Dongxing: Government expands green building materials procurement and speeds up optimization of supply side.

Dongxing released a research report stating that the government's increased scope and intensity of green building materials procurement align with the industry policy of eliminating outdated production capacity. This includes the enhancement of product production standards, environmental protection standards, and production capacity replacement standards introduced earlier in 2024, working together to accelerate the elimination of outdated production capacity in the construction materials industry. This will optimize the industry's supply side, further solidifying the certainty of development and growth for excellent and leading companies. Event: On January 10, 2025, the Ministry of Finance issued a notice expanding the scope of government procurement support for green building materials to promote the improvement of building quality. This aligns with the three-year action plan (2024-2026) issued by the State Council's General Office to improve government green procurement policies and actively promote green building and green building materials. Key points from Dongxing are as follows: - In 2025, procurement will focus more on the green and high-quality attributes of building materials to accelerate the elimination of outdated production capacity. - The 2025 edition of the government's "Green Building and Green Building Materials Government Procurement Demand Standards" places greater emphasis on the improvement of building quality through the procurement of green building materials. It encourages green building material production companies to conduct carbon footprint self-assessment and third-party assessments to promote carbon peaking and carbon neutrality. The 2025 standards also include mandatory and optional products, as well as the addition of 33 categories of green building materials products, reflecting higher "green" requirements for more building materials products from a fiscal policy perspective. Government procurement benefits the demand improvement of high-quality green building materials production companies, while it puts pressure on outdated companies. In the current industry environment where the construction materials industry has long been at historically low profit levels, many companies face operational pressures and even closure. In order to reduce costs, companies may compromise on the environmental quality of building materials products. Government procurement favors green, high-quality products, further promoting industry competition and speeding up the elimination of outdated production capacity. The broadened scope of government support for high-quality green enterprises in 2025 benefits excellent enterprises for better development. The implementation scope of the 2025 policy has also expanded to include urban renovation projects, showing a shift in policy direction for the year 2025. The number of cities implementing the policy has significantly increased, with 101 cities (including provincial capitals) now included in the range compared to 6 pilot cities previously. The increased financial support from the government for green building materials procurement will provide greater benefits for high-quality enterprises that promote green development. Fiscal policies are being targeted to support the development of new productive forces and optimize the supply side of the construction materials industry. This will help enhance the overall efficiency of the construction materials industry and boost the market share of leading companies, ensuring their continued growth. Investment recommendation: The construction materials industry is currently facing a downturn and intense competition. The longer it remains at historically low levels, the more significant the effects of optimizing the supply side will be. Recommended stocks to continue monitoring in the industry include Beijing New Building Materials Public (000786.SZ), Beijing Oriental Yuhong Waterproof Technology (002271.SZ), Zhejiang Weixing New Building Materials (002372.SZ), Shandong Pharmaceutical Glass (600529.SH), Yangling Metron New Material (300861.SZ), Anhui Conch Cement (00914,600585.SH), China Jushi Co., Ltd (600176.SH), and China Communications Construction (601800.SH). Risk warning: Real estate policy effectiveness may fall below expectations, and local government procurement efforts may be lower than anticipated.