Core Viewpoint - The cement sector is expected to turn profitable in Q3 2025 due to a decline in production costs and a slight recovery in prices, despite ongoing challenges in the real estate market and limited infrastructure support [1] Group 1: Industry Performance - In the first three quarters of 2025, infrastructure investment is projected to maintain growth, supporting demand for building materials [1] - The supply-demand imbalance in the cement industry is easing, although demand is still expected to decline due to the real estate sector not stabilizing and limited infrastructure activity [1] - The industry's awareness of "anti-involution" is increasing, and with a positive start, a slight recovery in average cement prices is anticipated, leading to some degree of profit recovery [1] Group 2: ETF and Index Information - The building materials ETF (159745) tracks the construction materials index (931009), which includes securities from companies involved in the manufacturing and sales of cement, glass, ceramics, and other building materials [1] - This index reflects the overall performance of publicly listed companies in the building materials sector and is significantly influenced by the real estate and infrastructure industries [1]

Market Performance - The three major indices experienced slight gains, with the Shanghai Composite Index up by 0.21%, the Shenzhen Component Index up by 0.72%, and the ChiNext Index up by 0.71% [1] - Over 3,500 stocks rose in the two markets, with a total trading volume of 976.3 billion [1] Sector Movements - Traditional Chinese medicine stocks saw a sharp decline, down by 1.08% at midday, with notable drops including Guangdong Wannianqing down 12.16% and Zhongsheng Pharmaceutical down 8.23% [3] - Titanium dioxide stocks surged, with a notable increase of 3.63%, and Jinpu Titanium Industry hitting the daily limit [3] - The Hainan sector continued to rise, with Hainan Ruize achieving three consecutive daily limits over four days [3] - The commercial aerospace sector experienced a breakout, with LeiKe Defense achieving four daily limits in five days and QianZhao Optoelectronics hitting a 20cm limit [3] - The Fujian sector saw significant gains, with multiple stocks like Fujian Cement and Haitong Development hitting daily limits [3] - The consumer sector remained active, with HaiXin Food achieving a remarkable trading pattern [3] Price Movements - Battery-grade EC prices increased by 13.5% from the beginning of the week, rising from 5,200 yuan/ton to 5,900 yuan/ton, marking a cumulative increase of 25% for the month [3] Infrastructure Developments - Beijing plans to construct and operate a centralized large-scale data center system with over 1,000 megawatts of power along a 700-800 km morning and evening rail line, aiming to transfer large-scale AI computing power to space [3]

Investment Rating - The report initiates coverage with a "Buy" rating for Huaxin Cement, targeting a price of HKD 18.34 based on a 10.5x PE for 2026 [3]. Core Insights - Huaxin Cement's net profit attributable to shareholders increased by 120.73% year-on-year in Q3 2025, driven by rising domestic cement prices, reduced costs, and growth in overseas operations [4]. - The company completed the acquisition of Nigerian assets, with a transaction value of USD 773.86 million, enhancing its international presence [4]. - The company is actively expanding its overseas operations, with several projects in Africa and the completion of acquisitions in Brazil [4][11]. - The management emphasizes shareholder returns, distributing a cash dividend of CNY 0.46 per share, amounting to CNY 956.34 million, which is 40% of the projected net profit for 2025 [4]. Financial Performance and Forecast - For 2025-2027, the forecasted net profits are CNY 2.969 billion, CNY 3.312 billion, and CNY 3.671 billion, respectively, reflecting a growth trajectory [3]. - The company reported a revenue of CNY 89.86 billion in Q3 2025, a 5.95% increase year-on-year, and a total revenue of CNY 250.33 billion for the first three quarters, up 1.27% [4]. - The average selling price of cement increased by CNY 25.71 per ton to CNY 329.95 per ton, contributing to improved profitability [17]. - The company’s gross margin improved by 20.84% year-on-year, with a gross margin rate increase of 5.27 percentage points [17]. Business Development - Huaxin Cement has established a significant international footprint, with operations in 14 countries and a total cement production capacity of 136 million tons [9]. - The company is focusing on projects in countries along the Belt and Road Initiative, ensuring strategic resource allocation and market growth potential [9]. - In H1 2025, the company achieved a revenue of CNY 160.46 billion, with a net profit of CNY 11.03 billion, marking a 51.05% increase year-on-year [16].

