Domestic demand for building materials remains subdued amid ongoing pressure in the property sector, posing challenges for local companies, according to a research report by Orient Securities. However, firms like Huaxin Cement and Keda Industrial Group have delivered strong operational performance in the first three quarters through overseas expansion.

While market sentiment suggests limited recovery in earnings or outlook for building material companies due to the property downturn, some firms have proactively diversified into international markets through strategic resource integration, presenting growth potential. Key takeaways from Orient Securities include:

**Weak Domestic Demand Persists** National Bureau of Statistics data shows that from January to September 2025, China’s property construction area fell 9.4% YoY to 6.49 billion sqm, while new construction starts dropped 18.9% to 450 million sqm. Completed property area declined 15.3% to 310 million sqm, reflecting continued weak demand for building materials. Cement output also fell 5.2% YoY to 1.26 billion tons during the same period, underscoring industry-wide pressure.

**Strong Overseas Performance** Huaxin Cement and Keda Industrial Group stood out with robust overseas operations. Huaxin Cement reported net profit attributable to shareholders of RMB 2.0 billion, up 76.0% YoY. Its overseas production bases span 12 countries, with annual cement grinding capacity reaching 24.7 million tons. Overseas revenue grew 15.4% to RMB 4.13 billion, accounting for 45.1% of total revenue.

Keda Industrial Group posted a 63.5% YoY increase in net profit to RMB 1.15 billion. Its African-focused building materials business, covering sub-Saharan demand, saw ceramic tile output rise 17.0% to 100 million sqm and float glass production exceed 170,000 tons. Overseas revenue surged 90.1% to RMB 3.77 billion, driven by volume and price growth.

**Overseas Expansion as a Strategic Focus** With domestic headwinds persisting, overseas markets offer a viable growth path for Chinese building material firms. Companies like Huaxin Cement and Keda Industrial Group exemplify successful expansion into Belt & Road nations and developed markets, providing a blueprint for peers. Continued global diversification may help offset domestic weakness and unlock new opportunities.

Key stocks to watch include Huaxin Cement (600801.SH) and Keda Industrial Group (600499.SH).

**Risks**: Further decline in domestic demand, slower-than-expected overseas expansion, and currency fluctuations.