[core view of this week] the government work report sets the GDP growth target of this year at about 5.5%, and points out that in order to achieve this target, more proactive fiscal, monetary and investment measures should be implemented. In the face of the triple pressure of current demand contraction, supply shock and weakening expectation, the policy still sets the economic growth target at a high level, showing a strong determination to stabilize growth. In addition, this week, the China Banking and Insurance Regulatory Commission and the central bank issued the notice on strengthening the financial services of new citizens, which supports “commercial banks to reasonably determine the standards for the first set of housing mortgage loans of new citizens who meet the purchase conditions”, which may provide reasonable channels for subsequent cities to implement policies, broaden credit and stabilize real estate.
The current policy has a clear attitude towards steady growth, the follow-up infrastructure is expected to increase, the real estate policy is expected to continue to improve, and strengthen the main line of steady growth investment: 1) undervalued blue chip: the main focus of this round of steady growth is large-scale key projects. As one of the main implementers, central construction enterprises and state-owned enterprises are expected to benefit from the core. Medium and long-term infrastructure REITs is expected to improve the capital turnover and business model of construction enterprises, Reshaping the valuation system, focusing on recommending central construction enterprises China State Construction Engineering Corporation Limited(601668) (March gold stock, pe4.2x), China Communications Construction Company Limited(601800) (pe6.4x), China Railway Group Limited(601390) (pe4.9x), high growth local state-owned enterprises Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (pe4.8x), Sichuan Road & Bridge Co.Ltd(600039) (pe8.3x); 2) Business elasticity direction: a) steel structure: steel structure benefits from infrastructure improvement and manufacturing investment repair, with emphasis on Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe11x) and Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe17x); b) New power system: the government work report requires to improve the power grid’s ability to absorb new energy. The rapid development of distributed new energy drives the construction of distribution and consumption side to accelerate. It focuses on recommending the leader of microgrid Acrel Co.Ltd(300286) (pe26x) and the leader of distribution network EPCO Suwen Electric Energy Technology Co.Ltd(300982) (pe23x); c) Urban pipe network: the government work report requires to speed up the renewal of pipe network, and the demand for energy-saving transformation of urban heat supply network is expected to accelerate. It is recommended that Runa Smart Equipment Co.Ltd(301129) (pe20x) be the leader of heating energy saving.
The government work report places steady growth in a prominent position and continues to be optimistic about investment opportunities in the main line of steady growth. The 2022 government work report stressed the need to “keep the economy operating within a reasonable range, maintain the overall social stability and welcome the victory of the 20th National Congress”. At the same time, it pointed out that “China’s economy will withstand the downward pressure and will go steady and far”, showing the determination of steady growth policy. Specifically: 1) in terms of GDP, the target growth is about 5.5%, and it is emphasized that the target is “medium and high-speed growth on a high base, which reflects the initiative and requires hard work to achieve”. Last year’s GDP target growth was 6% (actual growth was 8.1%), and there is no mention of the difficulty of achieving the target, which means that it is difficult to achieve the GDP target this year and more proactive measures need to be implemented, It is expected that the steady growth policy will be further strengthened; “All regions and departments should earnestly shoulder the responsibility of stabilizing the economy”. The weight of GDP assessment of local governments may be increased in the follow-up, and the enthusiasm of local governments to stabilize growth is expected to improve. 2) In terms of fiscal policy, the planned deficit ratio was 2.8%, 0.4 PCT lower than last year’s budget, and the scale of funds decreased by 200 billion yuan, However, through cross year adjustment (that is, China has made great efforts to build and improve the cross year budget balance mechanism since 2014, so as to maintain the general correspondence between budget revenue and expenditure over a period of several years, and the balance or deficit can be adjusted in the form of budget stability adjustment fund and government debt, in which the budget stability adjustment fund is the reserve fund set by the general public budget), The funds transferred from the central government to the general budget alone reached 1.27 trillion, which is equivalent to increasing the deficit ratio by 1 PCT. At the same time, it is planned to arrange 3.65 trillion yuan of special bonds for local governments, which is the same as last year. However, considering that the 1.2 trillion special bonds issued in the fourth quarter of last year will be carried forward to this year, 4-5 trillion special bond funds can be put into use throughout the year, It is expected that the overall fiscal expenditure of the whole year will maintain a high intensity. 3) In terms of monetary policy, it is proposed to “provide stronger support for the real economy” and “expand the scale of new loans”, which are more direct than last year. It is expected that China’s monetary environment will be relatively loose this year to provide support for steady growth.
