China National Building Material narrows third-quarter loss: How much improvement can higher cement prices bring?
China National Building Material’s third-quarter net loss narrowed to 67 million yuan, but basic building materials remained weighed down by volumes and prices. Morgan Stanley expects cement price stabilization to drive a modest improvement in the fourth quarter, while new materials such as fiberglass continue to support growth. It maintains an Equal-weight rating.
Original source：Morgan StanleyFirst published on Unhidea：Original source date：
Key takeaway
The quarter-on-quarter narrowing of the loss has not changed the pressure on basic building materials. Morgan Stanley is counting on cement price stabilization to support a fourth-quarter improvement and expects fiberglass to maintain relatively rapid growth.
Third-quarter loss narrows: How far has the recovery progressed?
Under Chinese accounting standards, China National Building Material reported a net loss of 728 million yuan for the first three quarters of 2026, broadly in line with its earlier warning of 760 million yuan. It earned a profit of 3 billion yuan in the same period of 2025. The result matched the earlier warning, but the year-on-year earnings gap remained large.
On that basis, the estimated net loss for the third quarter of 2026 was 67 million yuan, markedly narrower than the 484 million yuan loss in the second quarter. However, third-quarter selling and administrative expenses rose by 422 million yuan quarter on quarter and were broadly flat year on year; expenses did not fall in step with the narrowing loss.
Why has growth in new materials failed to offset the drag from basic building materials?
Management previously attributed the earnings weakness to pressure on volumes and prices in basic building materials: prices of cement, concrete and aggregates fell, as did sales volumes of cement, concrete and gypsum board. Weakness in both prices and volumes meant basic building materials continued to be the main drag.
Product mix and costs provided offsets: prices and sales volumes of fiberglass and electronic-grade fabric rose, sales volumes of battery separators increased, and costs of fiberglass, cement and concrete fell. These positives only partly offset the pressure.
Impairments also weighed on cumulative profit. Credit and asset impairment losses totaled 2.19 billion yuan in the first three quarters of 2026, an increase of 1.53 billion yuan year on year. The third-quarter figure was 261 million yuan, broadly flat year on year, showing that cumulative impairment pressure and changes in a single quarter need to be considered separately.
Why do higher cement prices support only a modest fourth-quarter improvement?
Since late September 2026, cement prices nationwide have stabilized and some regions have raised prices, supported by a quarter-on-quarter recovery in demand. But rising coal prices are also pushing up costs, so part of the effect of the price increases is to offset cost pressure.
Following this supply-demand and cost logic, Morgan Stanley expects only a marginal fourth-quarter improvement in the basic building materials business. New materials, especially fiberglass, are expected to maintain relatively rapid growth. The pace of recovery remains different across the two businesses.
How positive is Morgan Stanley’s valuation assessment?
Morgan Stanley maintains an Equal-weight rating and a target price of HK$3.50, implying approximately 21% upside from the closing price of HK$2.89 on 23 October 2026. The target price uses a discounted cash flow model with a forecast period extending to 2036, a cost of equity of 13.5% and a perpetual growth rate of 1%.
The extent of improvement depends on industry discipline and the pace of new-materials expansion; stricter production stoppages and environmental production limits form the upside scenario. Conversely, infrastructure investment below expectations or additional asset impairments could reduce the extent of the earnings recovery.
