[core view of this week] this week, we sorted out the performance forecast of listed construction companies in 2021. The profitability of steel structure and local state-owned enterprises was outstanding, and the decoration and gardens were greatly affected by the decline of real estate. Recently, the Ministry of Finance and the State Administration of Taxation updated the tax policy announcement of infrastructure REITs, focusing on optimizing the tax policy before and after the issuance and establishment of infrastructure REITs, which is expected to enhance the enthusiasm of infrastructure owners to issue REITs, enrich the sources of infrastructure funds, and improve the capital cycle and business model of construction enterprises, Core recommendation China Communications Construction Company Limited(601800) (with the largest scale of operating assets in hand, it is expected to significantly benefit from the acceleration of infrastructure REITs. Recently, it was announced that the pilot project of infrastructure REITs declared by Jiatong expressway was accepted, pe6.0x). At present, there is great downward pressure on the economy. Since the end of last year, a series of important meetings have continued to demonstrate China’s determination to stabilize growth. Infrastructure, as a government led investment field, is expected to bear fruit in a relatively short time. In the first half of the year, it will play a pillar role in stabilizing growth. The infrastructure boom is expected to improve. The key points are: 1) undervalued infrastructure blue chip: it is recommended to focus on the central construction enterprise China State Construction Engineering Corporation Limited(601668) (pe4.1x) China Railway Group Limited(601390) (pe4.9x), China Railway Construction Corporation Limited(601186) (pe3.8x), capital construction design leader China Design Group Co.Ltd(603018) (pe8x); 2) Four directions with high business elasticity: a) affordable housing: the development of affordable rental housing is expected to enter an accelerated period, with emphasis on Shenzhen Capol International&Associatesco.Ltd(002949) (pe14x); b) Steel structure: steel structure continues to benefit from the accelerated investment in infrastructure, manufacturing and affordable housing. At the same time, the development of bapv / BIPV brings incremental demand to the industry. It is recommended that Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe10x), Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe18x); c) New power system: the new infrastructure represented by the new energy infrastructure has great demand and high investment efficiency, and is expected to become the focus of the follow-up. It focuses on recommending and paying attention to the leaders Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (pe12x), China Energy Engineering Corporation Limited(601868) (pe12x) of central enterprises in power infrastructure, the leader of private distribution network EPCO Suwen Electric Energy Technology Co.Ltd(300982) (pe21x), and the expert of enterprise energy efficiency control Acrel Co.Ltd(300286) (pe29x); d) Urban pipe network: the demand for energy-saving transformation of urban heat supply network is expected to accelerate, and the leader in heating energy saving Runa Smart Equipment Co.Ltd(301129) (pe20x) is recommended.
The tax policy of REITs for infrastructure construction has been continuously improved, and the acceleration of issuance is expected to provide incremental funds for infrastructure construction. On January 29, the Ministry of Finance and the State Administration of Taxation issued the notice on accelerating the work related to real estate investment trusts (REITs) in the field of infrastructure and the CSRC proposed to promote the expansion of the pilot scope of infrastructure REITs, Focus on optimizing the tax policies for the links before the issuance and establishment of infrastructure REITs: 1) before the establishment, the original equity holder transfers the infrastructure assets to the project company and obtains the equity of the project company accordingly. Special tax treatment is applicable. The original equity holder and the project company do not recognize the income and do not levy enterprise income tax; 2) In the establishment stage, the original equity holder transfers the equity of the project company to the infrastructure REITs to realize the asset transfer evaluation value-added, and the income tax is allowed to be deferred until the infrastructure REITs completes the fund-raising and pays the equity transfer price; 3) The value-added of the asset transfer corresponding to the share of infrastructure REITs held by the original equity holder according to the strategic placement requirements is allowed to be deferred to the actual transfer and pay enterprise income tax. The announcement makes the tax arrangement more reasonable and helps to improve the enthusiasm of infrastructure owners to issue REITs. With the continuous promotion and improvement of relevant policies on infrastructure REITs in the near future, it is expected that the issuance rhythm of infrastructure REITs is expected to speed up in 2022. So far, China’s infrastructure REITs have issued 11, including 3 / 4 / 2 / 2 of transportation infrastructure / park infrastructure / warehousing logistics / ecological environmental protection, with the issuance scale of 156 / 99 / 77 / 3.2 billion yuan respectively, totaling 36.4 billion yuan. If the subsequent infrastructure REITs continue to expand under the encouragement of current policies, it is expected to provide some incremental funds for infrastructure, At the same time, improve the capital turnover and business model of construction enterprises. At present, the construction enterprises with more operating assets are expected to focus on benefiting from the promotion of China’s infrastructure REITs. The core recommendation is China Communications Construction Company Limited(601800) (with the largest operating assets in hand, it is expected to significantly benefit from the acceleration of infrastructure REITs. Recently, it was announced that the application for infrastructure REITs pilot project of Jiatong expressway was accepted), and Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Railway Construction Corporation Limited(601186) , China Railway Group Limited(601390) , Sichuan Road & Bridge Co.Ltd(600039) etc.
