Industry and policy developments
1) On December 20, 2021, people’s information, The new urbanization plan of Guangdong Province (2021-2035) proposes that by 2035, Guangdong will basically realize new urbanization, the urbanization rate of the province’s permanent population will reach 82%, and the urban permanent population will be 110 million. The urban settlement restrictions except for the central urban areas of individual mega cities will be completely cancelled, and the household registration system of permanent residence will be fully implemented.
2) On December 22, 2021, the national development and Reform Commission issued the multi-level Rail Transit plan for Chengdu Chongqing dual City Economic Circle: by 2025, the total scale of rail transit in Chengdu Chongqing will reach more than 10000 kilometers, including more than 9000 kilometers of railway network, covering all cities with a population of more than 200000.
Market review this week
This week (12.20-12.24), the construction industry (Shenwan building decoration index) increased by – 1.24% (HS300 was – 0.67%). The top 5 industry increases were Shanghai Luoman Lighting Technologies Inc(605289) + (34.76%), Shenzhen Wenke Landscape Co.Ltd(002775) (+ 21.00%), Shanghai Fengyuzhu Culture Technology Co.Ltd(603466) (+ 14.69%), Cofco Engineering & Technology Co.Ltd(301058) (+ 11.15%), S.P.I Landscape Design Co.Ltd(300844) (+ 10.38%); the top 5 industry decreases this week were Beijing Jiayu Door Window And Curtain Wall Joint-Stock Co.Ltd(300117) (- 21.09%), China Aluminum International Engineering Corporation Limited(601068) (- 19.95%), Fujian Yongfu Power Engineering Co.Ltd(300712) (- 14.67%), Zhenhai Petrochemical Engineering Co.Ltd(603637) (- 13.54%), Center International Group Co.Ltd(603098) (- 10.99%). From the perspective of the overall P / E ratio of the industry, the P / E ratio (TTM, index average overall method) of the architectural decoration industry as of December 26 was 9.60 times, which decreased compared with the previous week. The Industry P / B ratio (MRQ) was 0.94 times, which decreased compared with the previous week. At present, the industry P / E ratio (TTM) is the lowest, the top 5 Shaanxi Construction Engineering Group Corporation Limited(600248) (2.86), China State Construction Engineering Corporation Limited(601668) (4.03), China Railway Construction Corporation Limited(601186) (4.18), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (4.96), China Railway Group Limited(601390) (5.13); the lowest price to book ratio (MRQ) is China Railway Group Limited(601390) (0.64), China State Construction Engineering Corporation Limited(601668) (0.61), China Communications Construction Company Limited(601800) (0.61), Shenzhen Grandland Group Co.Ltd(002482) (0.57), China Railway Construction Corporation Limited(601186) (0.53). This week, the building decoration industry (SW) rose by – 1.24%, weaker than Shanghai and Shenzhen 300 (- 0.67%), Shanghai Composite Index (- 0.39%) and Shenzhen composite index (- 1.06%), ranking 19th among the 28 Tier-1 industries in sw28. This week, 42 companies in the construction industry recorded an increase, accounting for 29%; 56 companies exceeded the industry index (- 1.24%) this week, accounting for 38%. This week, the construction industry recorded an increase, the number of companies decreased, the number of companies exceeding the industry increase decreased, and the industry ranking was higher than last week (No. 3) down 16 places. From the structure of this week’s increase, the main targets of this week’s increase are decoration and garden engineering. The targets of decoration and decoration sector are Shanghai Luoman Lighting Technologies Inc(605289) (+ 34.76%), Shanghai Fengyuzhu Culture Technology Co.Ltd(603466) (+ 14.69%), Shenzhen Zhongzhuang Construction Group Co.Ltd(002822) (+ 10.00%), Shenzhen Bauing Construction Holding Group Co.Ltd(002047) (+ 7.79%); the targets of garden and forest engineering sector are Shenzhen Wenke Landscape Co.Ltd(002775) (+ 21.00%), S.P.I Landscape Design Co.Ltd(300844) (+ 10.38%), Inner Mongolia M-Grass Ecology And Environment (Group) Co.Ltd(300355) (+ 9.05%); Cofco Engineering & Technology Co.Ltd(301058) (+ 11.15%) ranked among the top 10 in the industry this week.
Interpretation of policies / highlights of this week
This week, new urbanization and new infrastructure construction in Guangdong and Chengdu Chongqing were promoted. On December 20, The new urbanization plan of Guangdong Province (2021-2035) was released. It is proposed that by 2035, Guangdong will basically realize new urbanization. The urbanization rate of the province’s permanent population will reach 82%, and the urban permanent population will reach 110 million. The restrictions on urban settlement except for the central urban areas of individual mega cities will be completely abolished, and the registered permanent residence system will be fully implemented.
