In the first half of 2018, the growth rate of real estate investment increased significantly compared with the same period in 2017, with a nominal growth rate of 9.7%. However, infrastructure investment closely related to cement demand fell sharply, with a year-on-year growth rate of only 7.3%, which was much lower than that of the same period in 2017. 21.1% directly dragged down cement demand, and cement demand declined slightly. As of the first half of 2018, the country's cumulative cement output was 997 million tons, a year-on-year decrease of 0.6%, and the decline was narrower than that in January to May. Among them, cement demand in the northern region has dropped significantly, and the growth rates in the Northeast, Northwest and North China are-12.85%,-11.81% and-5.21% respectively. Supported by poverty alleviation policies, the Southwest region has a fastest growth rate of 5.59%. The region shows a stable trend in the south and a downward trend in the north.
Overall, due to the impact of environmental protection and off-peak production, clinker wholesale in most regions is in a tight balance. Coupled with the early rise in clinker prices along the Yangtze River Delta, cement prices have stabilized. After entering August, with downstream cement demand recovering, cement prices in many regions will enter the upward channel. Huarong Securities recommends focusing on relevant regional domestic targets with better regional coordinated implementation and greater government environmental protection efforts.
Shen Wan Hongyuan believes that the cement sector will be "off-season" in the second half of the year. The continued improvement of the supply and demand pattern of clinker will support cement prices, and the sustainability of high profits will have a high probability of exceeding expectations. In the post-supply period, the stock selection logic of the cement sector needs to focus on the three main lines of regional attributes, growth attributes, and resource attributes to screen companies that are flexible in the short term, have growth in the medium term, and can win in the long term. In the second half of the year, we suggest focusing on regional attributes and growth attributes, and recommend Huaxin Cement and Conch Cement. In the glass sector, the pattern is long-term and short-term. Demand release and cold repair shutdown are showing signs of periodic lag. The concentrated release of dividends will be late but will not be absent. In addition, the increasingly smooth cost curve under the background of stricter environmental protection has gradually enlarged the comparative advantage of high-quality leaders.
