Shenwan Hongyuan released a research report indicating that in the first three quarters of 2025, the building materials sector saw a narrowing decline in revenue and improved profitability, with cement and fiberglass standing out.

During this period, most fiberglass companies achieved both revenue and profit growth, with price recovery effects gradually materializing in H1 2025. Although Q3 profits dipped slightly quarter-on-quarter, year-on-year improvements were maintained. The photovoltaic (PV) glass sector experienced a temporary rebound, driven by a rush for solar installations, but profitability declined after May due to high year-ago comparables, pushing the industry back into pressure. The report highlights the need to monitor supply contraction driven by anti-involution efforts and the effectiveness of price hikes.

Key takeaways from Shenwan Hongyuan’s analysis:

1. **Cement Sector Shows Profit Recovery** Cement sample companies reported total revenue of RMB 432.25 billion in the first three quarters, down 3.1% year-on-year, but net profit attributable to shareholders rose 27.8% to RMB 24.44 billion. Huaxin Cement (000401.SZ) delivered standout performance, supported by overseas cement and domestic aggregate businesses. Anhui Conch Cement (600585.SH) maintained its dominance, contributing over half of the sector’s total profits.

2. **Fiberglass Sector: Dual Growth in Revenue and Profit** Eight fiberglass companies posted combined revenue of RMB 49.21 billion (+23.5% YoY) and net profit of RMB 4.87 billion (+121.4% YoY). Price recovery efforts initiated in 2024 bore fruit in H1 2025, though Q3 saw a mild sequential decline. Companies like Sinoma Science & Technology (002080.SZ), International Grand Advanced Composites (688126.SH), and Honghe Technology (603256.SH) benefited from specialty fabric expansions.

3. **Consumer Building Materials Under Pressure, Select Outperformers** The sector’s revenue dipped 0.9% to RMB 110.75 billion, with net profit down 6.9% to RMB 8.21 billion. Exceptions included Keda Industrial Group (600499.SH), which leveraged overseas tile and ceramic machinery operations, and 3Trees Group (603737.SH), which capitalized on rural revitalization and art paint demand.

4. **Glass Industry Struggles; Anti-Involution in Focus** Glass companies reported revenue of RMB 38.09 billion (-11.0% YoY) and net profit of RMB 940 million (-63.2% YoY). PV glass faced post-May profit declines, while architectural glass remained pressured by weak property completions. The sector’s outlook hinges on supply discipline and pricing power.

5. **Early-Cycle Sector: Leaders Recover First** Tied closely to infrastructure and property starts, early-cycle segments like concrete products remained under pressure. However, Sobute New Materials (603916.SH) achieved double-digit growth by expanding into major western projects.

**Investment Recommendations** Focus on fiberglass and cement for sector-wide profit recovery, and select alpha-driven stocks in consumer building materials and early-cycle segments. Key picks include Huaxin Cement (000401.SZ), Anhui Conch Cement (600585.SH), China Jushi (600176.SH), and 3Trees Group (603737.SH).

**Risks** Potential headwinds include slower-than-expected property market recovery, subdued demand for existing homes, cost inflation, and supply-side pressures.