Weekly market of construction industry
The industry rose and fell in the week. This week (3.7-3.11), the building decoration industry (SW) fell by – 2.54%, stronger than the performance of Shanghai Composite Index (- 4.00%), Shanghai and Shenzhen 300 (- 4.22%) and Shenzhen Component Index (- 4.40%). The weekly increase ranked fifth among the 31 primary industries of SW, and the industry ranking increased by 6 compared with last week (11th). In terms of molecular sector, International Engineering (3.67%) was the only rising sector this week, with smaller declines in steel structure (- 0.16%), engineering consulting services (- 2.09%) and basic municipal engineering (- 2.19%), and the weakest performance in Chemical Engineering (- 6.75%).
Performance of individual stocks in a week. A total of 40 companies in the construction industry recorded an increase this week, accounting for 27.40%; 73 companies, accounting for 50.00%, rose more than the industry index (- 2.54%) this week. The construction industry recorded an increase this week. The number of companies decreased compared with last week, and the number of companies whose performance exceeded the industry increase increased compared with last week. The top 5 gainers of the industry are Shenzhen Water Planning & Design Institute Co.Ltd(301038) (24.53%), Zhejiang Construction Investment Group Co.Ltd(002761) (23.54%), Norinco International Cooperation Ltd(000065) (23.34%), Xinjiang Communications Construction Group Co.Ltd(002941) (14.89%), Beijing Jiayu Door Window And Curtain Wall Joint-Stock Co.Ltd(300117) (13.83%); The top 5 industry declines this week were Xiamen Sunrise Wheel Group Co.Ltd(002593) (- 10.31%), Shanghai Fengyuzhu Culture Technology Co.Ltd(603466) (- 10.31%), Daqian Ecology & Environment Group Co.Ltd(603955) (- 13.44%), Ningbo Construction Co.Ltd(601789) (- 13.64%), Tianyu Eco-Environment Co.Ltd(603717) (- 24.26%).
Industry valuation. From the perspective of the overall P / E ratio of the industry, as of March 11, the P / E ratio (TTM) of the architectural decoration industry was 10.56 times and the industry P / B ratio (MRQ) was 0.97 times, which was lower than that of last week. Compared with the SW primary industry, PE in the construction industry ranks fifth from bottom, higher than coal, steel, real estate and banking; Pb valuation ranks the third lowest in all primary industries, higher than real estate and banks. The current industry’s lowest price earnings ratio (TTM): Top 5 Shaanxi Construction Engineering Group Corporation Limited(600248) (3.33), China Railway Construction Corporation Limited(601186) (4.15), China State Construction Engineering Corporation Limited(601668) (4.22), China Railway Group Limited(601390) (5.35), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (6.06); The lowest price to book ratio (MRQ) is China Railway Construction Corporation Limited(601186) (0.55), Shenzhen Grandland Group Co.Ltd(002482) (0.63), Beijing Orient Landscape & Environment Co.Ltd(002310) (0.66), ST Meishang (0.68), China Railway Group Limited(601390) (0.70).
Industry dynamic analysis
The February social finance data released this week was lower than expected. The new social finance in February was 1.19 trillion, a decrease of 531.5 billion yuan over the same period last year, mainly due to the decrease of new RMB loans and the increase of off balance sheet financing year-on-year. The increase in social financing in February mainly came from government bonds and corporate bond financing, of which the net financing of government bonds was 272.2 billion yuan, an increase of 170.5 billion yuan year-on-year; The net financing of corporate bonds was 337.7 billion yuan, an increase of 202.1 billion yuan year-on-year. From January to February, China issued 877.5 billion yuan of new local government special bonds, accounting for more than 60% of the “early approval” quota. The issuance progress was significantly accelerated, which is expected to boost the growth of infrastructure investment.
According to the contents of the two sessions, steady growth continued to increase, and it was once again clear that infrastructure investment should be carried out moderately in advance. At the level of capital supply, fiscal expenditure was expanded, central transfer payment was increased, the issuance of special bonds was accelerated, and the policy support of the construction industry was still strong. At the industry level, the boom level of the construction industry increased significantly in February, and the market demand is expected to continue to release. At the micro level, four central enterprises have disclosed new orders signed from January to February, all of which have achieved positive year-on-year growth. We continue to be optimistic about the improvement in the growth rate of infrastructure investment in Q1, and continue to recommend central enterprises and local infrastructure leading sectors, survey and design sectors, urban rail industry chain and high-quality targets of new power construction as the main force of infrastructure, At the same time, it is suggested to pay attention to the prefabricated buildings and building photovoltaic sectors highlighted in the 14th five year plan for building energy conservation and green building development this week.