On December 22, the national development and Reform Commission issued the multi-level Rail Transit plan for Chengdu Chongqing Twin City Economic Circle: by 2025, the total scale of rail transit in Chengdu Chongqing will reach more than 10000 kilometers, of which the scale of railway network will reach more than 9000 kilometers, covering all cities with a population of more than 200000. The central economic work conference held in December proposed to deeply implement major regional strategies and regional coordinated development strategies to improve the quality of new urbanization. According to the new urbanization plan of Guangdong Province, there is sufficient room for the urbanization construction of the coastal economic belt and the northern Ecological Development Zone in Guangdong Province. The above urban-rural integration construction will help realize the co urbanization development of the central city of the metropolitan area and the surrounding urban and rural areas, as well as housing, commercial office, livelihood buildings, public facilities Investment in transportation facilities, construction and other fields can be improved. As a new type of infrastructure, urban rail transit system plays an important basic role in the expansion of big cities, multi centralization, optimization of urban layout, construction of Metropolitan Urban Agglomeration, etc. it has also achieved rapid growth in the past decade. The construction plans of many rail transit lines in China have been approved in 2020 and 2021, and there is great room to improve China’s urbanization rate in the next 10 years, Will lead to the expansion of public transport demand. At present, the construction goal of coordinated development of China’s metropolitan areas, urban agglomerations and regions is clear. The demand for urban rail construction projects around China is expected to continue to increase, including the construction of subway, light rail, intercity railway and suburban fast rail. The rail transit industry chain is relatively long, from design, vibration reduction High quality listed companies from equipment to operation and maintenance are expected to fully benefit.
On December 24 this week, according to the data of the Ministry of transport, from January to November, the national transportation fixed asset investment was 3.28 trillion yuan, including 640.1 billion yuan for railways, 2.53 trillion yuan for roads and waterways and 105 billion yuan for civil aviation. It is expected to be newly changed throughout the year (expansion) more than 9000 kilometers of expressways have been built, about 1000 kilometers of high-grade waterways have been added and improved, 9 newly certified civil transport airports have been added, and the operating mileage of urban rail transit has exceeded 1000 kilometers. From January to November 2021, the growth rate of infrastructure investment is under pressure, with a year-on-year increase of 0.5%, which is slower than that from January to October. In November, the decline of investment in a single month has expanded; from the perspective of sub sectors, road transportation The monthly investment growth rate of the industry and railway transportation industry increased. Two new and one heavy will remain the focus of work in 2022, including new infrastructure, new urbanization, transportation, water conservancy and other major projects. In the field of transportation construction, the market share of high-quality central enterprises and local state-owned enterprises deeply engaged in infrastructure construction continues to increase. We believe that under the background of steady growth, the dominant position of infrastructure industry leader and regional leader will be further strengthened. For example, 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, Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) and other regional infrastructure leaders have signed new orders and performed well. The valuation advantage is very significant, and the performance is worth looking forward to.
From January to November this year, the Shanxi Guoxin Energy Corporation Limited(600617) power generation reached 1035.57 billion kwh, breaking the 1 trillion kwh mark for the first time, with a year-on-year increase of 32.97%, accounting for 13.8% of the national power consumption from January to November, with a year-on-year increase of 2.14 percentage points. The national wind power generation, Cecep Solar Energy Co.Ltd(000591) power generation and biomass power generation reached 586.67 billion kwh, 300.9 billion kWh and 148 billion kwh respectively, with a year-on-year increase of 40.8%, 24.3% and 23.4% respectively. The contribution of new energy power generation to the national power supply continues to increase. China’s new power construction continues to be actively promoted, bringing development opportunities for relevant companies in the fields of power generation, intelligent transmission and distribution grid, energy storage and substation. The relevant targets of new power construction contracting and operation and maintenance in the construction industry are expected to fully benefit. It is suggested to pay attention to: 1) the performance of leading orders for power station and high-voltage transmission and transformation grid contracting and construction is improved, taking the opportunity of green power asset revaluation, Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) China Energy Engineering Corporation Limited(601868) ； 2) High quality targets of user side distribution network EPC and operators, layout photovoltaic power generation and energy storage business, Suwen Electric Energy Technology Co.Ltd(300982) , Zhejiang Southeast Space Frame Co.Ltd(002135) ; 3) Intelligent patrol inspection of high-quality private enterprises in the power industry, Hangzhou Shenhao Technology Co.Ltd(300853) ; 4) Pumped storage contracting and construction of state-owned enterprises, Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) , Guangdong No.2 Hydropower Engineering Company Ltd(002060) and Anhui Construction Engineering Group Corporation Limited(600502) .