Core Viewpoint - The A-share market in Fujian province experienced a rapid rise, with several stocks hitting the daily limit, driven by the announcement of the 15th Five-Year Plan for economic and social development in Fujian, which emphasizes infrastructure development and cross-strait economic cooperation [1] Group 1: Market Performance - Fujian stocks such as Xiamen Construction Machinery (厦工股份), Fujian Cement (福建水泥), and Nanwei Software (南威软件) reached their daily limit [1] - Other stocks like Bidding Shares (招标股份), Longgao Shares (龙高股份), and Haixia Innovation (海峡创新) also saw significant gains [1] Group 2: Policy Implications - The Fujian provincial government plans to construct transportation and logistics infrastructure and establish a comprehensive cross-strait hub [1] - Initiatives include enhancing water, electricity, gas, and bridge connectivity to Kinmen and Matsu, and exploring pathways for a common market across the strait [1] - The government aims to optimize the business environment for Taiwanese enterprises by easing market access restrictions and strengthening economic mechanisms [1]

Core Insights - The report from Guotai Junan indicates an increase in consumer sentiment and continued growth in the technology manufacturing sector, with notable trends in various industries [1] Consumer Sector - Domestic demand indicators are improving, with tourism and long-distance travel showing continuous recovery, suggesting a shift towards service-oriented and mass consumer goods consumption despite a contraction in real estate and durable goods [1] - Real estate transactions in 30 major cities saw a year-on-year decline of 25.8%, with first, second, and third-tier cities experiencing declines of 49.8%, 12.6%, and 22.3% respectively; the sales volume in major cities continues to struggle [1] - Durable goods consumption remains under pressure, with average daily retail sales of passenger cars declining year-on-year; in October, domestic sales and exports of air conditioners fell by 21.3% and 19.0% respectively [1][2] Technology & Manufacturing - The technology hardware sector is experiencing marginal growth slowdown, influenced by AI infrastructure investments; however, the overall sentiment remains strong, with October's PCB exports increasing by 23.4% year-on-year, despite a decline in growth rate [3] - Construction demand is still weak, with slight recovery in steel prices due to reduced operating rates of blast furnaces; prices for glass and cement continue to be under pressure [3] - The new energy lithium battery sector remains robust, with a year-on-year increase in power battery sales of 49.9% from January to October, while prices for lithium hexafluorophosphate and lithium carbonate continue to rise [3] Logistics & Transportation - Long-distance travel demand has improved significantly, with the Baidu migration index showing a month-on-month increase of 3.8% and a year-on-year increase of 18.0%; airline passenger load factors are high, indicating a recovery in business and tourism travel [4] - Freight logistics have seen a month-on-month decline, with highway truck traffic and railway freight volumes decreasing by 2.2% and 0.3% respectively; postal and express delivery volumes also fell significantly post "Double Eleven" [4] - Maritime transport prices for dry bulk and oil have risen sharply, driven by increased demand from iron ore and crude oil production [5]

Core Insights - Shanxi Province is promoting clean energy alternatives for industrial furnaces, achieving nearly 6,000 industrial kilns transitioning to cleaner energy sources [1] - The province has implemented deep pollution treatment for an additional 2,268 industrial kilns, achieving comprehensive governance of operational industrial kilns [1] - Since the start of the 14th Five-Year Plan, Shanxi has focused on ecological environmental protection to drive industrial pollution control and enhance the pollution treatment levels of industrial enterprises [1] Group 1: Clean Energy Transition - Shanxi is utilizing methods such as "coal to gas" and "coal to electricity" to facilitate the clean energy transition in industrial sectors [1] - The province has completed ultra-low emission transformations in the coal and steel industries, and is the first in the nation to initiate similar transformations in the coking and cement industries [1] Group 2: Pollution Control Measures - Shanxi is tightening emission limits for sulfur dioxide and nitrogen oxides in the coal power industry to further reduce pollutant emissions [1] - The province is enhancing environmental performance levels in key industries through differentiated environmental management policies based on performance ratings [1] Group 3: Industry Performance Ratings - A total of 462 enterprises in Shanxi have been rated as A or B level for environmental performance, with 209 of these being foundries [1] - The "Create A, Upgrade B" initiative is being used to promote comprehensive improvements in air pollution management among key industry enterprises [1]

