Weekly market of construction industry
The industry rose and fell in the week. This week (2.7-2.11), the building decoration industry (SW) rose by + 7.85%, which was stronger than the performance of Shanghai Composite Index (+ 3.02%), Shanghai and Shenzhen 300 (+ 0.82%) and Shenzhen Component Index (- 0.78%). The weekly increase ranked first among the 28 primary industries of SW, and the industry ranking increased by 9 compared with last week (10th). In terms of molecular sectors, housing construction (+ 21.51%), engineering consulting services (+ 11.57%), infrastructure and municipal engineering (13.40%) and other professional engineering sectors (+ 11.19%) increased the most, while decoration and decoration sectors performed the weakest (+ 1.93%).
Performance of individual stocks in a week. A total of 125 companies in the construction industry recorded an increase this week, accounting for 86%; The number of companies that exceeded the increase of the industry index (+ 7.85%) this week was 64, accounting for 44%. The construction industry recorded an increase this week, with a significant increase in the number of companies, and the number of companies that exceeded the increase of the industry increased slightly. The top five increases in the industry are Zhejiang Construction Investment Group Co.Ltd(002761) (+ 61.05%), Chongqing Construction Engineering Group Co.Ltd(600939) (+ 56.76%), Hualan Group Co.Ltd(301027) (+ 51.59%), Shenzhen Water Planning & Design Institute Co.Ltd(301038) (+ 36.51%), Henan Provincial Communications Planning & Design Institute Co.Ltd(300732) (+ 36.42%); The top five industry declines this week were Shanghai Fengyuzhu Culture Technology Co.Ltd(603466) (- 15.96%), Beijing Sanlian Hope Shin-Gosentechnical Service Co.Ltd(300384) (- 10.66%), Shenzhen Ruihe Construction Decoration Co.Ltd(002620) (- 9.01%), Cofco Engineering & Technology Co.Ltd(301058) (- 6.54%) and Shenzhen Bauing Construction Holding Group Co.Ltd(002047) (- 5.45%).
Industry valuation. From the perspective of the overall P / E ratio of the industry, as of February 11, the P / E ratio PE (TTM) of the architectural decoration industry was 11.1 times and the P / B ratio Pb (MRQ) of the industry was 1.02 times, up from last week. Compared with the SW primary industry, PE in the construction industry ranks fifth from bottom, slightly higher than steel, real estate, banking and mining; Pb valuation ranks the fourth lowest in all primary industries, higher than banking, real estate and mining industries. Current industry price earnings ratio (TTM) is the lowest, with top 5 Shaanxi Construction Engineering Group Corporation Limited(600248) (3.54), China State Construction Engineering Corporation Limited(601668) (4.55), China Railway Construction Corporation Limited(601186) (4.59), China Railway Group Limited(601390) (5.94), Tengda Construction Group Co.Ltd(600512) (6.32); The lowest price to book ratio (MRQ) is China Railway Construction Corporation Limited(601186) (0.59), Shenzhen Grandland Group Co.Ltd(002482) (0.62), * ST Meishang (0.64), Beijing Orient Landscape & Environment Co.Ltd(002310) (0.67), China State Construction Engineering Corporation Limited(601668) (0.74).
Industry dynamic analysis
In January, the increment of social finance exceeded expectations, the issuance of local government bonds surged, and the steady growth beneficiary sector continued to be recommended.
This week, the central bank released the social finance data for January. In January, the scale of social finance increased by 6.17 trillion yuan, an increase of 984.2 billion yuan year-on-year. The scale of social finance exceeded expectations and performed well. The main increase came from RMB loans, government bonds and corporate bonds, reflecting the obvious development of China’s monetary and fiscal policies. Among them, RMB loans increased by 394.4 billion yuan in January, a year-on-year increase of 398 million yuan, which was the main force of social finance increment in that month. In terms of sub sectors, the new loans of enterprises and institutions were 336 million yuan, an increase of 810 billion yuan year-on-year, and household loans increased by 843 billion yuan, a decrease of 427 billion yuan year-on-year. On the whole, the credit demand of enterprises was significantly higher than that of households. In January, the net financing of government bonds was 602.6 billion yuan, an increase of 358.9 billion yuan year-on-year. According to the data of the Ministry of finance, in January, the scale of local government bonds issued across the country reached 698.9 billion yuan, a year-on-year increase of 92.9%, of which the scale of new special bonds accounted for 69.3%, mainly invested in urban and rural / municipal / industrial park construction, transportation facilities and livelihood services / social undertakings, shantytowns reconstruction, etc.