The central economic work conference in 2022 focuses on stability and expresses strong expectations for steady growth. In the macro policy part, the meeting proposed to ensure the intensity of fiscal expenditure and accelerate the progress of expenditure. At the same time, it was mentioned for the first time that infrastructure investment should be carried out moderately in advance, indicating that infrastructure is expected to become an important starting point for this round of steady economic growth, and the annual infrastructure investment plan in 2022 is expected to be laid out in advance. In terms of capital supply, the accelerated issuance of local government special bonds in the second half of 2021 is expected to
Physical investment will be formed in 2022. Recently, the Ministry of finance has issued a quota of 1.46 trillion yuan of new special debt in 2022 to all localities in advance. In this regard, the Ministry of Finance said that it will continue to strengthen supervision and promote the issuance and use of the quota in advance in the first quarter of next year, so as to provide strong support for stabilizing the macro-economic market. In 2022, the special bonds will be mainly used in nine major directions: transportation infrastructure, energy, agriculture, forestry and water conservancy, ecological and environmental protection, social undertakings, urban and rural cold chain and other logistics infrastructure, municipal and industrial park infrastructure, major national strategic projects and indemnificatory housing projects.
It is expected that the prosperity of the infrastructure industry in the first half of 2022 will pick up compared with 2021h1, and the infrastructure investment is expected to be marginally improved.
Investment view
In 2022, the construction industry will continue to embrace the “new economy” and actively integrate into the “double carbon” national strategy, and green buildings are expected to rise. At present, China’s economy is facing downward pressure, steady growth and cross cycle adjustment are approaching, and the construction industry is expected to usher in dual development opportunities of policy driven and “construction +”. From the perspective of policy, the active fiscal policy should improve efficiency, pay more attention to accuracy and sustainability, ensure the intensity of fiscal expenditure and speed up the progress of expenditure. It is expected that local special bonds are expected to be launched in the first half of the year, the “two new and one heavy” construction is expected to be overweight, and the infrastructure investment is moderately advanced, which is worth waiting for. Monetary policy should be flexible and appropriate, and maintain reasonable and abundant liquidity. There is an expectation of reducing reserve requirements and interest rates in 2022. The easing of monetary policy is conducive to the development of the industry. Moreover, fiscal policy and monetary policy should be coordinated and linked, and cross cyclical and counter cyclical macro-control policies should be organically combined. The policy is expected to become a major driving force for the “spring agitation” of the industry in 2022. At the same time, the construction industry actively embraces the “new economy” and actively layout Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) around “construction +”. BIPV, energy storage and carbon sequestration have become the key layout fields of listed companies. Some companies Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) have begun to show signs and are expected to continue to make efforts in the future, so as to improve the valuation level of companies and industries. In addition, 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. We believe that the construction industry has not only a “white horse” with good performance and extremely low valuation, but also a “dark horse” with “building +” layout and standing at the market outlet. The overall trend of the industry is good, with fundamental support and policy catalysis, and “building +” can improve the valuation space. It is an industry with “advance, attack and retreat” and is optimistic about the overall trend of the construction industry in 2022.
Configuration mainline recommendations
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 leader 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 “two new and one heavy” construction, 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 recommended 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 regional infrastructure leaders such as Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) . 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, with emphasis on Guangzhou Metro Design & Research Institute Co.Ltd(003013) and Zhejiang Tiantie Industry Co.Ltd(300587) .
(2) Pumped storage benefit companies. With the change of energy structure, power supply safety has been put on the agenda, and energy storage has become the main means to solve power consumption safety. 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. Water conservancy and hydropower engineering enterprises have the construction of pumped storage projects Most of them have hydropower operation assets and are likely to layout pumped storage power stations. They are expected to fully benefit from the development of pumped storage in the future. It is mainly recommended that 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) .
(3) Prefabricated buildings. We believe that under the background of carbon peak and carbon neutralization goals, the prefabricated building field mainly in the form of concrete structure and steel structure will continue to fully benefit from the further improvement of the industry prosperity and demand release, and is expected to become an important development field under the carbon neutralization goals. 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) .
(4) 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) high-quality private enterprises for 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 less than expected, policy implementation is less than expected, economic downside risk
