Huaxin Building Materials Group(600801)：Overseas expansion to reshape earnings structure; global construction material platform to be revalued-格隆汇

机构：中金公司
研究员：Shuwei ZHANG/Yan CHEN

1H26 results in line with market expectations
Huaxin Building Materials Group announced its 1H26 results: Revenue rose 21.50% YoY to Rmb19.497bn and attributable net profit grew 55.22% YoY to Rmb1.713bn. In 2Q26, revenue rose 19.17% YoY to Rmb10.588bn and attributable net profit grew 24.51% YoY to Rmb1.083bn. Sales volume of domestic cement business increased, but earnings per tonne came under pressure. In 1H26, domestic cement and clinker sales volume rose 11.7% YoY to about 21.61mnt. We estimate domestic clinker ASP per tonne fell by Rmb54/t YoY to Rmb205/t in 1H26 with gross profit per tonne falling by Rmb14/t to Rmb47/t.
Overseas business continued to grow rapidly, and earnings per tonne improved notably. In 1H26, overseas cement and clinker sales volume rose 57.1% YoY to about 13.18mnt. We estimate overseas clinker ASP per tonne rose by Rmb156/t YoY to Rmb648/t in 1H26 with gross profit per tonne rising by Rmb58/t YoY to Rmb241/t.
Earnings quality and cash flow solid. In 1H26, the firm’s overall gross margin rose 2.6ppt YoY to 31.55%, and net operating cash flow increased 66% YoY to Rmb2,693mn.
Trends to watch
Overseas business a key growth engine for the firm; drag of domestic business on earnings gradually easing. We note that a key change in the firm is that its overseas capacity expansion is reshaping its earnings structure, rather than a cyclical recovery in the domestic cement market. The firm expects its overseas cement sales volume to exceed 27mnt in 2026 (+33% YoY) and overseas EBITDA to rise to Rmb7bn, and we estimate its overseas net profit per tonne at Rmb122/t in 2026. As technologically upgraded production facilities in Mozambique, South Africa and Zimbabwe are put into operation, and testing of several clinker production lines in Nigeria advances, we believe the firm’s overseas business will grow from a supplementary source of profit to a major source of incremental revenue for the firm, offsetting downward pressure from domestic demand.
The firm is transforming from a domestic cyclical cement producer into a global construction material platform company, and we expect changes in valuation logic for the firm. Amid expansion of overseas assets, the proportion of the firm’s overseas gross profit rose to 68% in 1H26, implying improvement in growth potential. We believe the firm has notable competitive advantages. First, equipped with its own equipment, the firm could effectively control costs and improve efficiency of its projects. Second, the firm could drive its growth by seeking overseas M&A targets and building its own production facilities. Third, the firm has a solid dividend payout mechanism and ample cash flows.
Financials and valuation
As the firm is growing from a domestic company with cyclical characteristics to a leading global growth construction material platform company and its overseas business is likely to continue growing, we raise our 2026 attributable net profit forecast by 22.9% to Rmb3.71bn and we introduce our 2027 attributable net profit forecast at Rmb4.49bn. The stock is trading at 13.1x 2026e and 10.8x 2027e P/E. We maintain an OUTPERFORM rating. Given changes in valuation logic for the firm and its earnings growth, we raise our target price 96.9% to Rmb31.50, implying 17.6x 2026e and 14.6x 2027e P/E and offering 35% upside.
Risks
Risks related to market demand, competition, and/or overseas business.