Southwest: In 2025, emphasis will be placed on actively changing the supply side, with a focus on consumer building materials.

Southwest released a research report stating that looking at the construction new materials industry in 2025, one should pay attention to positive changes in both supply and demand. In terms of specific industry tracks, the cement industry has seen smooth price increases under the background of industry self-regulation and off-peak production. Fiberglass and other industries have also seen price increases, with prices of thermoplastic/wind power fiberglass products increasing by 10%-15%/15%-20%. Coupled with the recovery in demand, the profitability levels of relevant targets are expected to continue to improve. As the real estate industry enters a stock market, as of 2023, the total stock of urban residential buildings in China was approximately 33.55 billion square meters, with around 374 million units. There is a broad growth space for renovation and transformation of existing housing stock. As downstream consumer building materials customers shift from B-end to C-end, targets with outstanding brand and channel power are worth focusing on. On the demand side, signs of a stabilizing and rebounding real estate transaction prices are gradually emerging. Statistical data shows that in November 2024, 17 out of 70 large and medium-sized cities saw a month-on-month increase in the transaction prices of new commercial housing, with an increase of 10 cities compared to October. Investors' confidence in property purchases and real estate is gradually improving, and the decrease in housing transaction area is gradually narrowing, indicating a possible stabilization and rebound on the demand side. Cement and concrete: With the narrowing of new real estate construction starts and construction area decrease, the decline in total domestic cement and clinker demand in 2025 will also narrow. With measures such as industry self-regulation and peak-shifting production, as well as strict implementation of capacity replacement policies on the supply side, the rebalancing of supply and demand is expected to maintain the current price increase results. In addition, the coal prices, which account for the largest proportion of cement clinker costs in 2025, will remain relatively low. The cost of cement clinker will further decrease, and the profitability level of the cement and concrete industries in 2025 will significantly recover. China West Construction Group (002302.SZ) is a key focus. Fiberglass: The downstream application areas of fiberglass continue to expand, with permeability rates in some application areas steadily increasing. While there is temporary oversupply in the supply stage, proactive supply control on the supply side is expected to drive the industry towards a new balance of supply and demand, supporting the recovery of industry profitability. Recommended targets are those with outstanding product structure, cost advantages, and strong overall competitiveness, such as China Jushi Co., Ltd (600176.SH), and Chongqing Polycomp International Corporation (301526.SZ) is worth watching. Consumer building materials: Policies stimulating demand for commercial housing have been introduced successively, with measures like "stabilizing prices and stabilizing returns", and "ensuring delivery" expected to provide a cushion for the completion and sales of commercial housing. The continuous release of demand for second-time refurbishment in the stock market, as well as the shift of downstream demand from B-end to C-end, will lead to the continuous improvement in market share of enterprises with prominent brand and channel competitive advantages. Recommended targets include Dehua TB New Decoration Material (002043.SZ), Beijing New Building Materials Public (000786.SZ), while Keshun Waterproof Technologies (300737.SZ) and SKSHU Paint (603737.SH) are worth keeping an eye on. Risk warning: Risks of significant economic downturn; Market development falling short of expectations; Policy effects falling short of expectations.