Special topic of this week: what signals will the Politburo meeting release?
On December 8-10, the central economic work conference was held to set the development focus and work strategy for 2022. The conference further emphasized the importance of steady growth, and infrastructure is expected to become the main focus of this round of steady growth. We compared the main contents of the meetings of the Political Bureau of the CPC Central Committee in 2021 and 2020:
1) Policy keynote: stabilize the word and re mention “economic construction as the center”. In addition to the “six stabilities and six guarantees”, we still need to pay attention to the requirement that economic construction is the center of the party’s basic line and send a clear mobilization signal for steady growth.
2) Infrastructure has been supported, but structural differentiation may still be more obvious. In terms of fiscal policy, this year’s meeting proposed to moderately advance infrastructure investment, but the 20-year economic work meeting did not explicitly mention infrastructure investment. The overall prosperity of infrastructure investment in 21 years is weak, and the downward trend is more obvious after entering Q2. We expect that infrastructure investment in the first half of 22 years will be driven by the accelerated issuance of special bonds and loose policy margin, The prosperity is expected to pick up compared with 21h1. However, it is worth noting that this year’s meeting still proposed to resolutely curb the hidden debt of local governments. The municipal infrastructure in the charge of the urban investment company is an important part of infrastructure investment. Under the condition of strict control of hidden liabilities, we judge that the pulling effect of municipal investment on infrastructure will still be very limited, and the main projects driving infrastructure may focus on highways, high-speed railways, new energy, pumped storage and other fields with strong central financial support and self hematopoiesis ability.
3) The main tone of “housing without speculation” remains unchanged, but the expression is marginal. The 2020 meeting mentioned “housing without speculation” and affordable housing construction. These two expressions were continued in 2021, but for commercial housing, the expressions of meeting the reasonable purchase needs of buyers and implementing policies according to the city were added. Generally speaking, we believe that “housing without speculation” is still the main tone of the real estate policy, but the recent policy and financing side have made marginal amendments according to the more severe economic situation. We judge that the sharp decline in real estate sales and new construction in 2022 is expected to show a marginal improvement trend. Under the condition of gradual transformation of new construction in the past, it is expected to maintain a relatively high boom, and affordable housing is expected to become a better supplement to the housing market.
Market Review
Last week, the construction (CITIC) index fell by 0.35%, the CSI 300 index rose by 2.90%, and all the three sub sectors rose, among which architectural decoration, housing construction and architectural design led the gains, recording positive gains of 1.31%, 1.15% and 0.71% respectively. Among the individual stocks, Beijing Fengshangshiji Culture Media Co.Ltd(300860) (+ 50.23%), Chengdu Hi-Tech Development Co.Ltd(000628) (+ 21.65%), Shenzhen L&A Design Holding Limited(300949) (+ 17.20%), Shenzhen Institute Of Building Research Co.Ltd(300675) (+ 15.26%), China Aluminum International Engineering Corporation Limited(601068) (+ 15.08%) 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 value variety valuation restoration, local state-owned enterprise leaders are expected to enjoy the high prosperity of regional infrastructure. The profit elasticity brought by the improvement of operating efficiency has initially appeared. There are opportunities for both 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.
