[core view of this week] in 2021, the construction sector rose by 22% as a whole, with an excess return of 27% relative to CSI 300, ranking seventh in the whole industry, with good performance, mainly due to the positive results of construction enterprises extending to new energy, new materials, mining, double carbon and other new business fields, and the rise of the sector driven by the revaluation of new business valuation. Looking forward to 2022, under the background of steady growth, the construction sector is expected to continue to meet the power of valuation improvement, focusing on three directions: 1) new power system: the new power system has high investment efficiency and large current demand, and is expected to become the follow-up key force direction under the background of steady growth, focusing on recommending and paying attention to the leading Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (pe12x) of central enterprises in green power construction and operation China Energy Engineering Corporation Limited(601868) (pe13x), private distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) (pe25x), enterprise energy efficiency control expert Acrel Co.Ltd(300286) (pe30x); 2) Affordable housing construction: affordable housing is expected to become one of the important drivers of common prosperity, non speculation in housing and housing and steady growth next year. It is expected to show a high prosperity. It is mainly recommended to Shenzhen Capol International&Associatesco.Ltd(002949) (leading enterprise in affordable housing design, pe13x), Shanghai Construction Group Co.Ltd(600170) (leading enterprise in affordable housing construction in Shanghai, pe8x), China State Construction Engineering Corporation Limited(601668) (leading enterprise in affordable housing construction in China, pe3.9x); 3) underestimate the value of blue chips: the overall valuation of the central enterprises is still at the lowest level in history. The expected improvement in infrastructure is expected to promote valuation and repair. The key recommendations and concerns are China Communications Construction Company Limited(601800) (accelerated REITs of infrastructure projects, the largest value in hand operation assets is expected to be significantly benefited, PE5.9X) and China National Chemical Engineering Co.Ltd(601117) (the two nitrile and aerogel projects will soon be put into operation, and the new material platform for chemical industry is ready to sail, PE11X). China Railway Group Limited(601390) （PE4.6X）、 China Railway Construction Corporation Limited(601186) （PE3.7X）。 In addition, continue to focus on recommending Runa Smart Equipment Co.Ltd(301129) (pe26x) experts in heating and energy saving system and Dongzhu Ecological Environment Protection Co.Ltd(603359) (pe12x) actively distributing forestry carbon sinks.
In 2021, the overall performance of the construction sector is high, and Q3 is the best. In 2021, CITIC construction index (ci005007. WI) rose by 22.2%, with a yield of 27.4% compared with CSI 300. The overall yield performed well, ranking seventh among the 30 industries of CITIC index. On a quarterly basis, the construction sector in 2021q1-4 achieved a yield of + 7.8% / – 3.5% / + 12.1% / + 4.7% respectively, and + 10.9% / – 6.9% / + 19.0% / + 3.2% respectively compared with the Shanghai and Shenzhen 300. The performance in the third quarter was better, mainly due to the positive results of the extension of central enterprises to new business areas such as new energy, new materials, mining and double carbon. The revaluation of new business valuation led to the rise of the sector.
By sector, the steel structure and professional engineering sector led the increase. The top three sectors in 2021 are steel structure (68%), chemical engineering (68%) and international engineering (46%); The top three declines were decoration (- 14%), building intelligence (- 3%) and design consulting (8%). Among them: 1) the rise of steel structure plate is mainly due to the active BIPV business of Center International Group Co.Ltd(603098) and other enterprises in the plate, which is catalyzed by the expectation of new business. 2) The higher growth in the chemical sector mainly benefited from the rise in the price of chemicals and the increase in the demand for green and intelligent transformation. At the same time, China National Chemical Engineering Co.Ltd(601117) leading enterprises actively developed the new chemical material industry, with a large increase. 3) The international engineering sector mainly benefited from carbon neutralization due to Sinoma International Engineering Co.Ltd(600970) , Sinosteel Engineering & Technology Co.Ltd(000928) being the leader of carbon emission reduction transformation in cement and steel industry, which led to a large increase, driving the overall international engineering sector to rise.