On March 11 this week, the Ministry of housing and urban rural development issued the “14th five year plan” for building energy conservation and green building development, which put forward clear development goals for several major building systems, including prefabricated buildings and building photovoltaic. According to this plan, there is a broad demand for prefabricated buildings and building photovoltaic construction during the “14th five year plan”, which is expected to usher in sustained and rapid development.
1) by 2025, new urban buildings will be fully built into green buildings, the energy utilization efficiency of buildings will be steadily improved, and the energy consumption structure of buildings will be gradually optimized;
2) by 2025, complete the energy-saving transformation of existing buildings with an area of more than 350 million square meters, and build ultra-low energy consumption and near zero energy consumption buildings with an area of more than 50 million square meters;
3) prefabricated buildings accounted for 30% of the newly-built buildings in cities and towns in that year;
4) the installed capacity of Cecep Solar Energy Co.Ltd(000591) photovoltaic in new buildings nationwide is more than 50 million kilowatts (50gw), the building application area of geothermal energy is more than 100 million square meters, the replacement rate of renewable energy in urban buildings reaches 8%, and the proportion of power consumption in building energy consumption exceeds 55%.
In the field of prefabricated construction, the overall market performance of the prefabricated sector in 2020 was higher than that of the industry and achieved high excess returns. In terms of industry development, with the continuous promotion of policies, the improvement of demand and the continuous development of prefabricated construction technology, the scale of China’s prefabricated construction industry has ushered in rapid development. According to the data released in the development overview of prefabricated buildings in 2020, the newly started prefabricated building area in China was 630 million m2 in 2020, with a year-on-year increase of 50%. In 2016, the newly started prefabricated building area in China was only 114 million m2, and the CAGR in 20162020 was 53%, far exceeding the compound growth rate of newly started real estate area of 7.68% in the same period, The proportion in the newly started area of real estate increased significantly from 6.83% to 28.07%. The proportion of Newly-built buildings is expected to increase to 20.5% in 2025, and the proportion of Newly-built buildings in the assembly industry is expected to reach a certain peak in 2020. It is suggested to pay attention to: the leader of prefabricated architectural design Shenzhen Capol International&Associatesco.Ltd(002949) , the company’s advanced level of prefabricated design, rich design experience in the field of talent guarantee housing and sufficient orders on hand. At the same time, it plans to jointly develop domestic BIM software with the leader of domestic industrial software Zwsoft Co.Ltd(Guangzhou)(688083) and the future performance valuation can be improved; Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , the target of steel structure engineering contracting, is a high-quality leader in the field of steel structure engineering. The company is actively transforming from steel structure engineering subcontractor to EPC engineering general contractor, which is expected to expand its market share. In addition, the company has improved its technical level and project experience in the field of prefabricated construction, developed prefabricated product system and undertook several prefabricated integration projects, At present, the steel structure promotion policies are intensively released, there is sufficient room for the upward demand of the industry, and the EPC mode continues to be promoted. The company is expected to benefit comprehensively and its development can be expected.
In terms of building photovoltaic development, the plan proposes to increase the installed capacity of building photovoltaic by 50gw during the 14th Five Year Plan period, promote the integrated design, construction and installation of Cecep Solar Energy Co.Ltd(000591) photovoltaic in new buildings, encourage the government to invest in public welfare buildings, strengthen the application of Cecep Solar Energy Co.Ltd(000591) photovoltaic, and actively promote the distributed and integrated application of Cecep Solar Energy Co.Ltd(000591) photovoltaic in urban and rural buildings and municipal utilities, Encourage Cecep Solar Energy Co.Ltd(000591) photovoltaic system to design and construct synchronously with buildings, encourage photovoltaic manufacturing enterprises, investment and operation enterprises, power generation enterprises and building property owners to strengthen cooperation, explore photovoltaic application business models such as roof leasing and distributed generation market-oriented transactions, and make detailed provisions on the technical requirements of building photovoltaic system China State Construction Engineering Corporation Limited(601668) roof area is huge, which provides a solid resource base for the development of roof BIPV, and is relatively more applicable in public buildings, industrial buildings and other fields. The promotion and implementation of BIPV puts forward new requirements for the construction industry from design, construction to operation and maintenance, covering multiple disciplines such as architecture, structure and power system, bringing new opportunities for the development of relevant enterprises in all links. At present, some enterprises in the construction industry have begun to expand the building photovoltaic business. Buildings pay attention to the leaders of steel structure engineering Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Zhejiang Southeast Space Frame Co.Ltd(002135) , the Tus-Design Group Co.Ltd(300500) , and the private enterprises with the layout of the whole industrial chain of operation and maintenance of power design consulting engineering Suwen Electric Energy Technology Co.Ltd(300982) .
