Shenwan Hongyuan Securities·2026-03-16 06:33Investment Rating - The report rates the construction materials industry as "Overweight" indicating that the industry is expected to outperform the overall market [2]. Core Insights - Legislative efforts to address "involution" competition are underway, which may lead to a more favorable competitive environment in the industry [4]. - Although cement demand has not significantly improved, excessive competition on the supply side is a primary reason for the continued decline in prices. In 2025, national cement production is projected to be 1.693 billion tons, a year-on-year decrease of 6.9% [4]. - The "anti-involution" legislation is expected to significantly improve the supply contraction in the cement industry, providing stronger institutional support to curb low-price competition and overproduction [4]. - The cement industry is expected to see improved profitability due to enhanced cash flow and dividend attributes following the "anti-involution" measures [4]. Summary by Sections Legislative Developments - The Ministry of Justice has highlighted the importance of optimizing the business environment and addressing issues such as local protectionism and "involution" competition in its legislative agenda for the year [4]. Supply and Demand Dynamics - Cement demand remains weak, with a correlation between industry profitability and competition. Regions with better production coordination have shown relatively stronger pricing, while weaker regions continue to struggle with low prices [4]. Industry Policy and Future Outlook - The cement industry association has initiated measures to promote "anti-involution" and stabilize growth, focusing on verifying actual production capacity against registered capacity to combat disordered competition [4]. - The cement sector is linked to carbon trading and energy-saving initiatives, with expectations for stricter controls on inefficient production capacities post-2026 [4]. Investment Recommendations - The report suggests focusing on leading companies in the industry such as Conch Cement (A/H), Huaxin Cement (A/H), Tianshan Cement, Tapai Group, Shangfeng Cement, Western Cement (H), and China Resources Cement Technology (H) as potential investment opportunities [4].