China Resources Building Materials’ third-quarter loss widens as slight cement gross profit recovery is outweighed by rising expenses
China Resources Building Materials’ net loss widened to 355 million yuan in the third quarter of 2026. Higher cement prices brought a modest gross profit recovery, but selling and administrative expenses rose, other income declined, and concrete and aggregates also came under price pressure. Morgan Stanley expects fourth-quarter price increases to support earnings but maintains its Underweight rating.
Original source：Morgan Stanley Asia LimitedFirst published on Unhidea：Original source date：
Key takeaway
For China Resources Building Materials to improve profitability, cement price increases must translate into greater gross profit gains while the company addresses falling sales volumes, price pressure in other businesses and rising expenses.
Why did the loss widen despite a recovery in gross profit?
China Resources Building Materials recorded a net loss of 355 million yuan in the third quarter of 2026, wider than the 253 million yuan loss in the second quarter, compared with a profit of 24 million yuan a year earlier. Its cumulative loss for the first three quarters was 796 million yuan, within the company’s guidance range of 750 million–850 million yuan.
The key was that the gross profit improvement was smaller than the increase in expenses: overall gross profit rose by 19 million yuan quarter on quarter in the third quarter, while selling and administrative expenses increased by 143 million yuan to 643 million yuan. The expense ratio rose from 11.2% in the second quarter to 15.3%. Together with lower other income, this resulted in a wider loss.
Why did higher cement prices bring only a modest recovery?
The average selling price of cement rose by 7 yuan quarter on quarter to 204 yuan per tonne in the third quarter, but rising coal prices also increased cost per tonne by 4 yuan to approximately 201 yuan. Using the approximate figures in the report, gross profit per tonne recovered from about 1 yuan in the second quarter to about 4 yuan, still clearly below the 22 yuan recorded a year earlier.
Unit profitability improved slightly, but sales volumes contracted: third-quarter cement sales were 11.9 million tonnes, down 16% year on year and 11.4% quarter on quarter. Cement gross profit consequently recovered only from approximately 12 million yuan in the second quarter to 44 million yuan, far below the 306 million yuan recorded a year earlier.
Can higher concrete volumes and lower aggregate costs close the gap?
Growth in concrete sales volume did not bring a corresponding increase in gross profit. Third-quarter sales reached 5 million cubic metres, up 40% year on year and 18.1% quarter on quarter. However, weaker prices reduced unit gross profit to approximately 25 yuan per cubic metre, below 29 yuan in the second quarter and 46 yuan a year earlier. Gross profit for the business was approximately 124 million yuan, flat quarter on quarter and down 25% year on year.
Aggregates faced pressure on both volume and price. Third-quarter sales were 17.5 million tonnes, down 21.2% year on year and 6.2% quarter on quarter, which Morgan Stanley believes may be related to regional peers’ capacity expansion. The impact of lower prices exceeded cost savings, bringing gross profit per tonne down from approximately 4.8 yuan in the second quarter to 3.6 yuan. Gross profit for the business fell 29% quarter on quarter and 66% year on year to approximately 63 million yuan.
What could drive a fourth-quarter improvement, and why does Morgan Stanley remain Underweight?
Morgan Stanley expects cement price increases since late September, driven by improving demand in southern China and tighter production inspections, to support fourth-quarter earnings. The improvement depends on supply and demand conditions supporting selling prices, while third-quarter data show that the effect of price increases is also influenced by changes in costs and sales volumes.
Regional competition also constrains this path: new capacity could intensify price competition, and a slowdown in property demand in Guangdong and Guangxi would weaken local pricing. Conversely, stronger property demand and stricter production shutdowns and environmental production curbs would support prices.
The bank believes the results have not changed its investment thesis and maintains its Underweight rating and target price of HK$0.70, approximately 25% below the 23 October closing price of HK$0.93 listed on the first page.
