The controlling shareholder makes a significant increase in holdings for the first time in 12 years. Behind Conch Cement's stock price lingering at low levels are cost variables and industry demand pressures.

Recently, the controlling shareholder of Conch Cement, Conch Group, made a significant increase in its holdings, marking its first acquisition in about 12 years. At the same time, the company also changed the purpose of its original plan to repurchase shares to cancellation.

Over the past three years, Conch Cement’s stock price has continued to fluctuate at relatively low levels, with overall performance relatively weak, partly due to the ongoing contraction in the company’s performance amid industry decline. However, even with a decrease in revenue in 2025, net profit increased, mainly due to a decline in the company’s raw material costs and fuel and power costs.

However, since March, the sharp rise in oil prices has introduced uncertainty regarding whether the company’s future profits can continue to improve. So, can the trend of profit improvement for Conch Cement in 2025 be sustained? How will the cement industry develop in 2026? In this regard, a reporter from the Daily Economic News conducted interviews and research.

According to the announcement of the progress of the controlling shareholder’s increase in holdings released by Conch Cement on March 25, the controlling shareholder Conch Group acquired 34.7556 million A-shares of the company through centralized bidding from March 3 to March 25, 2026. After this equity change, Conch Group’s shareholding ratio increased from 36.40% to 37.05%, reaching the 1% disclosure scale.

Estimating based on the average closing price of 26.64 yuan during this period, the value of 34.7556 million shares amounts to 926 million yuan; calculated at the lowest price during this period of 22.62 yuan, the value is 786 million yuan.

This increase in holdings is part of Conch Group’s plan disclosed on February 25, 2026. According to the plan, Conch Group intends to increase its holdings by an amount not less than 700 million yuan and not more than 1.4 billion yuan within six months from the date of the announcement.

It is worth noting that this is the first increase plan launched by Conch Group since November 2013, approximately 12 years later; however, at that time, it only increased its holdings by 1.5871 million shares.

Alongside the increase in holdings by the controlling shareholder, Conch Cement launched another initiative.

On March 24, the company held a board meeting, reviewing and passing the proposal on “changing the purpose of repurchasing A-shares and cancellation.” The company plans to change the purpose of the 22.4225 million A-shares repurchased between November 2023 and February 2024 (accounting for about 0.42% of the total share capital) from the original plan of “maintaining company value and shareholder equity, with the repurchased shares to be sold according to relevant regulations,” to “cancellation and corresponding reduction of the company’s registered capital.”

The average repurchase price for this portion of the shares was 22.51 yuan per share, with a total amount of approximately 501 million yuan. After the cancellation of the shares, the company’s total share capital will be correspondingly reduced, which will directly enhance earnings per share (EPS) under unchanged net profit. This proposal still needs to be submitted for approval at the company’s 2025 annual shareholders’ meeting.

Although the company previously had a large-scale repurchase and then launched a controlling shareholder’s increase plan, its stock price has continued to maintain a fluctuating trend at relatively low levels over the past three years.

The pressure on the company’s stock price may stem from the downward performance pressure in recent years. The company’s revenue peaked at 176.295 billion yuan in 2020, after which it showed a downward trend, with revenue dropping to 82.532 billion yuan in 2025, a decline of 53.19% from the historical high.

Correspondingly, the company’s net profit for 2025 has also significantly shrunk compared to the 2020 peak. Conch Cement achieved a net profit attributable to shareholders of 35.158 billion yuan in 2020, while in 2025, it was only 8.113 billion yuan.

However, although the company’s revenue in 2025 declined by 9.33% compared to 2024, its net profit for 2025 ended a four-year declining trend, increasing by 5.42% year-on-year.

Under the circumstance of declining revenue in 2025, the company’s net profit managed to grow, which may be attributed to its cost control.