Infrastructure is still the main focus of current steady growth, and the real estate policy shows a warming trend. 4) In terms of infrastructure, the report continues the requirements of the central economic work conference at the end of last year to “actively expand effective investment and moderately advance infrastructure investment”, and emphasizes supporting the follow-up financing of projects under construction. At present, infrastructure investment is still an important starting point for steady growth. In addition to emphasizing the construction of major water conservancy, transportation and energy projects, this year’s new emphasis on accelerating the renewal and transformation of urban gas pipelines and other pipe networks, improving flood control and drainage facilities, and promoting the construction of underground comprehensive pipe corridors is expected to show high elasticity in relevant subdivided fields. In addition, the report makes it clear to “promote the construction of affordable housing”, which is significantly further than the statement of “effectively increasing the supply of affordable rental housing and housing with common property rights” last year, and the construction of affordable housing has entered an accelerated period (from the perspective of investors and Implementation methods, we believe that the infrastructure attribute of affordable housing is stronger than that of real estate). 5) In terms of real estate, although the report still emphasizes “no speculation in real estate”, it specifically refers to “supporting the commercial housing market to better meet the reasonable housing needs of buyers”. Last year, it did not mention the relevant contents of commercial housing, reflecting the requirements for correction of early real estate policies. In addition, on Friday, the CIRC and the central bank issued the notice on strengthening the financial services of new citizens. The new public range has come to the urban areas, which have been living in towns for many reasons, such as starting a business, getting their children to school, and taking refuge in their children. There are about 300 million groups of people who have not obtained local registered residence or registered residence for three years. At the same time, the notice proposes to support “commercial banks to reasonably determine the standard of the first housing mortgage loan of new citizens who meet the purchase conditions, and improve the convenience of borrowing and repayment”. Adjusting the down payment ratio is one of the most effective means of real estate regulation. This policy may provide a reasonable channel for subsequent local policies to broaden credit and stabilize real estate, which needs to be followed up and observed. Overall, the current real estate policy shows a warming trend, and the industry is expected to continue to repair.
Dual carbon emphasizes giving priority to ensuring energy supply, and it is expected that the implementation mode and rhythm of dual carbon policy will be optimized. 6) In terms of dual carbon, compared with last year’s emphasis on “doing a solid job in carbon peaking and carbon neutralization”, this year’s emphasis on promoting dual carbon should be “orderly”, should be “established first and then broken” and “ensure energy supply”. It is expected that the implementation mode and rhythm of dual carbon policy will be optimized; In terms of new energy construction, this year’s new focus proposed to improve the power grid’s capacity to absorb new energy, and stressed that “new renewable energy and raw material energy consumption will not be included in the total energy consumption control”; In terms of specific energy-saving areas, it was not explained in detail last year. This year, it was clearly proposed to promote energy conservation and carbon reduction in iron and steel, nonferrous metals, petrochemical, chemical industry, building materials and other industries; In terms of dual control of energy consumption, last year stressed “improving the dual control system of energy consumption”, and this year proposed to promote the transformation from “dual control” of energy consumption to “dual control” of total carbon emission and intensity. On the whole, the management has made few statements on dual carbon since this year. This government work report basically defines the follow-up development focus of China’s dual carbon, that is, giving priority to ensuring energy supply, promoting green energy, improving the power grid’s ability to absorb renewable energy, weakening dual control of energy consumption, strengthening dual control of carbon emission, and actively promoting energy conservation and carbon reduction in the industrial field.