Combing the performance forecast of the construction sector in 2021: the profitability of the steel structure and local state-owned enterprises is outstanding, and the decoration and gardens are greatly affected by the decline of real estate. At present, the performance forecast of A-share listed enterprises in 2021 has been disclosed, and a total of 71 construction enterprises have disclosed performance information. In terms of sectors, the profitability of the steel structure sector is relatively prominent. Under the environment of large fluctuations in raw material prices, the steel structure leader shows strong cost control ability and business toughness, and the market share tends to increase; Local state-owned enterprises have benefited from the changes in their positioning by local SASAC, and the business resources in the province have accelerated their concentration, showing a rapid profit growth trend; Decoration, gardens and other sectors are more affected by the real estate industry. The increase in impairment loss provision leads to the increase of the first loss or loss of performance. Specifically:
1) steel structure: in 2021, due to the influence of factors such as the sharp fluctuation of steel price, the demand growth of steel structure industry slowed down periodically. However, after the rapid expansion of business in the early stage, the leading companies of steel structure had full orders, and the amount of projects executed during the period increased significantly year-on-year. At the same time, they locked in low-cost raw materials by paying a deposit in advance, Or the implementation of open-ended contracts has partially transmitted the rising pressure of raw material costs to the owner, and most companies still achieved a good profit growth throughout the year. The median value of Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) / Zhejiang Southeast Space Frame Co.Ltd(002135) / Haibo Heavy Engineering Science And Technology Co.Ltd(300517) 2021 performance forecast increased by 6% / 95% / 89% respectively, and the two-year compound growth rate was 30% / 41% / 96% respectively. In Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) 2021, although the cost side was under pressure against the background of rising prices of raw materials such as steel, the company actively improved its operating efficiency, reasonably controlled costs, and enabled management through digitization. The annual performance maintained steady growth. Later, with the weakening of price fluctuations of raw materials, the profitability of the company is expected to recover. Center International Group Co.Ltd(603098) it is estimated that the performance in 2021 will decrease by 80% – 86% year-on-year, mainly due to the significant increase in bad debt provision, including the liquidity risk of individual customers such as Zhongwang group and Brilliance Jinbei group, involving a total of about 161 million yuan of commercial acceptance bills, contract assets and accounts receivable. The corresponding increase in the provision of credit impairment and asset impairment losses has led to a significant decline in performance.
2) local state-owned enterprises: in recent years, local SASAC has gradually attached importance to the value of provincial road and bridge and construction engineering listing platforms and given more business resource support. At the same time, the reform of local state-owned enterprises has been deepened, large road and bridge and construction engineering groups (also the main investors of key infrastructure projects in the province) have been reorganized and accelerated, and the bidders of key infrastructure projects in the province tend to be unified, The competitive environment of the listed engineering enterprises under the group is optimized, the business sources are rich, and the profits show a rapid growth trend. The median value of Shandong Hi-Speed Road&Bridge Co.Ltd(000498) / Sichuan Road & Bridge Co.Ltd(600039) / Xinjiang Communications Construction Group Co.Ltd(002941) performance forecast increased by 58% / 66% / 101% respectively, and the two-year compound growth rate was 85% / 72% / 11% respectively. The performance growth rate of Shandong Hi-Speed Road&Bridge Co.Ltd(000498) and Sichuan Road & Bridge Co.Ltd(600039) in recent two years was good.
