UBS: Lowering the target price of China Building Materials (03323) to HK$7 to maintain a “buy” rating

The Zhitong Finance App learned that UBS released a research report stating that it will lower the target price of China Building Materials (03323) from HK$7.64 to HK$7, maintain a “buy” rating, and lower the profit forecast for this year and next two years by 95% and 30%, respectively. The bank expects that the company's cement business will still record losses this year, dragging down overall profits.

UBS pointed out that the cement cycle is still being hit by rising costs and weak demand. Since the beginning of the year, the average price of the 5500 thermal coal in Qinhuangdao has risen 20% year on year. Affected by political disruptions in the Middle East and the tightening of domestic supply after coal mine security checks in Shanxi, cement production costs have increased by about 20 yuan per ton. Meanwhile, demand for real estate and infrastructure continues to weaken, making it difficult for producers to pass on costs. However, the bank pointed out that the new materials business is developing well and continues to be the main profit engine for Chinese building materials, helping to offset the cyclical weakness of traditional building materials.