Investment advice this week:
At present, steady growth continues to increase, the construction industry has clear demand for two new and one heavy construction, local construction plans are large, and the capital supply is relatively sufficient. This week, we continue to recommend the high-quality infrastructure targets benefiting from the “two new and one heavy” under the steady growth target. At the same time, it is suggested to pay attention to the high-quality targets benefiting from the development of prefabricated buildings and BIPV and the high-quality targets in the field of new power construction, Including: 1) China State Construction Engineering Corporation Limited(601668) the; 2) China Design Group Co.Ltd(603018) , Anhui Transport Consulting & Design Institute Co.Ltd(603357) , high-quality survey and design targets at the front of the industrial chain, give priority to the steady growth of infrastructure and the high growth of infrastructure demand in the province during the 14th five year plan; 3) Shenzhen Capol International&Associatesco.Ltd(002949) , the leader of prefabricated building design, benefited from the release of demand for prefabricated building construction during the 14th Five Year Plan period; 4) Guangzhou Metro Design & Research Institute Co.Ltd(003013) , Zhejiang Tiantie Industry Co.Ltd(300587) , respectively, are leading enterprises in urban rail design and urban rail vibration reduction. They have a solid industry position, strong technical and brand strength and high performance, and fully benefit from the release of urban rail construction demand under the promotion of new infrastructure. 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, and Zhejiang Southeast Space Frame Co.Ltd(002135) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Tus-Design Group Co.Ltd(300500) .
Industry investment perspective
In 2022, the construction industry is expected to usher in multiple development opportunities of fundamentals, policy driven and “construction +”, and the industry is in the undervalued range, with prominent investment value.
The overall fundamentals of the construction industry are improving. In particular, the rapid growth of orders from central infrastructure enterprises and local infrastructure leaders will help improve performance. It will take the lead in benefiting from the release of infrastructure demand under the goal of stable growth. At the same time, it will actively layout new businesses, improve comprehensive strength and help valuation repair.
The policy is expected to become another driving force for the “spring agitation” of the industry in 2022. In the near future, the steady growth policy will continue to increase, the active fiscal policy should improve the efficiency, the local special debt can be launched within a certain period, the monetary policy should be flexible and appropriate, and the liquidity should be reasonable and abundant. In 2022, there are expectations of reducing reserve requirements and interest rates, and the loose monetary policy is conducive to the development of the industry. The “two new and one heavy” construction is expected to increase, and the infrastructure investment is moderately ahead of schedule, which is worth looking forward to.
The construction industry actively embraces the “new economy” and actively layout Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) . BIPV, energy storage and carbon sequestration have become the key areas of layout of listed companies. Some companies Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) have achieved initial results and are expected to continue to make efforts in the future to help improve the valuation level of companies and industries. 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.
On the whole, the construction industry has both “white horse” with good performance and extremely low valuation, and “dark horse” with layout of “building +” and standing at the market outlet. The overall trend of the industry is good, with fundamental support and policy catalysis. In addition, the “building +” helps to improve the valuation and is optimistic about the overall trend of the construction industry in 2022.
Suggestions on medium and long-term configuration
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 leaders 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 construction of “two new and one heavy”, 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 suggested 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 Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) and other regional infrastructure leaders. 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. Guangzhou Metro Design & Research Institute Co.Ltd(003013) and Zhejiang Tiantie Industry Co.Ltd(300587) .
(2) high quality target of infrastructure survey and design China Design Group Co.Ltd(603018) , Anhui Transport Consulting & Design Institute Co.Ltd(603357) , the front end of the industrial chain gives priority to benefiting from the release of infrastructure demand under the goal of steady growth. During the 14th Five Year Plan period, the planned infrastructure investment scale of many provinces increased significantly, the contracting advantage of leading orders of high-quality design was significant, and the market share could be increased in time.
(3) pumped storage beneficiary company. With the change of energy structure, power supply security has been put on the agenda, and energy storage has become the main means to solve power security. 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 to enter. Water conservancy and hydropower engineering enterprises own the construction and operation of pumped storage projects, and most of them have hydropower operation assets. It is possible to layout pumped storage power stations, which is expected to fully benefit the development of pumped storage in the future. 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) .
(4) prefabricated buildings. We believe that under the background of carbon peak and carbon neutralization goal, the prefabricated construction 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 the release of demand, and is expected to become an important development field under the carbon neutralization goal. 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) .
(5) 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 to recommend Suwen Electric Energy Technology Co.Ltd(300982) , the leader of power construction and operation on the user side, the high-quality private enterprise of power intelligent inspection Hangzhou Shenhao Technology Co.Ltd(300853) , the Zhejiang Southeast Space Frame Co.Ltd(002135) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Tus-Design Group Co.Ltd(300500) Shenzhen Zhongzhuang Construction Group Co.Ltd(002822) and Dongzhu Ecological Environment Protection Co.Ltd(603359) of carbon sink layout.
Risk tips: epidemic control is not as expected, policy implementation is not as expected, economic downside risk, PPP promotion is not as expected, fixed asset investment is declining, local financial growth is slow, etc