Among them, Shandong Hi-Speed Road&Bridge Co.Ltd(000498) has abundant orders on hand, actively developed the expansion of various businesses such as municipal administration, industrial park, railway and environmental protection, and continuously improved the project management ability. Moreover, the enterprises acquired in 2021 gradually released their production potential and helped the continuous improvement of the company’s performance. Sichuan Road & Bridge Co.Ltd(600039) after the merger of major shareholders, the development of new markets has been accelerated and high-quality projects have increased. At the same time, under the background of rising raw material prices, the contract management work such as project change and material difference adjustment has been accelerated to increase profits.
3) professional engineering: the professional engineering sector is divided, the leaders in infrastructure and manufacturing related fields such as rail transit, electric power and heating perform well, and the companies in real estate related fields such as geotechnical engineering have some business pressure. Among them, the median value of Zhejiang Tiantie Industry Co.Ltd(300587) performance forecast increased significantly by 55%, with a compound growth of 55% in two years. It mainly benefited from the national strategic planning of “transportation power”, “metropolitan area and Urban Agglomeration” and the revision of the environmental noise pollution prevention law. The demand for rail transit vibration and noise reduction business continued to increase, and at the same time, lithium salt business, building vibration reduction and isolation and other new businesses continued to increase; The median value of Acrel Co.Ltd(300286) performance forecast increased significantly by 42%, mainly benefiting from the improvement of China’s industrial and commercial energy efficiency management demand and the continuous large-scale demand of enterprise microgrid; Suwen Electric Energy Technology Co.Ltd(300982) the median performance forecast increased by 28%, with a compound growth of 54% in two years. In 2021, the company continued to give full play to the advantages of EPCO integrated service for power distribution and actively developed new businesses such as photovoltaic and electrical equipment. At the same time, with the enhancement of brand strength after listing, the business market outside Jiangsu Province accelerated to expand, driving the rapid growth of profits; Runa Smart Equipment Co.Ltd(301129) the median performance forecast increased by 31%, with a compound growth of 32% in two years. At present, the company’s regional businesses continue to actively explore, and the follow-up is expected to continue to benefit from the dual opportunities of large-scale transformation of the stock market and upgrading of the intelligent heating industry.
4) decoration: due to the increased liquidity risk of the real estate industry in 2021, there was no cashing risk in a large proportion of notes and accounts receivable of some major customers, the provision of corresponding credit impairment and asset impairment loss increased significantly, and the performance of enterprises in the decoration sector generally declined sharply, among which the median loss of Suzhou Gold Mantis Construction Decoration Co.Ltd(002081) / Shenzhen Grandland Group Co.Ltd(002482) / Shenzhen Bauing Construction Holding Group Co.Ltd(002047) / Zhejiang Yasha Decoration Co.Ltd(002375) performance forecast was 4.5/15/800 billion yuan respectively. Looking forward to 2022, if the prosperity of the real estate industry hits the bottom, the infrastructure is improved, and the decoration leader with relatively stable early operation and low dependence on a single major customer is expected to be the first to recover.
5) design consultation: on the one hand, the capital construction design leaders generally do not disclose the performance forecast. We expect that the relevant leading companies are expected to achieve steady growth under the trend that the capital construction design market share is concentrated to the leader. On the other hand, a number of real estate construction and design companies have disclosed performance forecasts. Due to the increasing downward pressure on the real estate industry and the growth of bad debt provision for accounts receivable of some major customers, the profits fluctuated greatly. Among them, the median value of Shenzhen Capol International&Associatesco.Ltd(002949) performance forecast decreased by 39%, which was in line with the overall expectation, mainly due to the large proportion of bad debt receivables of individual real estate customers. Looking forward to 2022, with the significant optimization of the company’s customer structure (the company’s current main customers are Vanke, China Resources, poly, China Merchants and Shenzhen Anju group and other high-quality customers), the demand for affordable housing design and BIM design, The company is expected to return to the rapid growth trend. Shenzhen Ridge Engineering Consulting Co.Ltd(300977) the median performance forecast in 2021 increased by 23% at the same time, including the impact of equity incentive fee of 15.68 million yuan. If this factor is restored, the median growth rate of the company’s performance forecast will reach 36%. It is difficult and valuable to achieve rapid income growth under the downward pressure of real estate and repeated epidemics in various places in 2021.
