Group 1 - The core viewpoint of the report is that despite concerns about the real estate downturn affecting the valuation of the building materials sector, leading companies in the coatings segment are showing signs of operational improvement and performance recovery, indicating a favorable investment timing [1][2]. - The relaxation of real estate policies in first-tier cities, such as Beijing and Shanghai, is expected to boost consumer demand for building materials, providing a positive signal for the market to stabilize [1]. - The domestic leading coatings company, Sanke Tree, has reported improved operational performance, with a revenue of 5.82 billion yuan in the first half of 2025, reflecting a year-on-year growth of 1.0%, and a net profit attributable to shareholders of 440 million yuan, up 107.5% year-on-year, marking a historical high [2]. Group 2 - The coatings sector is considered a high-quality segment within consumer building materials, with strong growth potential for leading companies due to increasing demand for renovation and repainting, alongside strong brand attributes [3]. - Domestic brands like Sanke Tree are gradually closing the gap with foreign competitors such as Nippon Paint and Dulux, as they enhance their core competencies and upgrade their products and services [3]. - The market share of domestic companies in the coatings sector is expected to increase as local brands gain more recognition and distribution channels mature [3].

Investment Rating - The report maintains a "Positive" outlook for the building materials industry, particularly highlighting the recovery of leading companies in the paint sector [4][9]. Core Viewpoints - The report indicates that after several years of downturn in the real estate sector, the risks associated with corporate development and operations have been largely mitigated. Leading companies in the paint sector are showing signs of operational improvement and performance recovery, suggesting a favorable time for investment [4][9]. - The report emphasizes that the demand for building materials is expected to stabilize due to recent policy relaxations in first-tier cities, which are anticipated to boost consumer demand for building materials [9]. - The leading domestic paint company, SanKeShu (三棵树), has shown significant improvement in its operational performance, with a reported revenue of 5.82 billion yuan in the first half of 2025, reflecting a year-on-year growth of 1.0%, and a net profit of 440 million yuan, up 107.5% compared to the same period in 2024 [9]. Summary by Sections Market Outlook - The report notes that the overall demand for the paint industry is expected to see slight growth despite the ongoing downturn in the real estate sector. Urban renewal projects and renovation needs are driving demand [9]. Investment Recommendations - The report suggests focusing on leading companies in the paint sector, specifically recommending SanKeShu (三棵树) and Beixin Building Materials (北新建材), as they are well-positioned to benefit from the anticipated recovery in demand [4][9].