HUAXIN BUILDING MATERIALS GROUP(SH:600801) GUOTAI HAITONG SECURITIES·2025-11-12 11:52Investment Rating - The report assigns an "Accumulate" rating for the industry, indicating a potential increase in value relative to the market index [6]. Core Insights - Both Zambia and Malawi have low economic development levels, with Malawi facing a significant cement supply gap, necessitating imports from Zambia and other countries [3]. - Zambia has a strong cement industry, with a production capacity of nearly 3 million tons, while Malawi's production is insufficient to meet its demand of over 170 million tons, leading to a reliance on imports [31]. - The cement prices in Malawi are among the highest in sub-Saharan Africa, with prices reaching up to $222 per ton, while Zambia's prices are also elevated due to regional demand [37][39]. Summary by Sections Economic Overview - Zambia and Malawi have large populations with rapid growth but low urbanization rates. Zambia is rich in mineral resources, particularly copper and cobalt, while Malawi has faced significant currency devaluation and foreign exchange controls [3][12][17]. Cement Supply and Demand - Malawi's cement production is below 500,000 tons, creating a substantial shortfall against its demand of approximately 178 million tons. Zambia, as a cement powerhouse, exports clinker to Malawi and Zimbabwe to address this gap [3][31]. - The cement industry in Zambia is relatively stable, with major players like Huaxin Cement holding a significant market share [4][32]. Price and Profitability - Cement prices in Malawi are exceptionally high, with market prices reaching $200 per ton, while Zambia's prices are also robust, with Dangote's factory prices nearing $110 per ton [5][41]. - Chilanga Cement in Zambia is projected to achieve over $20 million in net profit from a production capacity of 120,000 tons, indicating strong profitability in the sector [44][47]. Future Outlook - Demand for cement in both countries is expected to grow due to population increases, while supply remains stable with no significant new capacity anticipated in the near term [50]. - Huaxin Cement's planned expansions in Zambia and Malawi are expected to enhance profitability and sales, contributing to a more balanced supply-demand dynamic [50].