6) construction machinery leasing: the performance forecast of 2021 has been disclosed in Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) , Jiangxi Geto New Materials Corporation Limited(300986) , Shaanxi Construction Machinery Co.Ltd(600984) of the sector companies ( Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) , Shaanxi Construction Machinery Co.Ltd(600984) ). Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) in 2021, the profit performance was good, the median value of performance forecast increased significantly by 49%, and the two-year compound growth rate reached 32%. In 2021, the management scale of the company’s aerial work platform exceeded 47000, and the national business network exceeded 150, which doubled compared with the average year of 2020. The equipment rental rate remained high and stable, driving the rapid development of the aerial work platform business segment. At the same time, the company’s aluminum formwork New businesses such as civil steel support and underground space maintenance continued to increase in volume, promoting the company’s profit to maintain rapid growth.
7) International Engineering: in 2021, with the expansion of overseas vaccine coverage and the normalization of construction under the overseas epidemic environment, the profits of international engineering companies generally showed a recovery trend. At the same time, they actively explored the Chinese market or extended along the industrial chain to create new profit growth points. The median value of Sinoma International Engineering Co.Ltd(600970) / Sinosteel Engineering & Technology Co.Ltd(000928) 2021 performance forecast increased by 26% / 9% respectively, and China Camc Engineering Co.Ltd(002051) / China National Complete Plant Import And Export Co.Ltd(000151) turned losses into profits. Among them, Sinoma International Engineering Co.Ltd(600970) acquired Sinoma mining, Nanjing Kaisheng and Beijing Kaisheng in 2021. After the retroactive adjustment of the statement, the profit increased rapidly (the median growth rate in the performance forecast was 19.5%). The company benefited from the large demand for replacement, relocation and upgrading of China’s cement industry. At the same time, it actively overcome the difficulties of personnel entry and exit, accelerated the construction of overseas projects, and promoted the rapid growth of performance.
8) landscape Enterprises: the performance of enterprises in the landscape industry sector generally suffered the first loss or increased loss in 2021. The landscape industry sector faced a relatively unfavorable business environment in 2021. On the one hand, there were many downstream real estate customers with tight cash flow, and there were many bad debts in the receivables of real estate landscape business; On the other hand, under the environment of increasing downward pressure on the economy and continuous rectification of financial discipline, the financial resources and financing capacity of government customers are more limited, and there are more delays in project payment collection. As a whole, there are many impairment losses of accounts receivable, notes receivable and goodwill in the garden PPP sector in 2021.
Investment suggestions: steady growth is still the main line of the current investment in the sector, and continued focus is optimistic: 1) undervalued infrastructure blue chips: focus on recommending central construction enterprises China Communications Construction Company Limited(601800) , China State Construction Engineering Corporation Limited(601668) , China Railway Group Limited(601390) , China Railway Construction Corporation Limited(601186) , and infrastructure design leaders China Design Group Co.Ltd(603018) ; 2) Four directions with high business elasticity: a) affordable housing: the development of affordable rental housing is expected to enter an accelerated period, with emphasis on Shenzhen Capol International&Associatesco.Ltd(002949) ; b) Steel structure: steel structure continues to benefit from the accelerated investment in infrastructure, manufacturing and affordable housing. At the same time, the development of bapv / BIPV brings incremental demand to the industry. It is recommended that Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) ; c) New power system: the new infrastructure represented by new energy infrastructure has great demand and high investment efficiency, and is expected to become the focus of the follow-up. It is expected to recommend and pay attention to the leaders Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) of central enterprises in power infrastructure, the leader of private distribution network EPCO Suwen Electric Energy Technology Co.Ltd(300982) , and the expert of enterprise energy efficiency control Acrel Co.Ltd(300286) ; d) Urban pipe network: the demand for energy-saving transformation of urban heat supply network is expected to accelerate, and the leader in heating energy saving Runa Smart Equipment Co.Ltd(301129) is recommended.
Risk tips: the risk of policy promotion is less than expected, the risk of epidemic impact is more than expected, the risk of accounts receivable, overseas business risk, etc.
