Investment summary:
Event: in the work report of the Chinese government on March 5, 2022, it was proposed that the fiscal deficit rate should be reduced to 2.8%, and the amount of special bonds should be 365 million yuan, "funds follow the project", so as to mobilize the enthusiasm of private investment. Real estate "implement policies according to the city" to promote a virtuous circle and healthy development.
Comments:
I. The goal of "steady growth" in 2022 is determined, and the probability of sustainability exceeding expectations is high. The government work report once again mentioned that "China's economic development faces triple pressures of shrinking demand, supply shock and weakening expectations. Local epidemics occur from time to time. The recovery of consumption and investment is slow, it is more difficult to stabilize exports, the supply of energy and raw materials is still tight, and the task of stabilizing employment is more arduous".
In 2022, the negative impact of the "three red lines" regulation policy on the real estate industry will further appear. At the same time, there is uncertainty in the external environment:
The uncertainty of China US relations, the increasing tightening of the Fed's policies and the impact of the political and military environment.
At present, these influencing factors have just entered an initial stage, which will have a sustained impact on China's economy in the future. Therefore, the policy goal of steady growth in 2022 is not only highly deterministic, but also not achieved overnight. It is an important issue that needs to constantly face new problems and changes, take advantage of opportunities, layout in advance and respond actively. In this case, there is a high probability that the sustainability of steady growth will exceed expectations.
II. The reduction of the fiscal deficit ratio and the year-on-year balance of special bonds are mainly to improve the effectiveness and sustainability of investment. When the sustainability of steady growth may exceed expectations, the force of fiscal policy must be effective. Only by improving the effectiveness of investment can a virtuous circle of economic stimulus be formed, rather than extensive and rapid work, forming a large number of inefficient investment assets, becoming a drag on economic development and limiting the further sustainable development of fiscal policy. Therefore, the reduction of the fiscal deficit ratio and the year-on-year balance of the amount of special bonds are to ensure that the follow-up of the fiscal policy can continue to work, and reserve space for the sustainability of the steady growth policy.
Only when the effectiveness of policies is improved, can the funds used for efficient investment projects have better economic returns, attract the participation of private capital, ensure that "private investment accounts for the majority of investment", ensure the sustainability of project construction and operation, and ensure that more private capital can continue to enter more new projects, Ensure that steady growth can be sustained and effective, rather than stabilizing the present and laying a mine for the future, so as to prevent risks and stabilize growth.
III. The strength of fiscal policy is not reduced, but increased and accumulated. In fact, from the perspective of the amount of fiscal expenditure, even with a deficit rate of 2.8%, considering the growth of fiscal revenue and other income, the scale of fiscal expenditure increased by more than 2 trillion year-on-year, with a year-on-year increase of about 8%. The issuance of special bonds has started in the second half of 2021. In the second half of 2021, 3 trillion special bonds were issued, accounting for 83.69% of the annual quota. The construction of these projects will be released in 2022, including the issuance of special bonds from January to February 2022, which has reached 877.5 billion yuan, accounting for 24% of the annual quota. It also accumulates and prepares for the project. Meanwhile, the investment in the central budget in 2022 was 640 billion yuan, an increase of 5% year-on-year.
IV. infrastructure construction is an important starting point for steady growth, and the construction of municipal, transportation, water conservancy and energy bases is an important direction. In 2022, we are faced with the uncertainty of export driving the economy. The impact of the epidemic on the normal social order still exists. The economic downturn has a negative impact on the operating profits of enterprises and residents' income. At the same time, with the interference of raw materials and inflation factors, the driving effect of consumption on the economy will not be obvious. Therefore, infrastructure construction will become an important starting point for steady growth.
This time, the government work report also described the detailed direction of investment: "build key water conservancy projects, comprehensive three-dimensional transportation network, important energy bases and facilities, speed up 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." And "orderly promote urban renewal, strengthen the construction of municipal facilities and disaster prevention and reduction capacity" and "build digital information infrastructure".
Therefore, the combination of old and new infrastructure is an important path for steady growth in 2022. However, due to the large scale of traditional infrastructure, nearly 20 trillion, if it is not well developed, the effect of steady growth will be affected. Therefore, in 2022, the policy of benefiting from steady growth in municipal construction, transportation, water conservancy and professional engineering is great.
V. the performance growth of construction companies with sufficient newly signed orders and on-hand orders is determined, and the demand of building materials companies has a high probability of bottoming out and improving. It is necessary to carry out the "moderate growth" of infrastructure investment and ensure the "stable implementation" of projects. Companies with ordered projects can better implement the projects in such an environment, ensuring the certainty of performance growth. In particular, some infrastructure companies can take advantage of the stable growth environment in 2022 to revitalize and optimize the stock assets, which will bring new opportunities for the development of the company.
The demand side of building materials companies related to municipal construction and transportation will also be improved by the release of infrastructure projects. Although the impact of the downturn of the real estate boom on the demand for building materials will continue, with the real estate "implementing policies for the city" and "meeting the reasonable housing needs of buyers", the risk prevention policy of the real estate industry will maintain the healthy and sustainable development of the industry. From the perspective of the policy orientation of real estate, it is also to improve the effectiveness of investment in the real estate industry and prevent blind leverage, so as to lay risks for the future. Therefore, with the promotion of the real estate policy, the real estate industry has entered a virtuous circle and long-term healthy development, and the demand for building materials related to real estate will also see a bottom improvement, so as to ensure the long-term and healthy release of the demand for building materials, which is also conducive to the improvement of the valuation of the building materials industry.
Vi. continue to suggest paying attention to undervalued buildings, cement and post consumption cycle building materials. Based on the leading companies of infrastructure, professional engineering and steel structure construction that are not affected by the real estate, benefiting from the direction of infrastructure construction, full orders, low valuation and uncertain performance growth, it is recommended to pay attention to China Communications Construction Company Limited(601800) ; For the cement industry benefiting from the improvement of the bottom of demand caused by the change of real estate policy, it is suggested to pay attention to the leading cement companies and excellent companies of post cycle consumer building materials; Optimistic about the subject matter with performance release and valuation improvement.
Risk tip: the uncertainty and strength of the steady growth rhythm are less than expected, and the decline in the prosperity of the real estate industry lasts longer than expected.
