\u3000\u3000 China State Construction Engineering Corporation Limited(601668) (601668)
Housing construction orders grew against the trend, and infrastructure business was significantly strengthened. In January 2022, the newly signed construction contract value of the company was 282.4 billion yuan, an increase of 19% at the same time. In terms of business segments, the newly signed contract amount of real estate construction was 232.7 billion yuan, an increase of 13% at the same time. Under the condition that the new construction area of real estate decreased significantly and the industry fundamentals were weak, the real estate construction orders increased steadily against the trend. It is expected that the main reasons are: 1) the newly signed government projects such as regional development and comprehensive parks increased significantly. 2) Manufacturing investment projects grew rapidly. According to the announcement, in January, the company won the bid for many factory projects such as Xiaomi, BOE and Hefei Lanke electronics. The newly signed contract amount of infrastructure construction is 48.7 billion yuan, with a significant year-on-year increase of 68%. It is expected that the high prosperity of infrastructure construction is mainly due to the “steady growth” policy. In terms of subregions, the newly signed contract amount at home / abroad in January was 274.4/8 billion yuan respectively, an increase of 18% / 84% at the same time. Overseas orders became positive for the first time after negative growth for 12 consecutive months, indicating that the overseas business environment has improved. In January, the newly started area of the company decreased by 59% and the completed area decreased by 14%. The physical quantity data of housing construction is still relatively low, and the bottom recovery still needs more policies and time.
The real estate sales data in January is still under pressure, and the industry policy is expected to continue to be marginal loose. In January 2022, the contract sales volume of the company’s real estate business was 16.4 billion yuan, a year-on-year decrease of 40%; The contracted sales area was 850000 square meters, a year-on-year decrease of 39%. By the end of January, the land reserve in hand of the company was 102.07 million square meters, about five times the sales area in 2021, and the land reserve was relatively abundant. Since the second half of last year, the national real estate investment and sales data have continued to decline. At present, the policy side has continuously released loose signals, and many places have issued supporting policies accordingly. The fundamentals of subsequent industries are expected to pick up.
The supply side reform of the industry has accelerated, and the leading value of central enterprises needs to be revalued. Under the supervision of the “three red lines”, in 2021, a number of highly leveraged private real estate enterprises have risks in their operation. It is expected that they will gradually withdraw from the market or slow down their expansion in the future, the supply side reform of the real estate industry will accelerate, and the market share is expected to further concentrate on the leaders of central enterprises and state-owned enterprises. China State Construction Engineering Corporation Limited(601668) its CNOOC real estate has long adhered to the low leverage business strategy and stable financial indicators. At the same time, as the leader of central enterprises, the company has smooth financing channels and low cost. In the future, it is expected to obtain more high-quality land resources under compliance requirements, or acquire real estate enterprise projects with operational risks, so as to accelerate industry integration. In addition, in recent years, under the disturbance of negative factors such as anti-corruption, replacing business tax with value-added tax, financial supervision and so on, the industry concentration in the field of construction has continued to increase. In the future, factors such as the advantages of centralized procurement of central enterprises, large-scale and comprehensive projects, and assembly development are expected to accelerate the industry concentration trend. The market share of the company’s “real estate + construction” business is expected to continue to increase. As of the latest closing date, the company’s PE (TTM) / Pb (LF) were 4.5/0.7 times (the lowest 3.8/0.64 times in History) respectively, and the valuation is still at a historical low. The follow-up efforts have been effective with the steady growth policy, and the company’s valuation is expected to be repaired.
Investment suggestion: we predict that the net profit attributable to the parent company from 2021 to 2023 will be 49.5/54.1/58.7 billion yuan respectively, with a year-on-year increase of 10% / 9% / 9%, corresponding to EPS of 1.18/1.29/1.40 yuan respectively. The current share price corresponds to PE of 4.7/4.3/3.9 times and Pb (LF) of 0.72 times respectively, maintaining the “buy” rating.
Risk tips: the credit risk impact of some real estate enterprises, the risk of real estate regulation, the risk that the project implementation progress does not meet expectations, and the risk of regulatory policy changes.
