GUOTAI HAITONG SECURITIES·2025-07-08 02:54Investment Rating - The report maintains an "Overweight" rating for the cement industry, indicating a significant expansion of overseas production capacity from 45.03 million tons in 2021 to 87.59 million tons by 2024, with overseas cement business becoming a crucial part of profitability for some companies by 2023-2024 [3][7][25]. Core Insights - The period from 2021 to 2024 is identified as a rapid expansion phase for Chinese cement companies venturing overseas, with a potential differentiation in profitability expected post-2025 based on operational capabilities and site selection [2][3][6]. - The report emphasizes that the ability to convert high overseas cement prices into actual profitability remains a point of contention in the market, highlighting the importance of operational mechanisms and internal capabilities in determining success [3][8]. - Recommended stocks include Huaxin Cement and Conch Cement, with Western Cement as a related stock [8]. Summary by Sections 1. Investment Story - Post-2020, domestic cement companies are accelerating overseas capacity construction as domestic demand reaches a ceiling, with a focus on how overseas operations can enhance profit elasticity [6][24]. 2. Global Cement Overview - Cement demand growth is primarily driven by urbanization and population growth, with significant demand observed in regions like Southeast Asia and North Africa, characterized by a fragmented industry structure and intense price competition [10][13][20]. 3. Cement Going Overseas: Endowments and Internal Capabilities - The report notes that the expansion of overseas production capacity is led by companies with superior market mechanisms, with a focus on site selection as a critical internal capability for profitability [7][25][29]. 4. Dollar Resilience Eases, Overseas Profitability Expected to Improve - The report discusses the financial performance of Dangote Cement, highlighting that despite currency depreciation, the company maintains a relatively high profitability level compared to domestic averages [40][41]. - It also addresses the impact of foreign currency liabilities on profit margins, emphasizing the need for effective management to mitigate exchange rate risks [42][44]. 5. Financial Perspective - The report illustrates how exchange rate fluctuations can significantly affect profitability, particularly for companies with substantial foreign currency debt, and suggests that effective management of this exposure can enhance actual profitability [8][42][45].