Shenwan Hongyuan Group Co., Ltd. has released a research report stating that in the first quarter of 2026, the supply and demand for electronic fabric in the fiberglass industry is tight. Prices for standard fabric have risen significantly, while specialty fabric is seeing accelerated volume growth, indicating high sector prosperity. Building materials are benefiting from a recovery in the secondary housing market and cost-driven price increases, achieving growth in both volume and price. The domestic cement industry's profitability remains at a historical low, although overseas operations are performing strongly. The glass industry continues to be at the bottom of its cycle, with supply gradually being rationalized. Shenwan Hongyuan's main views are as follows:

Prices for standard fabric have risen substantially, while specialty fabric is accelerating in volume. Since the beginning of 2026, prices for fiberglass electronic yarn and electronic fabric have continued to increase. According to SCI data, the average price for 7628-type electronic fabric in Q1 2026 was 5.2 yuan per meter, up 0.9 yuan per meter from the previous quarter and 1.3 yuan per meter year-on-year; prices for standard electronic yarn have risen concurrently. The first quarter is a critical period for the continued volume expansion of China's specialty fiberglass fabric. Supplies of first-generation low-dielectric fabric, second-generation low-dielectric fabric, low thermal expansion coefficient fabric, and Q fabric remain tight amid downstream CCL upgrades. Leading companies have seen their production-sales ratios gradually increase during the quarter, boosting profit contributions, yet specialty fabric remains in short supply. Various segments of the industrial chain, including PCBs, CCLs, and fiberglass fabric/resin/copper foil, are all experiencing opportunities for price increases. Amid high demand for specialty fabric, the supply of looms used for both standard and specialty fabric is insufficient. Looms are being allocated more towards the higher-margin specialty fabric, exacerbating the shortage of standard fabric. The firm expects strong downstream demand to persist, with the loom supply shortage difficult to resolve in the short term, suggesting continued prosperity for both standard and specialty fabric.

Regarding roving, the average price in Q1 2026 was 3,832.7 yuan per ton, an increase of 25.4 yuan per ton from the previous quarter but a decrease of 51.3 yuan per ton year-on-year, indicating overall stability. The firm anticipates that companies related to fiberglass electronic fabric, such as China Jushi, Sinoma Science & Technology, International Granding Materials, Honghe Technology, and Kingboard Laminates, will perform relatively well. Companies related to roving, such as Changhai Group and Shandong Fiberglass, are expected to remain generally stable.

Building materials see volume and price growth, but individual stock performance diverges. After years of adjustment, the building materials sector is seeing improved structure and profitability, coupled with active secondary housing transactions, leading to strong overall expectations for the first quarter. However, since March, sustained rising oil prices have significantly impacted costs for sectors including waterproofing, coatings, and piping, prompting corresponding segments to accelerate price increases to counter rising costs. Beyond unit profitability, the price increases have had two effects: first, downstream customers accelerated stockpiling before the price hikes took effect, which actually stimulated shipment volume growth in Q1; second, small and medium-sized enterprises with weaker brands and channels found it difficult to fully pass on costs, forcing them to abandon high-cost orders, thereby further accelerating industry consolidation. The firm expects some companies may achieve volume and price growth in Q1, but a pullback is possible in Q2 after winter raw material reserves are depleted and cost pressures and the effects of demand front-loading become apparent.

Domestic cement industry profitability falls to historical lows, while overseas cement maintains high prosperity. According to Digital Cement Network, the national average cement price in Q1 2026 was 349 yuan per ton, down 9 yuan per ton from the previous quarter and 52 yuan per ton year-on-year. With domestic cement prices at a multi-year low and sector sentiment still weak, the firm expects profitability for the domestic cement sector to be weaker than the same period last year. Concurrently, domestic aggregate business may also see a decline. The concrete segment may perform relatively better in Q1, primarily because the new Value-Added Tax Law took effect on January 1, 2026. The concrete industry was not included in the simplified taxation scheme, and the previous 3% simplified tax rate was completely abolished, mandating a switch to the 13% general tax rate with no transition period or option. Small and medium-sized concrete batching plants, lacking sufficient input tax credits, face increased tax burdens and a significant decline in profitability. This is expected to drive market share gains for leading concrete companies and those with standardized input tax credit capabilities, benefiting larger listed enterprises. Overseas cement operations by Chinese companies, which began to bear fruit in 2025, are expected to see growth in both volume and price.

The glass industry continues its bottoming-out process, with attention on cold repair progress affecting supply. The average price for flat glass in Q1 was 1,217 yuan per ton, down 226 yuan per ton year-on-year and 26 yuan per ton from the previous quarter. The average price for 2.0mm coated photovoltaic glass was 10.6 yuan per meter, down 2.0 yuan per meter both quarter-on-quarter and year-on-year. Both photovoltaic glass and flat glass remain at cycle lows, with supply gradually being rationalized as the market awaits improvement in demand.

Investment Analysis Recommendations: It is advised to focus on the high-prosperity fiberglass sector, paying attention to stocks such as China Jushi, International Granding Materials, Honghe Technology, Sinoma Science & Technology, and Kingboard Laminates. It is also recommended to monitor building materials stocks showing signs of bottoming recovery and strong alpha, including 3TREE, Keshun Waterproof Technology, Oriental Yuhong, Beixin Building Materials, Tuteng, China Liansu, Keda Industrial, and HIGOLD. For the cement sector, focus on leading enterprises such as Anhui Conch Cement and Huaxin Cement.

Risk warnings: Potential decline in fiberglass sector prosperity, cement capacity control measures falling short of expectations, industry supply shocks, and persistently high cost pressures for building materials.