Core Viewpoint - Morgan Stanley maintains a constructive outlook on the CSI 300 index, projecting a target level of 5200 points by the end of 2026, driven by four major investment themes [1] Group 1: Investment Themes - The execution of "anti-involution" policies is expected to accelerate post the National People's Congress in March 2024, benefiting the net profit margin and return on equity of CSI 300 constituents [1] - Growth in global AI infrastructure capital expenditure is anticipated to favor Chinese suppliers, with more domestic stocks and AI monetization targets expected to benefit despite being in crowded growth sectors [1] - A favorable global macroeconomic environment, particularly in fiscal and monetary policy easing in 2026, will support overseas sales for listed companies [1] - The K-shaped recovery in consumption will benefit both low-end and luxury goods [1] Group 2: Potential Risks - There are three potential downside risks: a possible downward adjustment in Q4 earnings expectations for the CSI 300, particularly in the technology and healthcare sectors; the ongoing push for "high-quality development" may suppress excessive speculation and further pressure mid-range consumption; and despite a trade truce between China and the US, new confrontations may arise amid increasing regional tensions [2] Group 3: Stock Selection - Morgan Stanley has identified IT and healthcare A-shares that can capitalize on China's innovation opportunities, expecting a shift from value stocks to growth stocks by early 2026 [2] - The team has also selected leading A-share companies in sectors such as automotive, battery materials, lithium, photovoltaics, cement, chemicals, coal, steel, dairy, pork, liquor, and logistics that are poised to benefit from the "anti-involution" trend, indicating a shift from price/scale competition to quality competition over a decade [2]

Core Viewpoint - Recent price increases for cement have been observed in various regions of China, including Guangdong, Henan, Shanxi, and Hainan, driven by factors such as production adjustments and improving market demand, although the effectiveness of these price hikes remains uncertain [1][2][3][4]. Guangdong Region - In late October, cement prices in the Pearl River Delta did not increase as expected, leading some companies to lower actual transaction prices to maintain sales. Starting from the 23rd, leading companies announced a price increase of 30 yuan/ton for bulk cement, with a 20 yuan/ton increase in Yunfu. However, overall market demand remains average, making the success of this price increase uncertain [1]. Henan Region - From November 15, Henan will implement staggered kiln shutdowns, reducing production. Favorable weather has led to a recovery in downstream market demand, prompting companies to raise prices by 20 yuan/ton. The implementation of this price increase is still to be observed [2]. Shanxi Region - Due to the implementation of staggered production policies and rising raw material costs, cement companies in Longzhi and Jincheng announced a price increase of 20 yuan/ton on November 21. However, the construction market is entering a traditional off-season, raising doubts about the effectiveness of this price increase in reaching the downstream market [3]. Hainan Region - Following previous price declines that pressured profitability, Hainan's cement companies are seeing a gradual recovery in market demand due to improved weather conditions and accelerated outdoor construction. Starting from the 26th, some leading companies announced a price increase of 30 yuan/ton for bulk cement, with the effectiveness of this increase still to be determined [4].

