On the whole, the establishment of the GDP target of about 5.5% in the government work report is expected to significantly reduce the market’s concerns about the continuity and effect of the steady growth policy. Although the deficit ratio of 2.8% is lower than last year, the fiscal expenditure has expanded by 2 trillion with the support of financial institutions turning in the profit balance and transferring into the budget stabilization fund, and the transfer payment has increased significantly by 18%, Local government infrastructure development is expected to have stronger support. In addition, the focus of the two sessions on special bonds, investment in the central budget, infrastructure development, and the policy orientation of real estate are in line with market expectations.
1) the GDP target of about 5.5% shows the determination to stabilize growth: Recently, external risks have increased and concerns about economic growth have increased. The GDP growth target of about 5.5% shows the determination of the central government to stabilize growth. We expect that there is still room for follow-up policies to stabilize growth.
2) the deficit ratio is 2.8%, but the fiscal expenditure has increased significantly: the 22-year deficit ratio is planned to be arranged at about 2.8%, and the deficit ratio is relatively reduced. On the one hand, it is to enhance the sustainability of finance, on the other hand, the balance profits of recent years handed over by specific financial institutions and franchise institutions, the scale of expenditure has increased by more than 2 trillion compared with last year, and the available financial resources have increased significantly; In addition, compared with last year, this year’s emphasis on new financial resources sinking to the grass-roots level and implementing enterprise relief; It is emphasized to make good use of government investment funds, drive the expansion of effective investment, adhere to “funds follow projects”, and give full play to the leveraging role of government investment.
3) 3.65 trillion yuan of local government special bonds: the 22-year target is 3.65 trillion yuan, the scale is the same as that of 21 years. At the same time, it emphasizes the need to make good use of government investment funds, drive the expansion of effective investment, adhere to the follow-up of funds with projects, reasonably expand the scope of use, support the follow-up financing of projects under construction, and start a number of qualified major projects, new infrastructure For construction projects such as the transformation of old public facilities, we should give full play to the role of major projects and leveraging government investment, improve relevant support policies, and fully mobilize the enthusiasm of private investment.
4) key direction of infrastructure development: 640 billion yuan was invested in the central budget (a year-on-year increase of 4.9%, higher than that in the past two years). In terms of projects, infrastructure investment will be carried out moderately in advance around the major national strategic deployment and the 14th five year plan. We will build key water conservancy projects, comprehensive three-dimensional transportation networks, important energy bases and facilities, accelerate the renewal and transformation of urban gas pipelines and other pipe networks, improve flood control and drainage facilities, and continue to promote the construction of underground comprehensive pipe corridors.
5) real estate: the tone of real estate is still the same as that of the past, but the first paragraph mentioned “continue to ensure the housing needs of the masses”, and also mentioned promoting the construction of affordable housing.
Market Review
Last week, the construction (CITIC) index rose 0.93% and the CSI 300 index fell 0.84%. The housing construction and infrastructure sectors, which underestimated the value of the three sub sectors and dominated by blue chips of central enterprises, led the gains, recording positive gains of 5.30% and 2.03% respectively. Among the individual stocks, Shanghai Yanhua Smartech Group Co.Ltd(002178) (+ 27.56%), Daqian Ecology & Environment Group Co.Ltd(603955) (+ 13.11%), Longjian Road&Bridge Co.Ltd(600853) (+ 9.71%), Shenzhen Qixin Group Co.Ltd(002781) (+ 9.74%) and Beijing Jiayu Door Window And Curtain Wall Joint-Stock Co.Ltd(300117) (+ 8.36%) 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.
