Investment summary:
Talk every Monday: Comments on the annual report and the first quarterly report: the revenue growth is still at the bottom of the profit
Building materials sector: the performance has increased steadily in 21 years, and Q1 in 22 years has a weak start due to the impact of the epidemic. The overall revenue of 21 / 22q1 sector was 911 billion yuan / 161.2 billion yuan, an increase of 24% / 5% at the same time. The growth rate of net profit was lower than that of revenue, with a year-on-year increase of 16% / – 12% in 21 / 22q1 respectively. The building materials industry is in the middle reaches with profit squeezed. The gross profit margin decreased slightly by 0.88 PCTs in 2021 and further decreased by 2.91 PCTs in Q1 in 2022. In terms of sector composition, cement is still the sub section with the largest profit scale, with cement, glass fiber and decoration building materials accounting for 70%, 19% and 11% respectively.
Glass fiber: the prosperity is high in 21 years and is expected to continue in 22 years. The performance of glass fiber sector is more flexible, with revenue and net profit increasing by 25% / 119% respectively in 21 years. In 2022, the product price has dropped, and the growth rate of net profit slightly lags behind that of revenue. Looking forward to 2022, the tight supply and demand pattern will continue. The cost advantage of the leader over the backward production capacity gives the traditional business a more stable basic sector. In addition, the increment of new materials is remarkable. The share price of the glass leader led by Qibin may be more flexible in the second half of the year.
Cement: profitability is at a low level in recent years. The prices of raw materials such as cement and coal both rose, with high revenue and low profit growth elasticity. The 21-year revenue and net profit of the cement sector were 638 billion yuan and 66.1 billion yuan respectively, with a year-on-year increase of 44% and 12%. In 2022, the cement price is still at a relatively high level, but due to the high price of coal, the profit margin has narrowed and Q1 profit has declined. Looking forward to this year, the supply control is loose, the demand side is weak, and the profit elasticity is limited. Steady growth sentiment is the market catalyst. Recently, high-level officials have intensively stressed the importance of infrastructure construction and stable growth, and the allocation opportunity of cement sector is at hand.
Decoration building materials: the logic of concentration improvement remains unchanged, and the profit is squeezed by multiple factors. In 2021, the operating revenue of the decoration and building materials sector was 170.2 billion yuan, with a year-on-year increase of 27%, which was higher than that in the previous three years. It mainly benefited from the high growth of real estate completion and the accelerated concentration of market share to listed enterprises. Profitability was greatly impacted. In 2021, the net profit of the sector decreased to 10.6 billion yuan, a year-on-year decrease of 22%. The downturn of Q1 sector continued in 22 years. On the one hand, the rising cost of raw materials reduced the gross profit margin. On the other hand, the impairment of real estate credit dragged down the performance. The overall provision of the sector in 21 years was about 3.988 billion yuan, 76.17% more than the previous year, including nearly 800 million yuan for engineering coating giants. Looking forward to this year, the fundamentals continued to be depressed to Q2, but the recovery of the layout real estate chain was just at the right time. Stable real estate is also an important part of stable growth, and the demand side is expected to be repaired. The cost of raw materials and impairment risk in this year are expected to be significantly improved compared with that in 21 years. It is suggested to actively layout the valuation repair brought by the recovery of the real estate chain.
Tracking of key sub industries:
Glass: profitability bottomed out and the demand side gradually entered the peak season. As of April 29, the average price of the latest glass in China was 205031 yuan / ton, which was basically the same as that of the previous week. The demand recovery is relatively slow compared with previous years, the new orders of downstream processing plants have not been significantly improved, and the operating rate is lower than expected. The overall inventory was reduced slightly. The total inventory of production enterprises in key monitoring provinces was 61.16 million weight boxes, a decrease of 660000 weight boxes compared with the previous week, a decrease of 1.07%. The expected resumption of price rise requires the logical catalysis of two main lines: the real demand of the downstream exceeds the expectation or the contraction of the supply side, and the market may be dominated in the short term. The completion demand exists objectively, but it needs the improvement of the real estate capital chain. Last week, the average net profit of the industry was low. The prices of manufacturers in some regions were close to the cost line, and the willingness to further reduce prices under cost pressure was not strong. The short-term shock will not change the long business cycle of the glass industry, and continue to focus on recommending Zhuzhou Kibing Group Co.Ltd(601636) .
Cement: the marginal opportunity of improving the allocation of fundamentals is emotional. As of April 29, 2022, the national average price of cement was 463.42 yuan / ton, down 0.39% month on month. The cement price has no upward elasticity, and the demand is still weak. Clinker inventory continued to grow this week, with the average national clinker storage capacity ratio of 65.91%, up 1.52 PCTs compared with last week. The mill operating load was 53.51%, up 0.1pcts from last week. The average price difference between cement and coal in this period was 307.59 yuan / ton, down 2.86% from last Thursday. Compared with the same period last year, the average price difference between cement and coal fell 9.22%.
Consumer building materials: after the high-level statement, stabilize the real estate or usher in catalysis, and consumer building materials are expected to usher in the double repair of performance and valuation. The differentiation in the industry continues in the trough period, but we believe that the logic of expanding categories and increasing concentration has not changed. High quality enterprises with alpha attributes such as Yuhong and Weixing are still scarce varieties, and the rise of cost side is only a short-term disturbance. Continue to recommend Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) , Zhejiang Weixing New Building Materials Co.Ltd(002372) .
Market review: as of the closing on April 29, the building materials sector rose 1.06% and the Shanghai and Shenzhen 300 index rose 0.07%. From the perspective of sector ranking, the building materials sector ranked third among Shenwan 31 sectors last week, with an increase of – 17.73% year to date, ranking 13th among Shenwan 31 sectors.
Top five gainers of individual stocks: Guangdong Sanhe Pile Co.Ltd(003037) , Jiangsu Changhai Composite Materials Co.Ltd(300196) , Shandong Donghong Pipe Industry Co.Ltd(603856) , Luyang Energy-Saving Materials Co.Ltd(002088) , Ningbo Fuda Company Limited(600724) .
Top five stocks with declines: Grace Fabric Technology Co.Ltd(603256) , Lets Holdings Group Co.Ltd(002398) , Beijing Lier High-Temperature Materials Co.Ltd(002392) , Sinostone(Guangdong) Co.Ltd(001212) , Guangdong Kinlong Hardware Products Co.Ltd(002791) .
Investment strategy: in the chain of steady growth, focus on recommending the strong and constant Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) , and the steel structure leader Anhui Honglu Steel Construction(Group) Co.Ltd(002541) ; Zhejiang Weixing New Building Materials Co.Ltd(002372) , the leading consumer in building materials, and Dehua Tb New Decoration Material Co.Ltd(002043) , the leader in sector industry with steady performance growth, are the first to be promoted in real estate recovery; New materials recommends that traditional businesses maintain high prosperity and enter a new growth period Zhuzhou Kibing Group Co.Ltd(601636) .
Risk tip: the demand of real estate chain declines, infrastructure investment slows down, and the price of raw materials fluctuates.