Local governments have sufficient power to become powerful countries, and infrastructure listed enterprises have sufficient power. They focus on the leaders of state-owned enterprises Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Sichuan Road & Bridge Co.Ltd(600039) . At present, although the financing channels of local infrastructure are limited under the strict supervision of implicit debt, we can still improve the financing capacity of the capital market by supporting the strengthening and expansion of local listed state-owned construction enterprises, promoting the listing of infrastructure assets, and issuing REITs. In the future, local governments are expected to focus on supporting state-owned listed infrastructure companies, Relevant listed companies are expected to enter a new stage of rapid development, and the valuation center is expected to improve.
We are optimistic about local infrastructure listed companies with large regional infrastructure investment space, good regional financial situation and strong resource strength of major shareholders, and focus on recommending high growth local state-owned enterprises: 1) Shandong Hi-Speed Road&Bridge Co.Ltd(000498) : this week, we issued the company’s in-depth report “leading transportation infrastructure in Shandong Province, high growth, low value and good cost performance”, During the “14th five year plan” period, the mileage target of new expressways / high-speed railways in Shandong increased by 19% / 68% respectively compared with the actual mileage increased during the “13th five year plan”. The investment in traffic construction in the province in 2022 is expected to exceed 270 billion yuan, an increase of 12% compared with last year. The traffic infrastructure in Shandong is expected to improve. Shandong Hi-Speed Company Limited(600350) group, the largest shareholder of the company, was formed by the merger of Shandong Hi-Speed Company Limited(600350) group and Qilu transportation group in 2020. The investment and construction market share of expressways in the province has increased from 39% to 94%, which is expected to drive Shandong Hi-Speed Road&Bridge Co.Ltd(000498) a significant increase in the share of high-speed construction in the province and a rapid growth in profits. 2) Sichuan Road & Bridge Co.Ltd(600039) : this week, the company released the performance express for 2021, achieving revenue / total profit / performance growth of 31% / 82% / 79% respectively. The revenue and total profit targets significantly exceeded the targets at the beginning of the year, and the Q4 revenue performance increased significantly. According to the official account of the company, in February 25th, the company proposed in the first quarter of the production and operation promotion meeting that “in principle, we must ensure that the annual revenue target of 20% is achieved in the first quarter”. We assume that the company’s revenue target is 100 billion yuan (see draft of the company’s equity incentive plan) in 2022, and the company’s 2022Q1 is expected to achieve a revenue of 20 billion yuan, an increase of 50%, and continue to grow at a high growth trend. Recently, the price of lithium iron phosphate has continued to rise, and the lithium battery industry chain has maintained a high momentum. At present, the company continues to layout the lithium battery business and actively bind the upstream and downstream industry chain. The subsequent production of lithium battery cathode materials and precursors is expected to accelerate and benefit from the high prosperity of the lithium battery industry.
The supply and demand of the steel structure industry has improved, and we are optimistic about the leading enterprises to achieve accelerated profit growth. 1) On the demand side: at present, steel structure is mainly used in public buildings and industrial buildings (China’s steel structure housing is still in the early stage of development and the construction volume is small). This year, infrastructure improvement and manufacturing investment are expected to continue the repair trend, and the demand for steel structure is expected to increase significantly. Superimposed on the stabilization of steel price this year, the release rhythm of steel structure demand is expected to accelerate, and the industry is expected to show a higher outlook. 2) On the supply side: according to the tracking situation of our industry, the steel price fluctuated sharply last year. Many small and medium-sized steel structure enterprises had weak anti risk ability, had certain operating difficulties, gradually withdrew from the market, and the industry supply pattern was reshaped. Therefore, under the background of optimizing the supply and demand pattern this year, the steel structure leader with outstanding scale cost advantage is expected to increase the market share and accelerate the growth of profits, and the valuation is expected to meet the driving force of improvement. It is recommended to focus on the steel structure construction leader Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , steel structure manufacturing leader Anhui Honglu Steel Construction(Group) Co.Ltd(002541) , and note Anhui Fuhuang Steel Structure Co.Ltd(002743) .