In terms of individual stocks, new energy related stocks led the rise, while real estate chain companies fell significantly. The top five companies were mainly related to new energy, namely Center International Group Co.Ltd(603098) (414%) (jointly Longi Green Energy Technology Co.Ltd(601012) to expand the BIPV market), Shandong Chiway Industry Development Co.Ltd(002374) (366%), Sichuan Road & Bridge Co.Ltd(600039) (178%) (introducing Byd Company Limited(002594) to jointly expand the lithium business with Sichuan energy investment), Sinomine Resource Group Co.Ltd(002738) (166%) (cesium rubidium leader actively develops the lithium business), Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) (119%); The top five declines were * ST Meishang (- 62%), Myhome Real Estate Development Group Co.Ltd(000667) (- 55%), Shenzhen Qixin Group Co.Ltd(002781) (- 54%), * ST Sai (- 49%) and Shanghaichengdiconstructioncorporationltd(603887) (- 44%). The companies with the top declines were mainly enterprises related to the real estate industry chain.
In terms of valuation, the valuation of the construction sector rebounded in 2021, but it is still in a historically low range. The current construction sector valuation (TTM) is 9.3 times; Pb (LF) is 1.03 times, 20% / 23% higher than the lowest point respectively, and the ratio of PE / Pb of construction plate to CSI 300 is 0.67/0.61 (the lowest in history is 0.48/0.45 respectively), both rebounding relative to the lowest point in history, but the whole is still in a historically low range.
Looking forward to 2022, real estate investment or “toughness is difficult”, and the growth of export may be weak under the high base. As an important tool for counter cyclical regulation, infrastructure acceleration has the necessity and objective conditions. The intensive issuance at the end of this year and the early approval of special bond funds next year are expected to form a joint force to promote the improvement of infrastructure investment in the first half of next year, and the construction sector is expected to continue to meet the momentum of valuation improvement.
The double carbon development of central enterprises is overweight, focusing on the construction of new power system and energy conservation and carbon reduction projects of central enterprises. This week, the State Council issued the guiding opinions on promoting the high-quality development of central enterprises and doing a good job in carbon peak and carbon neutralization, focusing on promoting the leading and exemplary role of central enterprises in the dual carbon development goal, through industrial structure transformation, energy structure optimization, energy utilization efficiency improvement, construction of new power system, R & D and promotion of green and low-carbon technologies, etc, By 2025, the comprehensive energy consumption of 10000 yuan output value of central enterprises will be reduced by 15% compared with 2020, the carbon dioxide emission will be reduced by 18%, the installed capacity of renewable energy power generation will account for more than 50%, and the revenue proportion of strategic emerging industries will not be less than 30%. In order to achieve this goal, the opinions focuses on: 1) industrial structure: we should adjust the stock structure of state-owned capital, dispose of assets and enterprises that do not meet the requirements of green and low-carbon standards, increase green and low-carbon investment, comprehensively implement green construction technology and green and low-carbon building materials, and promote the large-scale development of ultra-low energy consumption, near zero energy consumption and low-carbon buildings; 2) In terms of production mode, we should vigorously promote energy conservation and emission reduction of central enterprises, promote green upgrading of industrialization, comprehensively implement cleaner production upgrading and green transformation in key industries, and resolutely curb the blind development of high energy consumption and high emission projects; 3) In terms of energy structure, we should build a clean, low-carbon, safe and efficient energy system, accelerate the promotion and exploration of the development of non fossil energy such as wind power, Cecep Solar Energy Co.Ltd(000591) , hydropower, marine energy, geothermal energy, nuclear power and hydrogen energy, and accelerate the construction of a new power system with new energy as the main body; 4) In terms of energy efficiency: central enterprises should accelerate the improvement of energy conservation and utilization level, strengthen the dual control of total energy consumption and intensity, fully implement the green and low-carbon building standards for new public buildings, and speed up the energy-saving transformation of existing public buildings; 5) Carbon emission management: it is necessary to improve carbon emission management capacity, improve carbon trading management capacity, actively participate in national and regional carbon emission trading, and develop carbon sink projects and national certified voluntary emission reduction (CCER) projects. Central enterprises play an important role in important industries and key fields related to national security and the lifeline of the national economy. They are an important policy implementation carrier for China to promote the goal of carbon peak and carbon neutralization. The accelerated promotion of double carbon by central enterprises is expected to drive a series of industrial investment opportunities: 1) new power system: the opinions puts forward higher requirements for energy structure and utilization efficiency, The demand for new energy infrastructure of central enterprises is expected to continue to increase in the medium and long term, focusing on recommending and paying attention to the green power construction and operation of central enterprise leaders Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) , China Nuclear Engineering & Construction Corporation Limited(601611) ; 2) energy saving and carbon reduction projects: “opinions” require central enterprises to actively layout green industrial structure, and promote energy saving and emission reduction in production mode. The key point is to recommend China National Chemical Engineering Co.Ltd(601117) (Ji Erjing, aerogel project to be put into operation), and new material platform for chemical engineering to focus on energy saving and emission reduction in chemical engineering, focusing on Sinoma International Engineering Co.Ltd(600970) and Sinosteel Engineering & Technology Co.Ltd(000928) .
