Cement industry: One hundred years of agitation, who master ups and downs

The integrated business model continues to increase growth momentum while resisting the risk of large fluctuations in performance brought about by the economic cycle. Compared with the gross profit margin and net profit margin of leading building materials companies, the gross profit margin of CRH and Pacific Cement is relatively stable, which is closely related to their complete industrial chain and highly concentrated market. This trend can also be seen from the perspective of net profit margin. While the net profit margin of CRH remains relatively stable, in recent years, with the deep integration of various business modules, profitability has also been significantly improved.

Based on the development history and market performance of the overseas cement industry, we draw the following conclusions:

(1) Combined with our view in series 1, due to the constraints of new domestic production capacity, clinker shortage squeeches the downstream grinding station market space, and the upgrading of the pricing power and development right of leading clinker enterprises promotes the acceleration of the downstream aggregate and concrete business, and the relatively more complete industrial chain is conducive to providing the downstream with reliable quality and stable supply of construction and installation raw materials. This is similar to the layout of the whole industrial chain of foreign cement leaders;

(2) Compared with overseas markets such as Japan and Taiwan, after experiencing rapid urbanization in China, the demand for cement is likely to shrink significantly; With the downward demand, the industry merger and reorganization process is expected to accelerate, based on the leading companies to take the initiative to reduce capacity is expected to become the market's helpless choice; At the same time, the strengthening of the voice of leading companies is expected to lead the industry to rationally deploy production and exports according to market demand, and cement prices are expected to remain at a high level.