Results Review

3Q26 results beat our expectations Huaxin Building Materials Group announced its 1–3Q26 results: Revenue rose 19% YoY to Rmb29.7bn, and attributable net profit rose 41% YoY to Rmb2.83bn. In 3Q26, revenue rose 13% YoY to Rmb10.2bn, attributable net profit rose 24% YoY to Rmb1.1bn, and recurring net profit grew 17% YoY to Rmb1bn. Results beat our expectations. According to corporate filings, earnings growth in 1–3Q26 was driven mainly by the steady ramp-up of new overseas production capacity and higher sales volumes.

Trends to watch

International expansion is paying off, with gross margin stable YoY and QoQ. In 3Q26, revenue rose 13% YoY to Rmb10.2bn, and gross margin was largely stable QoQ at 32%. The company’s profitability is ahead of peers, and overseas cement EBITDA exceeded Rmb250/t as of 1H26, based on publicly disclosed data.

Cash flow remained strong, supporting a dividend of Rmb0.5 per share (tax included). According to corporate filings, net operating cash flow rose 44% YoY to Rmb2.2bn in 3Q26, capex reached Rmb1.78bn, and the company paid a cash dividend of Rmb0.5 per share (tax included).

The Philippine project was approved at the shareholder meeting, the Brazil project has signed an exclusivity agreement, and overseas contributions are improving. (1) Philippine project: According to corporate filings, the shareholders’ meeting approved the project on October 30, 2026. The company may acquire Holderfin B.V.’s indirect and direct stakes in HPI in two phases through another wholly owned subsidiary. The first phase will acquire a 67.623% stake, based on an enterprise value of US$780mn for 100% of HPI. Total capacity may reach 9mnt. (2) Brazil project: According to corporate filings, the company signed an exclusivity agreement with CSN on October 30, 2026, at a transaction valuation equivalent to Rmb15.87bn; CSN plans to sell its Brazilian cement business, which has production capacity of 17mnt/yr.

Financials and valuation

Reflecting improving sales volumes and earnings in the company’s overseas business, we raise our 2026 and 2027 earnings forecasts by 3.8% and 12.1% to Rmb3.85bn and Rmb5.03bn. The stock is trading at 12x 2026e and 9x 2027e P/E. We maintain our OUTPERFORM rating and target price of Rmb31.50, implying 17x 2026e and 13x 2027e P/E and offering 47% upside.

Risks

Sharper-than-expected fluctuations in overseas cement prices; sharp decline in domestic cement prices; sharper-than-expected forex losses.