UOB Kay Hian
Date of Report: 09 July 2025

China Resources Building Materials Technology: Margin Strength, Discipline, and Supply Reform Set the Stage for 2025 Recovery

Overview

China Resources Building Materials Technology (CR Build Mat, 1313 HK) continues to demonstrate robust margin management and strategic discipline amid ongoing sector headwinds. With a maintained BUY rating and a target price of HK\$2.30, UOB Kay Hian’s latest report dives deep into the company’s first-half 2025 performance, outlook, and the critical industry reforms ahead.

Company Profile

• Business: Production, distribution, and sale of cement, clinker, concrete, and aggregates.
• Market Cap: HK\$12.5 billion (US\$1.6 billion)
• Shares Issued: 6,982.9 million
• Major Shareholder: China Resources National Corporation (73.3%)
• 52-week Range: HK\$2.31 / HK\$1.39

Share Performance

1H25 Performance: Pricing Power Over Volume

• Gross profit per tonne exceeded expectations, surpassing RMB 50/tonne due to disciplined pricing strategies, despite a weaker sales environment.
• April 2025: Cement ASP hit RMB 261/tonne, with gross profit per tonne at RMB 73.
• Sales volume restraint: Monthly sales dropped to 4.5 million tonnes in April (vs. 5.5 million in April 2024), reflecting an intentional focus on profitability over volume.
• May 2025: ASP declined to RMB 244/tonne (gross profit per tonne at RMB 56) amid seasonal and regional pressures (e.g., higher Xijiang water levels increased clinker inflows from Guangxi, rainy season slowed construction).
• June 2025: Management guided a further RMB 10/tonne ASP drop, but daily shipments stabilized at 150,000–160,000 tonnes.

Gross Profit and Sales Trends

• Gross profit per tonne in 1H25: Estimated at RMB 50—up from RMB 29 in 1H24—thanks to industry-wide supply discipline.
• Cement product sales volume: Estimated 1H25 volume down ~13% year-on-year, steeper than earlier full-year guidance of an 8% drop, highlighting both demand softness and a firm commitment to margin over volume.
• Despite volume declines, the improved gross profit per tonne is expected to deliver an overall year-on-year gross profit increase.

Financial Highlights and Forecasts

Sector Insights: Infrastructure and Aggregates

• Infrastructure demand remains weak despite record RMB 4.4 trillion in local government special-purpose bonds for 2025 and a 24.8% year-on-year surge in 1H25 domestic excavator sales.
• Cement demand limited: Infrastructure fixed asset investment up 5.6% year-to-date, but key tender volumes in Guangdong/Guangxi are forecast to decline by 6%/8% year-on-year.
• Aggregates: Segment accounted for 65% of total 2024 capex. External aggregates sales target for 2025: 84 million tonnes (+22% YoY), with full capacity at 130 million tonnes when all projects are running.
• Gross margin pressure: Aggregates gross margin expected to stabilize above 30% as newer, higher-cost mines ramp up.

Industry Reform: Enforcement Key to Supply Discipline

• “Anti-involution” guidance from the China Cement Association has improved sentiment but lacks enforcement power.
• Stricter oversight is required at the provincial and environmental agency levels, with up to 10–20% of regional capacity potentially being eliminated through robust enforcement—especially among small, non-compliant producers.
• Industry outlook for 2025: Sales expected to decline by a single digit year-on-year, an improvement from the 9.5% drop in 2024. Effective capacity reduction depends on verifying actual output against approved quotas, with real-time emissions monitoring and third-party audits as emerging tools.
• National emissions trading scheme: Anticipated impact from 2026–27, pending regulatory clarity and enforcement mechanisms.

Revised Earnings and Valuation

• Earnings upgraded: 2025/26/27 earnings forecasts raised by 7%/9%/6% respectively on higher gross profit per tonne assumptions.
• Valuation: BUY maintained, target price HK\$2.30, pegged to 0.3x 2025F P/B (–1.5 SD).
• Investment case: Gradual supply-demand stabilization, supported by stricter capacity relocation and overproduction controls. The company’s diversified operations support upstream product sales and enhance overall resilience and margins.

Key Catalysts for Share Price

• Stricter enforcement of overcapacity controls across the industry.
• Potential new infrastructure stimulus packages.

Profit & Loss, Balance Sheet, and Cash Flow Summary

Conclusion

China Resources Building Materials Technology stands out for its margin discipline and resilient strategy in a challenging sector. With disciplined pricing, a focus on high-margin aggregates, and a readiness for stricter industry reforms, the company is well-positioned for gradual recovery. Investors should watch for decisive policy enforcement and infrastructure stimulus as potential catalysts in the coming quarters. The maintained BUY rating and upgraded earnings outlook underscore confidence in the company’s ability to weather near-term headwinds and capitalize on long-term sector stabilization.