly fell below the industry's cash cost. Photovoltaic enterprises have thinner historical profit accumulation, and the cold repair and production reduction speed is faster than float glass. In the medium to long term, it will return to cost curve pricing.

Glass fibreglass, in 24Q2, the glass fibreglass and electronic cloth collectively experienced four rounds of price recovery, from general product categories to structured product extension, clearly marking the industry's bottom. The advantages of leading enterprises are reflected in the differentiated product shipping capacity in areas such as thermoplastics, wind power, and exports, as well as the control of the range and pace of price recovery products, expected to return to reasonable profits.

Regarding Symbol.

Recommended leading companies in the consumer building materials sector: Beijing Oriental Yuhong Waterproof Technology (002271.SZ), Beijing New Building Materials Public (000786.SZ), Zhejiang Weixing New Building Materials (002372.SZ), Dehua TB New Decoration Material (002043.SZ); Leading cement companies: Conch Cement (600585.SH), Huaxin Cement (600801.SH), Gansu Shangfeng Cement (000672.SZ); Glass fibreglass leading companies: China Jushi Co., Ltd (600176.SH), Sinoma Science & Technology (002080.SZ), Xinyi Glass (00868), Zhuzhou Kibing Group (601636.SH), Fuyao Glass (600660.SH).

Risk reminder: macro policy risk; raw material cost risk.