In December 2021, the Ministry of finance has issued a new special debt limit of 1.46 trillion yuan in 2022 to all localities in advance. In 21q4, China issued a total of 1.2 trillion yuan of local government special bonds, which is expected to form physical investment in 22q1. Previously, the Ministry of finance has issued a new special debt limit of 1.46 trillion yuan in 2022 to all localities in advance. According to the contents of the meeting of the national development and Reform Commission, According to the requirements of “funds follow the project”, implement the special bonds issued by local governments in the fourth quarter of last year to specific projects as soon as possible, pay close attention to the issued amount, and strive to form more physical workload in the first quarter of this year. In January this year, the issuance of special bonds by local governments is expected to boost the growth rate of infrastructure investment in Q1.
At present, the demand for two new and one heavy construction in the construction industry is clear. All localities have successively issued construction plans, with sufficient capital supply and strong policy drive. This week, we continue to recommend high-quality infrastructure targets benefiting from the “two new and one heavy” under the goal of steady growth, including: 1) China State Construction Engineering Corporation Limited(601668) , China Communications Construction Company Limited(601800) , China Railway Construction Corporation Limited(601186) , Metallurgical Corporation Of China Ltd(601618) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) and other central construction enterprises, Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) and other regional infrastructure leaders, The outstanding performance of orders and significant valuation advantages are the main force for infrastructure overweight, as well as the main beneficiaries of steady growth and increased industry concentration; 2) China Design Group Co.Ltd(603018) and Anhui Transport Consulting & Design Institute Co.Ltd(603357) , high-quality survey and design targets at the front of the industrial chain, give priority to the steady growth of infrastructure and the high growth of infrastructure demand in the province during the 14th Five Year Plan period; 2) Guangzhou Metro Design & Research Institute Co.Ltd(003013) and Zhejiang Tiantie Industry Co.Ltd(300587) are respectively the leading enterprises in urban rail design and urban rail vibration reduction. They have a stable position in the industry, strong technical and brand strength and high performance. They fully benefit from the release of urban rail construction demand under the promotion of new infrastructure construction.
The field of affordable housing was supported by financial policies, and the prefabricated sector was given priority to benefit from the promotion of construction.
This week, the construction of affordable housing received policy support at the capital level. The central bank and the China Banking and Insurance Regulatory Commission jointly issued the notice on excluding the loans related to affordable rental housing from the management of real estate loan concentration, which made it clear that the loans related to affordable rental housing projects were not included in the management of real estate loan concentration, Encourage banking financial institutions to increase support for the development of affordable rental housing. At the same time, the relevant construction plans of affordable housing have been issued in many places. Guizhou Province plans to build 37000 affordable rental housing units in 2022. Chengdu Municipal Bureau of housing and urban rural development has clearly included the development of affordable rental housing in Chengdu’s 14th five year plan. During the 14th five year plan, 300000 affordable rental housing units (rooms) will be raised through multiple channels by means of new construction, reconstruction, reconstruction and revitalization, The total investment will reach more than 150 billion yuan, of which 60000 sets (rooms) are planned to be built in 2022.
During the 14th Five Year Plan period, the construction of affordable housing in China is strong. The proportion of new affordable rental housing in the total supply of new housing should strive to reach more than 30%. 40 key cities preliminarily plan to add 6.5 million units (rooms), with sufficient demand space, which will help the further development of prefabricated construction industry. It is suggested to continue to pay attention to the market opportunities of prefabricated construction sector, Including: 1) the leader of prefabricated architectural design Shenzhen Capol International&Associatesco.Ltd(002949) , the company has a leading level of prefabricated design, has rich design experience in the field of talent affordable housing, and has established a close cooperative relationship with government agencies in Guangdong, which provides an increasing basis for the company to undertake projects in the field of talent affordable housing; 2) With regard to Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) as the contracting object of steel structure engineering, the company has actively transformed from steel structure engineering subcontractor to EPC engineering general contractor, which is expected to expand its market share. In addition, it has developed fabricated product system and undertaken several fabricated integration projects, with sufficient technology and project experience.
Industry investment perspective
In 2022, the construction industry is expected to usher in multiple development opportunities of fundamentals, policy driven and “construction +”, and the industry is in the undervalued range, with prominent investment value.
The overall fundamentals of the construction industry are improving, especially the rapid growth of orders from central infrastructure enterprises and local infrastructure leaders, which will help improve performance. In the future, it will take the lead in benefiting from the release of infrastructure demand under the goal of stable growth. At the same time, it will actively layout new businesses, improve comprehensive strength and help valuation repair. The policy is expected to become another driving force for the “spring agitation” of the industry in 2022. In the near future, the steady growth policy will continue to increase, the active fiscal policy should improve the efficiency, the local special debt can be launched within a certain period, the monetary policy should be flexible and appropriate, and the liquidity should be reasonable and abundant. There are expectations of reducing reserve requirements and interest rates in 2022, and the loose monetary policy is conducive to the development of the industry. “Two new ones”
“Heavy” construction is expected to increase, and the appropriate advance of infrastructure investment is worth looking forward to.
