China Materials: 3Q26 Outlook: Equity Implications: Building Materials

Research evidence excerpt

China Materials: 3Q26 Outlook: Equity Implications: Building Materials

Idea

July 9, 2026 08:01 AM GMT

Morgan Stanley Asia Limited+MChina Materials | Asia Pacific Rachel L Zhang

Equity Analyst

3Q26 Outlook: Equity Rachel.Zhang@morganstanley.comHannah Yang, CFA +852 2239-1520

Hannah.Yang1@morganstanley.com +852 2239-7079

Implications: Building Materials Chris Jiang

Chris.Jiang@morganstanley.com +852 3963-1593

The building materials space remains under pressure from the Cynthia Tang

continued decline in property demand. The anti-involution ResearchCynthia.Tang@morganstanley.comAssociate +852 3963-4360

theme could lead to more consolidation and capacity closures.

Cement – Supply controls progressing slowly; trough margins likely to persist:

Supply-control policies have moved into the implementation phase, but 2Q26

evidence suggests progress remains slow and incremental. Capacity swaps and

physical production-line closures are taking place, yet the pace of exits has not been Greater China Materials

sufficient to offset continued demand weakness or restore pricing power. Cement Asia Pacific

Industry View Attractive

prices stayed close to multi-year lows and industry margins remained compressed.

We expect cement prices and margins to remain near trough levels over the next Exhibit 1 : What's changed

% Upside/few quarters. That said, downside risk also appears limited, as current prices are Rating Price Target Downside

below effective breakeven for many producers and some listed players are already China Materials New Ccy New Old to PT

Late-Cycle Building Materials

loss-making. This should gradually force further capacity rationalization and OrientalBNBM Yuhong 002271.SZ000786.SZ OWEW RMBRMB 11.0025.60 13.0031.40 -11%37%

China Lesso 2128.HK UW HKD 3.20 3.80 -16%

consolidation.