Building materials industry: Renovation demand underpins TAM, retail transformation is the core, buy waterproof double faucet (Goldman Sachs)
Goldman Sachs believes that the total market size (TAM) of China's building materials industry has stabilized, with rising renovation demand offsetting the contraction in new construction.
Goldman Sachs believes that the total market size (TAM) of China's building materials industry has stabilized, with rising renovation demand offsetting the contraction in new construction. The four companies covered have undergone strategic transformation such as 2C retail and sinking into the market, and their profitability is expected to bottom out and rebound. It is highlights to buy Oriental Yuhong and 3Trees, both with target prices of 13%-53% upside. The shift of channels to the retail side is the core of improving profitability. One-sentence conclusion: China's building materials industry bids farewell to its reliance on new real estate construction projects. The renovation and retail markets have become new growth poles. Leading companies are ushering in a profit turning point through strategic transformation. Good news/bad news: Good news for building materials leaders such as Oriental Yuhong and 3TREES that have successfully transitioned to the retail end. The impact on companies relying on engineering channels is neutral to bearish. The market's pessimistic expectations for the real estate chain may have been excessive, and the value of the company's strategic transformation has not yet been fully recognized (not fully priced in). Catalysts: 1) The revenue proportion and growth rate of each company's quarterly 2C retail business; 2) Policy promotion and actual bidding volume for the renovation of old communities and urban renewal; 3) The impact of raw material price fluctuations on gross profit margins.