Zhongjin: Domestic cement leader seeks second growth curve, overseas core market demand has great growth potential.

Zhongjin released a research report stating that the recent market has increased its attention on the export of cement. It is believed that in the background of weak domestic demand and a relatively gentle pace of improvement in supply and demand relationships, going abroad for cement companies has become an important way to build the second growth curve. On one hand, there is great potential for cement demand in overseas core markets entered by domestic enterprises: in the sub-Saharan Africa region, the per capita cement demand is 130kg in 2023, far below the global average of 541kg. Coupled with expectations of population growth and urbanization rate increases, this will drive the increase in cement demand. On the other hand, domestic enterprises are gradually going overseas through self-construction, mergers and acquisitions, reducing the significant risk of oversupply of cement production capacity abroad. Zhongjin's main points are as follows: Africa has growth space and a relatively stable pattern for cement, but it is difficult for companies to acquire resources According to data from Dangote, the per capita cement demand in sub-Saharan Africa in 2023 is 130kg, far below the global average. The bank judges that in most parts of Africa, such as Nigeria (mainly Dangote, BUA, Huaxin, high concentration), Tanzania, Malawi, etc., the pattern is relatively stable, and short-term prices are relatively stable; in addition, companies have difficulties in acquiring coal and limestone resources, or increasing market entry thresholds. In terms of profitability, in the past five years, Dangote/BUA/Rafiki in Nigeria have contributed to the regional revenue growth rates of 32%/43%/32% from 2020 to 2024, and Dangote/BUA EBITDA profit margins have maintained levels above 50%/30%. Central Asia is well developed, with reduced capital expenditure in the future, domestic companies may have cost advantages By 2024, the per capita cement consumption in Central Asia is 0.4-0.5 tons, slightly lower than the global level of 0.55 tons; among them, Uzbekistan (capacity utilization rate of 40-50%) and Kazakhstan (capacity utilization rate of 60-70%) have a strong supply-demand balance. Some regions of Central Asia have excess cement capacity, and exports to neighboring countries such as Tajikistan and Kyrgyzstan may be the main focus in the future. Starting in 2025, domestic companies are expected to reduce their capital expenditure in Central Asia. The path of going abroad is transitioning from self-construction to a new build + acquisition model, reducing the burden of adding local supply After 2012, domestic cement demand growth slowed down, reaching a plateau in 2014 and maintaining a high level for 7 years. Leading domestic companies took the initiative to "go abroad", building large-scale production lines in Southeast Asia, Central Asia, etc., forming an early layout for cement exports. After 2020, the path for enterprises going abroad transitioned to self-construction + mergers and acquisitions. Dangote and Holcim adjusted their strategy based on ESG pressure by divesting part of their capacity in Africa and the Middle East, providing development opportunities for Chinese companies. Risk Changes in the market structure of overseas segmented cement markets may lead to significant price fluctuations; exchange rate fluctuations; cost increases exceeding expectations; and the complexity of the business environment.