Investment Rating - The industry rating is "Outperform the Market" [8][68]. Core Insights - The cement supply-side reform is progressing steadily, and expectations for a rate cut by the Federal Reserve in September are rising [3]. - The report highlights that the real estate market is showing signs of stabilization, with various policies being implemented to support housing transactions and mortgage rates [3]. - The construction materials sector is expected to benefit from supply-side reforms and a potential recovery in housing demand, leading to improved market fundamentals [6]. Summary by Sections Investment Highlights - The report notes significant policy changes aimed at improving real estate registration and facilitating housing transactions, with over 2,200 counties adopting the "house delivery equals certificate delivery" measure [3]. - The report emphasizes the potential for monetary and fiscal policy space to expand, particularly in light of the easing monetary policies in Europe and the U.S. [3]. - It mentions that the real estate market is entering a bottoming phase after a decline in sales area for over three years, increasing sensitivity to policy easing [3]. Recent High-Frequency Data - As of September 12, 2025, the average price of bulk P.O 42.5 cement is 341.7 CNY/ton, showing a 0.3% decrease from the previous week and a 9.6% decrease year-on-year [4][14]. - The average price of glass (5.00mm) is 1164.3 CNY/ton, reflecting a 0.7% increase from the previous week but a 6.5% decrease year-on-year [20][23]. Sector Review - The construction materials index increased by 2.45%, outperforming the broader market indices, with sub-sectors like refractory materials and fiberglass manufacturing showing notable gains [5][55]. - The report identifies key stocks to watch, including high-quality companies benefiting from inventory upgrades and those with strong fundamentals expected to recover [6]. Investment Recommendations - The report suggests focusing on three main investment themes: high-quality companies benefiting from inventory upgrades, undervalued stocks with long-term growth potential, and leading cyclical construction material companies [6].

Core Viewpoint - The cement industry is experiencing a significant decline in prices, with a need for "anti-involution" measures to address overcapacity and improve profitability [1][2]. Group 1: Industry Overview - In 2024, the capacity share of central state-owned enterprises in the cement industry is expected to be around 45%, with the top four companies being state-owned, indicating a favorable competitive structure for anti-involution efforts [1]. - The industry's concentration ratios (CR10, CR5, CR2) are projected to reach 57%, 44%, and 31% respectively in 2024, highlighting a high level of market concentration [1]. Group 2: Financial Performance - The cement industry faced a challenging period, with over 55% of companies reporting losses in the worst quarter, but a recovery is expected in Q4 2024, with total profits projected to be between 150-160 billion yuan, reversing a loss of 11 billion yuan in the same period last year [2]. - The average national cement price has decreased by 43.7 yuan/ton year-on-year as of early August, indicating a return to the industry's lowest profitability levels seen in the previous year [2]. Group 3: Supply-Side Reform - Previous supply-side reforms successfully reduced new capacity and improved industry profitability, with profits rising from 518 billion yuan in 2016 to a historical high of 1867 billion yuan in 2019 [3]. - The industry has reached a peak supply level of around 1.8 billion tons, but demand continues to decline, leading to a projected capacity utilization rate of only 53% in 2024 [4]. Group 4: Future Outlook - The anti-involution strategy will involve a combination of market, administrative, and legal measures, with short-term reliance on staggered production to stabilize the market [5]. - In the medium term, administrative measures will likely force companies to reduce capacity, potentially leading to a 19.5% decrease in actual capacity to 1.77 billion tons [5]. - Long-term expectations include stricter carbon emission policies by 2027, which may increase production costs and accelerate the exit of high-emission capacities from the market [5].