Economic Activity Index - The China High-Frequency Economic Activity Index (YHEI) as of November 25, 2025, is 1.27, an increase of 0.02 from November 18 [1][3] - The "import dry bulk freight index" rose by 0.05 to 1.29, while the "30-city commodity housing sales index" fluctuated between 0.44 and 0.46 [1][3] Industrial Sector Performance - From January to October 2025, the total profit of industrial enterprises above designated size reached 59,502.9 billion yuan, a year-on-year increase of 1.9%, which is 1.3 percentage points lower than the growth rate from January to September [19] - The revenue and cost growth rates for the same period were both 0.6 percentage points lower than those from January to September, at 1.8% and 2.0% respectively [19] - State-owned industrial enterprises' profits remained stable compared to the previous year, while joint-stock enterprises saw a profit increase of 1.5% to 44,328.3 billion yuan, foreign and Hong Kong-Macau-Taiwan enterprises increased by 3.5% to 14,848.6 billion yuan, and private enterprises grew by 1.9% to 16,995.6 billion yuan [19] Profitability by Industry - Profitability varied across industries from January to October 2025, with the mining industry's profit margin rising from 16.68% to 16.76%, while the manufacturing sector's profit margin remained stable at 4.57% [2][19] - The profit margin for the electricity, heat, gas, and water production and supply industry decreased from 7.05% to 6.97% [2][19] Monetary Policy and Interest Rates - As of November 25, 2025, the central bank's net fund injection through open market operations was 337.5 billion yuan, with a reverse repurchase amount of 1,626.3 billion yuan and a 7-day reverse repurchase rate of 1.4% [5] - The overnight interbank rate decreased by 17 basis points to 1.41%, while the 7-day repurchase rate remained unchanged at 1.54% [8][9] Real Estate Market - New housing transaction areas in first, second, and third-tier cities increased by 10.84%, 23.06%, and 12.72% respectively, while second-hand housing transaction areas decreased by 5.84%, 2.64%, and 13.86% [30] - The average daily transaction area for all types of housing was below the level of the previous year [30] Consumer Behavior - The average daily box office revenue for movies was 64.23 million yuan, a decrease of 36.73 million yuan from the previous week [34] - The road logistics price index increased by 0.07% over the past month, up 0.48% year-on-year [34] Global Economic Indicators - The US dollar index rose by 0.22 points to 99.81, while the RMB to USD exchange rate increased by 187 basis points to 7.0938 [35][38] - The Chicago Board Options Exchange VIX index decreased by 6.13 points to 18.56 [35][38]

Investment Rating - The report maintains a "Positive" investment rating for the building materials industry [12]. Core Viewpoints - The report highlights an increase in expectations regarding real estate policies, suggesting a focus on high-quality consumer building materials leaders. The industry is experiencing intensified downward pressure, but the anticipated policy tools aim to reduce housing burdens, which could support residential demand [6][9]. - The report recommends focusing on quality leaders in consumer building materials, such as SanKeTree, TuBaoBao, and WeiXing New Materials, as they possess bottom value and are expected to benefit from policy changes and operational turning points [6][9]. - The report notes a slight decline in cement prices and a shift in glass inventory from decrease to increase, indicating ongoing challenges in the market [7][8]. Summary by Sections Basic Situation - Cement prices have slightly decreased, with a national average of 355.65 yuan/ton, down 1.45 yuan/ton week-on-week and down 76.77 yuan/ton year-on-year. The cement output rate is approximately 45.5%, reflecting a 0.4 percentage point decrease [24][32]. - The glass market is operating weakly, with a national average price of 61.55 yuan per weight box, down 1.84 yuan per weight box week-on-week and down 15.22 yuan year-on-year. The inventory of glass has increased, indicating pressure on the market [38][40]. Recommendations - The report continues to recommend investments in the African supply chain and existing supply chain leaders, highlighting companies like Huaxin Cement and Keda Manufacturing as key players benefiting from demand recovery and structural optimization [9]. - It emphasizes the importance of focusing on quality leaders in the consumer building materials sector, particularly those with strong business models and growth potential, such as SanKeTree and TuBaoBao [9]. Market Trends - The report indicates that the downward slope of the industry is increasing, with a focus on the expected rise in real estate policies. The core reasons for the pressure on housing prices in major cities are linked to income and inflation expectations, as well as the rental-to-sale ratio being inverted with mortgage rates [6][9].