For 9M26, revenue was RMB130.0bn (-2.6% YoY). CNBM recorded an attributable net loss of RMB730mn, swinging from an attributable net profit (NP) of RMB2,960mn in 9M25, broadly in line with its profit alert of a RMB760mn loss. For 3Q26, revenue was RMB48.5bn (-3.3% YoY, +6.1% QoQ), and attributable NP was RMB100mn (-93.7% YoY from RMB1.6bn in 3Q25), switching to a profit from losses of RMB180/650mn in 1Q/2Q26, which we attribute mainly to profit growth in new materials businesses such as electronic fabrics. In our view, the company is firmly leading supply-side reform through the industry downcycle, while its new materials and overseas businesses have shown strong resilience, with clear results from mix optimization. Maintain BUY.
ASP declines in basic building materials weighed on earnings
For 9M26, blended GPM was 18.1% (-2.8pp YoY), which we attribute mainly to YoY and QoQ ASP declines in basic building materials such as cement & clinker, concrete, and aggregates; although cost reduction and efficiency efforts lowered unit costs, this was insufficient to offset the price declines. Aided by QoQ ASP increases in new materials such as electronic fabrics, blended GPM rose by 1.9pp vs 1H26. Pressure on basic building materials dragged 9M26 total profit down by 71.1% YoY to RMB2,340mn. In addition, as much of the new materials business sits in non-wholly-owned subsidiaries, income tax expenses/minority interests were RMB1,540/1,530mn (largely flat/-57.7% YoY), declining less than total profit and pushing attributable NP into a loss.
Rigid administrative/financial spending eroded dilution effect
For 9M26, combined sales/administrative/R&D/financial expenses were about RMB19.56bn (-1.3% YoY), but as revenue declined, the overall expense ratio rose by 0.2pp YoY to 15.1%; expense control was broadly stable but did not fully offset the GPM decline. Sales/administrative/R&D/financial expenses were RMB2,790/ 9,720/3,590/3,460mn (-4.4/+2.1/-11.0/+3.6% YoY), with the slight YoY increases in administrative and financial expenses the main drivers of the higher overall expense ratio. The debt-to-asset ratio was 63.8% at end-3Q26 (+1.9pp vs the beginning of 2026). 9M26 net operating cash flow was RMB2,300mn (-68.6% YoY), but aided by higher financing inflows, cash and cash equivalents stood at RMB35.40bn at end-3Q26, up from RMB24.12bn a year earlier.
Earnings forecasts and valuation
Given the slower-than-expected recovery in downstream cement demand and improvement in competition-cooperation landscape since 2026, we lower our 2026/2027/2028 cement ASP and per-tonne gross profit assumptions, and forecast attributable NP of RMB0.12/3.2/5.5bn (trimmed by 93/32/16% from previous RMB1.8/4.6/6.6bn). With cement companies recently accelerating curbs on overproduction and strengthening consensus on competition-cooperation, we expect losses in basic building materials to narrow and new materials profit to rise QoQ in 4Q26. We forecast 2027E BVPS of RMB12.61. Given near-term pressure on both property-chain earnings and the valuation of the new electronic fabric business, we value the stock at 0.3x 2027E PB, a 30% discount to its average PB ratio since 2021. Our target price is HKD4.15 (previous: HKD5.85, based on 2026E BVPS of RMB12.57 and 0.4x PB, in line with its average PB ratio since 2021).
Risks: slower-than-expected stabilization in property sales, weaker-than-expected implementation of staggered production plans, and lower-than-expected profit contribution from specialty fiber fabrics.