Investment summary:
Changes in the demand of the building materials industry: from stable leverage to stable growth, new economic development promotes new demand. Building materials industry is an industry with infrastructure and real estate as the main downstream industries. 2021 is a year of stable leverage. The “three red lines” policy of the real estate industry restricts the external financing of the real estate industry. This policy of stabilizing leverage not only affects the cash flow of real estate enterprises, but also affects the demand of building materials industry. From the purchase of real estate land to the completion of the area continued to decline year-on-year and the growth rate decreased, and the demand for building materials in all links was affected. However, active regulation has improved the accumulated risks of the real estate industry, prevented ups and downs, and ensured the sustainable and healthy development of the real estate industry. It also releases energy for the follow-up demand of the building materials industry and ensures the healthy development of the building materials industry. 2022 is a year of steady economic growth in China. The deterioration of exports, the uncertainty of China US relations, the spillover caused by the tightening of the Fed’s policies and the lag of the regulation benefits of real estate policies have made China’s stable economic growth and risk prevention become the key. Infrastructure construction led by market mechanism is an effective starting point for steady growth. From the issuance of special bonds, stock projects, government statements and real estate, infrastructure construction is necessary in the first half of 2022 and will start in the first half of 2022. The real estate industry has entered the risk prevention stage after stabilizing leverage. Under the lag effect of policy relaxation, the industry will improve after reaching the bottom. Overall, in 2022, the demand of the building materials industry will show a high probability of bottom improvement. The demand of the building materials industry in the later cycle is relatively stable. The development requirements of efficient green economy will expand a greater demand space for high-quality products.
Supply side of building materials industry: the improvement of concentration is a definite and long-term trend. After the high growth stage of real estate and infrastructure has passed, the high demand growth of China’s building materials industry has also become the past, the market competition has intensified, and the survival of the fittest has been accelerated. Capacity control policies and environmental protection policies increase the cost of small enterprises and restrict the expansion of small enterprises. The industry environment of leading and excellent companies is getting better and better, which promotes their market share and industry concentration. At the same time, the overall concentration level of China’s building materials industry is not high, and there is still a large gap compared with foreign countries. In addition to glass fiber and gypsum board, the market share of leading companies in other industries is not high, and most industries and leading companies still have great room for improvement. The bottom improvement of the demand of the building materials industry in 2022 will accelerate the improvement of the industry concentration. Efficient and green development is the requirement of China’s long-term economic development. The driving factors such as market competition and stricter environmental protection will exist for a long time, and the trend of increasing the industry concentration will also exist for a long time. China’s building materials industry is in the development stage of rapid improvement of the concentration.
Investment strategy: in 2022, with the improvement of the bottom demand of the building materials industry and the continuous improvement and optimization of the supply side pattern, we are optimistic about the opportunities brought by the bottom improvement of the prosperity of the cement industry, the opportunities for sustainable growth under the release of stable demand for consumer building materials, and the stronger and growth opportunities of leading and excellent companies in the building materials industry.
Risk tip: the intensity of infrastructure construction is less than expected and the change of real estate policy is less than expected.
（ Dongxing Securities Corporation Limited(601198) ）