The construction industry actively embraces the “new economy” and actively arranges Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) around “construction +”. BIPV, energy storage and carbon sequestration have become the key areas of the layout of listed companies. Some companies Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) have achieved initial results and are expected to continue to make efforts in the future to help improve the valuation level of companies and industries. Industry leaders and regional leaders will continue to cultivate traditional businesses, expand the whole industrial chain and extend upstream and downstream around traditional businesses, and fully benefit from the improvement of industry concentration. The release of future performance is sustainable.
On the whole, the construction industry has both “white horse” with good performance and extremely low valuation, and “dark horse” with layout of “building +” and standing at the market outlet. The overall trend of the industry is good, with fundamental support and policy catalysis. In addition, the “building +” helps to improve the valuation and is optimistic about the overall trend of the construction industry in 2022.
Suggestions for long-term configuration
The overall fundamentals of the construction industry have improved. Industry leaders and regional leaders have benefited from the “national advance and people retreat” and the improvement of industry concentration. Both newly signed orders and performance have increased rapidly. At the same time, the construction industry actively embraces the “new economy” and the “construction +” era is coming, opening up the future development space of the company. On the main line of configuration, we propose to actively layout the “construction +” new business sector around the “two new and one heavy” infrastructure leaders and the “double carbon” background:
(1) “two new and one heavy” infrastructure leaders. Central construction enterprises and regional infrastructure leaders will fully benefit from the construction of “two new and one heavy”, and central construction enterprises and regional infrastructure leaders are the main beneficiaries of “national advance and people retreat” and the improvement of industry concentration. The newly signed orders and performance are bright, and the valuation advantage is very significant. It is suggested to pay attention to China State Construction Engineering Corporation Limited(601668) , China Communications Construction Company Limited(601800) , China Railway Construction Corporation Limited(601186) , Metallurgical Corporation Of China Ltd(601618) and other central construction enterprises and Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) and other regional infrastructure leaders. At the same time, urban rail design and vibration reduction will fully benefit from the release of urban rail transit demand under the construction of new urbanization. It is recommended to focus on Guangzhou Metro Design & Research Institute Co.Ltd(003013) and Zhejiang Tiantie Industry Co.Ltd(300587) .
(2) high quality target of infrastructure survey and design. China Design Group Co.Ltd(603018) , Anhui Transport Consulting & Design Institute Co.Ltd(603357) , the front end of the industrial chain gives priority to benefiting from the release of infrastructure demand under the goal of steady growth. During the 14th Five Year Plan period, the scale of planned infrastructure investment in many provinces increased significantly, the leading order contracting advantage of high-quality design was significant, and the market share could be improved.
(3) pumped storage beneficiary company. With the change of energy structure, power supply security has been put on the agenda, and energy storage has become the main means to solve power security. As the most important way of energy storage, pumped storage has been strongly supported by national policies. In the future, pumped storage will enter a stage of rapid growth and encourage social capital to enter. Water conservancy and hydropower engineering enterprises have the construction and operation of pumped storage projects, and most of them have hydropower operation assets. It is possible to layout pumped storage power stations, which is expected to fully benefit the development of pumped storage in the future. It is recommended to focus on Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , Guangdong No.2 Hydropower Engineering Company Ltd(002060) and Anhui Construction Engineering Group Corporation Limited(600502) .
(4) prefabricated buildings. We believe that under the background of carbon peak and carbon neutralization goal, the prefabricated construction field mainly in the form of concrete structure and steel structure will continue to fully benefit from the further improvement of the prosperity of the industry and the release of demand, and is expected to become an important development field under the carbon neutralization goal. It is suggested to pay attention to Shenzhen Capol International&Associatesco.Ltd(002949) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Zhejiang Southeast Space Frame Co.Ltd(002135) .
(5) new power construction. Under the background of new power system construction with new energy as the main body, construction enterprises involved in the field of power construction are expected to benefit from the improvement of power grid investment and construction, operation and maintenance demand, and the release of BIPV and energy storage demand. It is recommended that Suwen Electric Energy Technology Co.Ltd(300982) the leader of power construction and operation on the user side, Hangzhou Shenhao Technology Co.Ltd(300853) the private enterprise with high-quality power intelligent inspection, and Zhejiang Southeast Space Frame Co.Ltd(002135) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Tus-Design Group Co.Ltd(300500) of BIPV layout Shenzhen Zhongzhuang Construction Group Co.Ltd(002822) and Dongzhu Ecological Environment Protection Co.Ltd(603359) of carbon sink layout.
Risk tips: epidemic control is not as expected, policy implementation is not as expected, economic downside risk, PPP promotion is not as expected, fixed asset investment is declining, local financial growth is slow, etc
