At the current time point, we continue to be optimistic about the spring market of infrastructure: 1) at present, it is a rare infrastructure boom cycle with complete demands of projects + funds + local governments, and the growth rate of infrastructure investment is expected to exceed expectations; 2) The performance of local state-owned enterprises is highly flexible and gradually recognized by the market; 3) The REITs policy was significantly promoted, and the valuation of infrastructure central enterprises with more operating assets ushered in the opportunity to repair.
The year-on-year growth differentiation of provincial transportation infrastructure investment in 2022 is more obvious than that in 2021. According to the provincial data of investment planning published in 2022, there are great differences in the year-on-year growth rate of transportation infrastructure investment planning among the provinces with a high base. Among the provinces with a high base, the transportation investment planning of Shandong Province in 2022 increased by 12% compared with that of 2021, the transportation investment planning of Guangxi and Shanghai increased by 18% and 16% in 2022, and the growth rate of transportation investment planning of Zhejiang and Jiangsu slowed down, 3% and 6% respectively, The growth rate of transportation infrastructure investment in Guizhou, Anhui, Xinjiang and Hubei in 2022 is 63%, 33%, 33% and 30% respectively. We expect that the infrastructure construction in major transportation projects, urban rail transit and new urbanization mentioned in the 14th five year plan is still expected to grow. In addition, the investment in new energy types such as pumped storage and BIPV is gradually increasing, and the growth rate of generalized infrastructure is expected to be significantly repaired.
The issuance of special bonds is intensive, and the construction of urban pipe network and water conservancy projects are expected to be accelerated. Recently, the regulatory authorities issued a notice requiring local governments to supplement and submit a number of special debt projects on the basis of submitting the capital needs of special debt projects in the early stage. The supplementary application projects should comply with the nine investment areas stipulated by the national development and Reform Commission and the Ministry of finance. At the same time, the regulatory authorities require all localities to take the key areas such as urban pipe network construction and water conservancy as the supplementary report focus. In addition, we will do a good job in project reserve in rural areas such as rural revitalization and agricultural and rural modernization. As of February 8, the scale of local special bonds issued nationwide in 2022 reached 511.351 billion yuan, exceeding one third of the amount of special bonds issued in advance. From the perspective of purpose, the special debt for urban and rural, municipal and industrial park infrastructure accounts for the largest proportion, up to 42.2%; Transportation infrastructure construction is the second largest use, accounting for 18.3%; Followed by livelihood services, social undertakings and shantytowns, accounting for 16.0% and 10.7% respectively; The rest is invested in agriculture, forestry and water conservancy, transformation of old communities, Rural Revitalization and other fields.
Market Review
Last week, the construction (CITIC) index rose by 8.50%, the CSI 300 index rose by 2.66%, and all the tertiary sub sectors rose. Benefiting from the rising expectation of steady growth, the housing construction and infrastructure sectors dominated by blue chips of central enterprises led the rise. Among the stocks, Huitong group (+ 61.06%), Chongqing Construction Engineering Group Co.Ltd(600939) (+ 56.76%), Hualan Group Co.Ltd(301027) (+ 51.59%), deepwater planning (+ 36.51%) and Henan Provincial Communications Planning & Design Institute Co.Ltd(300732) (+ 36.42%) led the increase.
Investment advice
Under the medium and long-term growth dimension of “construction +” leader, enterprises with “new energy” and “chemical” industries have gradually entered the performance cashing period, and their performance is expected to grow high. Under the dimension of valuation restoration of value varieties, the leaders of local state-owned enterprises are expected to enjoy the high boom of regional infrastructure. The profit elasticity brought by the improvement of operating efficiency has initially appeared. There are both opportunities for steady growth and report quality improvement in the medium and long term. The increase of market share of central enterprises supports the continuous growth of revenue. After the completion of leverage reduction, roe still has obvious upward elasticity, With the continuous strengthening of the profit release ability and willingness of central enterprises, they also have strong elasticity of valuation repair.
Risk tips: Infrastructure & real estate investment went down more than expected, new energy & chemical business expansion was less than expected, the concentration of assembled leaders was less than expected, and the progress of efficiency improvement in the reform of central enterprises and state-owned enterprises was less than expected.