According to Tonghuashun data, Conch Cement’s gross margin for sales in 2025 was 24.16%, an increase of 2.46 percentage points from 21.7% in 2024; the net profit margin was 9.53%, an increase of 1.11 percentage points from 8.42% in 2024. The annual report shows that the comprehensive cost of the company’s cement clinker products decreased by 11.12% year-on-year, with fuel and power costs down 15.70% year-on-year and raw material costs down 10.85%, with these two cost components accounting for 52.56% and 19.55%, respectively.

In this regard, Guotou Securities’ research report stated that Conch Cement’s decline in cement clinker sales was better than the industry average, mainly benefiting from the growth in overseas and export sales; at the same time, because the decline in coal costs was greater than the price decline, the company’s gross profit per ton increased year-on-year.

Although the company benefited from the decline in fuel, power, and raw material costs in 2025, since March 2026, oil prices have surged sharply, and domestic coal prices have also seen significant increases from their mid-2025 lows. So, how will the company’s operations be impacted in the context of rising energy prices? Can it maintain the trend of increased gross margin seen in 2025?

In this regard, a relevant person from Conch Cement (hereinafter referred to as: Conch Cement representative) stated: “Since coal is our main fuel and raw material, the rise in coal prices will definitely affect some costs, but it has a transmission process.” Regarding whether the company’s gross margin can continue to improve, the representative stated that the gross margin has seen some phase-specific decline, but it is difficult to judge how it will be in the future.

A reporter from the Daily Economic News found that although the company’s net profit for the entire year of 2025 increased, its net profit for the fourth quarter of 2025 declined by 27.59% compared to the same period in 2024, amounting to 1.809 billion yuan. The sales gross margin for the fourth quarter of 2025 was 23.77%, down 4.38 percentage points from 28.15% in the same period of 2024.

Observing Conch Cement’s stock price operation, it has generally fluctuated at relatively low levels over the past three years. Although it has shown some resilience during the industry’s downturn, industry factors remain one of the main drivers of the company’s stock price. What will be the future situation of the cement industry in which the company operates?

In this regard, the Conch Cement representative stated: “Overall industry demand will continue to decline, but the subsequent decline may narrow. The supply side will implement overproduction control policies starting this year, and the industry is also consolidating, with relevant capacity being cleared. Additionally, the carbon trading market should accelerate the exit of some backward production capacity. There should be some positive factors on the supply side, but how much supply can exit will depend on the implementation of relevant policies.”

According to a report from China Chengxin International, domestic cement demand will continue to be weak in 2025, with capacity utilization rates further declining and prices fluctuating downward. Looking ahead to 2026, it is expected that the policy support will be limited, and industry demand may further decline; on the supply side, under strict regulation, the speed of capacity clearance will accelerate, but excess pressure still exists; prices are expected to continue to fluctuate at low levels throughout the year. If capacity control and corporate self-discipline significantly strengthen, there will be considerable benefits for price recovery; the differentiation of cement enterprises’ profitability will intensify, with leading enterprises demonstrating resilience through scale and overseas layouts, while overall debt repayment pressure remains controllable.

Guangfa Securities’ research report predicts that the capacity utilization rates for cement clinker in 2024 and 2025 will be 53% and 50%, respectively, indicating severe overcapacity. After the past two years of policy brewing and advocacy, the years 2026-2027 will usher in supply-side policy control dominated by “overproduction control + carbon market,” which is expected to lead to the gradual exit of excessive and backward cement production capacity, optimizing cement supply and raising the profit center.

Northeast Securities’ research report believes that the domestic cement market is in a slow downward channel. In 2025, China’s cement output is expected to reach 1.689 billion tons, a year-on-year decrease of 7%, with the decline narrowing, and the annual output is about 70% of the peak; on the demand side, real estate demand in China will continue to decline in 2025, and infrastructure investment will shift from growth to decline, marking the first decline since the National Bureau of Statistics began publishing infrastructure investment growth rates in 2014. Under the “anti-involution” strategy in 2026, the supply side will be controlled, and major projects such as the Yaxia Hydropower Station will bring regional market demand prosperity, expecting overall industry profitability to recover, as well as an increase in dividend returns under the trend of improving dividend yields.

Cover image source: Daily Economic News Media Library