March gold stock China State Construction Engineering Corporation Limited(601668) : real estate and construction business need to be revalued, the core benefit target of steady growth, and the current key recommendation continues! Since the end of last year, we have repeatedly issued China State Construction Engineering Corporation Limited(601668) depth and comment reports, continued to focus on recommendations, and again listed them as gold stocks in March, believing that they have great momentum for valuation revaluation: 1) real estate development business is expected to be revalued: under strict supervision, the supply side reform of the real estate industry is accelerated, the market share is expected to further concentrate on the leaders of central enterprises and state-owned enterprises, and the competition pattern of the industry is optimized, The profitability of the project is expected to improve in the future.
CNOOC real estate, the company’s main real estate platform, has long adhered to the low leverage business strategy and stable financial indicators. As a leader of central enterprises, it is expected to obtain more high-quality land resources under compliance requirements in the future, or acquire real estate enterprise projects with risks in operation, accelerate industry integration, realize the continuous improvement of market share, and the value is expected to be revalued. 2) The construction business is expected to be revalued: the market share of the company is expected to increase from 4.5% in 2009, which is expected to further accelerate the increase of the leading market share. In recent years, the company has continued to optimize the construction business structure, the proportion of infrastructure and public construction projects has been increasing, and the proportion of residential projects has decreased from a high of 50% in 2017 to 31% in the first three quarters of 2021, which is expected to drive the continuous improvement of profitability and operation quality of construction business.
3) national reform and steady growth to promote valuation repair: the company actively promoted the reform of state-owned enterprises, carried out the fourth phase of restricted stock grant throughout the company, and implemented restricted stock options in the overseas development of subsidiaries. This year is the year when the three-year action plan for the reform of state-owned enterprises ends and the results are tested. A number of reforms are expected to fully stimulate the company’s business vitality and enhance the driving force of enterprise market value. At present, the company’s valuation is at an all-time low, with a dividend rate of 4%. The steady growth policy is expected to drive the valuation repair. 4) There is still much room for revaluation: we predict that the net profit attributable to the parent company in 21-23 years will be 49.5/54.1/58.7 billion yuan respectively, with a year-on-year increase of 10% / 9% / 9%, PE 4.6/4.2/3.9 times and Pb (LF) 0.72 times respectively. The reasonable market value of the segment is 311.1 billion yuan, about 36% higher than the current market value.
Investment suggestions: the government work report in 2022 has a firm attitude towards steady growth, strengthens the main investment opportunities for steady growth, and continues to be optimistic: 1) undervalued blue chip: in the short term, the main focus of this round of steady growth is large-scale key projects. As one of the main implementers, central construction enterprises and state-owned enterprises are expected to benefit from the core. In the medium and long term, with the accelerated issuance of infrastructure REITs and the gradual maturity of the trading market, it is expected to broaden infrastructure financing channels, improve the capital turnover and business model of construction enterprises, and reshape the valuation system. Construction blue chips with more operating assets are expected to benefit mainly. China State Construction Engineering Corporation Limited(601668) , China Communications Construction Company Limited(601800) , China Railway Group Limited(601390) , and high growth local state-owned enterprises Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Sichuan Road & Bridge Co.Ltd(600039) ; 2) Business elasticity direction: a) steel structure: the supply and demand of steel structure industry is improved, the leader is optimistic about achieving accelerated profit growth, and Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) ; b) New power system: the government work report requires to improve the power grid’s ability to absorb new energy, and the rapid development of distributed new energy drives the construction of distribution and consumption side to accelerate. It focuses on recommending the leader of microgrid Acrel Co.Ltd(300286) , the leader of distribution network EPCO Suwen Electric Energy Technology Co.Ltd(300982) ; c) Urban pipe network: the government work report clearly proposes to speed up the renewal of pipe network, and the demand for energy-saving transformation of urban heat supply network is expected to be released rapidly. It is mainly recommended that Runa Smart Equipment Co.Ltd(301129) .
Risk of overseas accounts receivable exceeding the expected risk, risk of overseas accounts receivable exceeding the expected risk
