This week’s opinion update:
In our annual strategy report and public infrastructure REITs series reports, we stressed that public infrastructure REITs will be an important variable of infrastructure investment this year. The announcement on the pilot tax policy of real estate investment trusts (REITs) in the field of infrastructure issued by the Ministry of Finance and the State Administration of Taxation will effectively reduce the tax friction cost in the issuance of public REITs and effectively enhance the willingness of original equity holders to declare projects. The direct impact on the construction and building materials sector is as follows: 1) the certainty of infrastructure related demand is further improved; 2) Construction enterprises holding more inefficient operating assets at this stage or overall value revaluation (operation efficiency improvement, statement quality improvement, etc.).
We noticed that the float glass inventory continued to decline before the festival. Combined with the supply and demand structure and market sentiment, it is judged that the demand for float glass after the festival is expected to rebound rapidly. Steady growth is expected to gradually heat up. Under the background of loose credit environment and guaranteed completion, the subsequent glass demand is expected to pick up. End customers usually have limited stock in the off-season. With the start of demand after the festival, the voice may return to the upstream links again. We believe that benefiting from the high prosperity of the glass industry in the past two years, glass manufacturers and intermediaries have sufficient financial strength and willingness to promote a new round of rebound in glass prices.
Review of recent key reports:
Recently, the key reports we have issued include “policy warm wind blows frequently, and the issuance of public infrastructure REITs is expected to accelerate in 2022” (January 30, 2022), and “how high is the qualitative growth of the income of central construction enterprises?” (January 25, 2022), “under the expectation of” steady growth “, short-term cement stocks may usher in valuation repair” (January 21, 2022), “policy driven urban pipe network and pipeline enterprises may usher in a development window period” (January 10, 2022), “float pessimism or bottoming out, elasticity and growth attributes of new products in the medium and long term” (December 1, 2021).
Market performance and high frequency data tracking this week:
Market performance: this week, CITIC Building materials index was – 5.12%, of which glass fiber sector had the smallest decline (- 2.27%) and other structural materials sector had the largest decline (- 8.43%); This week, CITIC construction index was – 4.16%, of which the infrastructure construction sector had the smallest decline (- 3.05%) and the garden engineering sector had the largest decline (- 7.43%); This week, the public infrastructure REITs sector increased by an average of 1.52% (arithmetic average), of which laterite Shenzhen Yan Tian Port Holdings Co.Ltd(000088) REIT rose the most (+ 7.57%), and CICC prosperos REIT fell the most (- 1.76%).
High frequency data: cement: po42 this week (1.14-1.21) 5. The average price of cement was 527 yuan / ton, down 0.94% month on month; The storage capacity ratio was 61.25%, up 0.63 PCT month on month. Glass: the spot price of glass this week (1.21-1.28) was 2038 yuan / ton, up 1.44% month on month; The inventory was 35.58 million heavy boxes, down 1.14% month on month. The average price of 3.2mm and 2mm photovoltaic glass was 25 yuan and 19.20 yuan / m2 respectively, unchanged month on month; Glass fiber: this week (1.23-1.30), the price of winding direct yarn is 6400 yuan / ton, and the price of G75 electronic yarn is 12250 yuan / ton, which is the same month on month.
Investment suggestions:
Building materials sector: in the direction of periodic products, float is the best at this stage (it is suggested to pay attention to: Zhuzhou Kibing Group Co.Ltd(601636) , Shandong Jinjing Science And Technology Stock Co.Ltd(600586) ); The end of the policy on consumption of building materials has been realized (it is suggested to pay attention to: Guangdong Kinlong Hardware Products Co.Ltd(002791) , Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) , Zhejiang Weixing New Building Materials Co.Ltd(002372) ); In the direction of capital construction, pay attention to the elasticity of cement and some pipeline enterprises (recommended attention: Shandong Donghong Pipe Industry Co.Ltd(603856) , Huaxin Cement Co.Ltd(600801) , Anhui Conch Cement Company Limited(600585) ); New material direction, continue to recommend Luyang Energy-Saving Materials Co.Ltd(002088) , Triumph Science & Technology Co.Ltd(600552) .
Construction sector: public infrastructure REITs bring revaluation of sector value (it is recommended to pay attention to: China Communications Construction Company Limited(601800) , China Railway Group Limited(601390) and other central enterprises); Optimistic about the trend of affordable housing and the investment opportunities of prefabricated buildings (it is recommended to pay attention to: Shenzhen Capol International&Associatesco.Ltd(002949) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) , Zhejiang Yasha Decoration Co.Ltd(002375) ); Be optimistic about the equipment leasing track (it is recommended to pay attention to: Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) , Jiangxi Geto New Materials Corporation Limited(300986) ); Some undervalued local state-owned enterprises also have good allocation value (recommended attention: Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Shaanxi Construction Engineering Group Corporation Limited(600248) , Henan Provincial Communications Planning & Design Institute Co.Ltd(300732) ).
Preferred portfolio: China Communications Construction Company Limited(601800) (0.5xpb, revaluation of the value of existing operating assets), Luyang Energy-Saving Materials Co.Ltd(002088) (16xpe, the volume and price of ceramic fiber leaders rise together under the trend of emission reduction), Zhuzhou Kibing Group Co.Ltd(601636) (10xpe, the performance elasticity of float glass and the valuation elasticity brought by photovoltaic glass), China State Construction Engineering Corporation Limited(601668) (0.6xpb, optimistic about the improvement of real estate business against the trend) Triumph Science & Technology Co.Ltd(600552) (22xpe, UTG, new electronic material value discovery). Note: the valuations are the 22-year forecast data of Everbright Building Materials team.
Risk analysis: infrastructure investment is less than expected; Real estate investment fell sharply; Rising raw fuel prices; The epidemic situation is repeated.