The acceleration of affordable housing construction is clear, and we continue to be optimistic about individual stocks in the industrial chain. Since the fourth quarter, important national conferences, including the Political Bureau meeting and the central economic work conference, have placed affordable housing construction as one of the key directions for the development of the real estate industry in the future. In the medium and long term, it is one of the important footholds of China’s two strategies of “common prosperity” and “housing without speculation”; In the short term, it can also play a supporting role in real estate investment under the background of private real estate enterprise investment contraction and promote steady economic growth. According to the data of the Ministry of housing and urban rural development, a total of 936000 new affordable rental housing units are planned to be raised in 40 key cities in China in 2021. 720000 units have been started from January to September, accounting for 77% of the national plan, with an investment of 77.5 billion yuan. We estimate that the national affordable rental housing is expected to drive the construction and installation investment scale of about 195 billion yuan next year. Among them, the construction of affordable housing in the first and second tier cities is significantly stronger. This week, the Beijing Development and Reform Commission issued the social and public service plan of Beijing during the 14th Five Year Plan period, which plans to supply about 1 million sets of all kinds of housing, and the number of new affordable rental housing accounts for no less than 40%. Meanwhile, according to the data of the Ministry of housing and urban rural development, during the 14th Five Year Plan period, Shanghai, Guangzhou and Shenzhen respectively plan to add 47 / 60 / 400000 sets (rooms) of indemnificatory rental housing, accounting for 40% / 50% / 45% of the total supply of new housing respectively. The construction of affordable housing in China is expected to speed up significantly in the follow-up. It is mainly recommended that Shenzhen Capol International&Associatesco.Ltd(002949) , the leading enterprise in affordable housing design in Shanghai Shanghai Construction Group Co.Ltd(600170) , and the leading enterprise in affordable housing construction in China China State Construction Engineering Corporation Limited(601668) .
The national development and Reform Commission actively guides local governments to carry out the pilot work of infrastructure REITs, and the scale of China’s infrastructure REITs is expected to accelerate. This week, the national development and Reform Commission issued the notice on accelerating the work related to real estate investment trust funds (REITs) in the field of infrastructure, which provides more detailed guidance for local governments to promote the pilot work of infrastructure REITs: 1) mobilize participation enthusiasm and speed up reserve projects: all localities should actively publicize and introduce the role of infrastructure REITs in reducing enterprise asset liability ratio It plays an active role in preventing and resolving hidden debt risks and improving the reinvestment capacity of enterprises, mobilizing the enthusiasm of participation, carefully sorting out local intended projects and reserve projects, and the national infrastructure REITs pilot project library shall ensure that the projects “enter as much as they are willing and should enter as much as possible”, and shall not refuse to enter the project for any reason; 2) Speed up the application speed and reduce the preparation cycle: for each reserve project, it is necessary to clarify the connection of special personnel, effectively speed up the project progress, strengthen the collaborative communication of various departments, jointly solve the problems in the project promotion, reduce the project preparation cycle as much as possible, speed up the handling of relevant procedures such as no objection letter, and implement various issuance conditions. There is no quota limit and regional difference for various application projects. As long as the conditions are met and the quality is excellent, they can apply for recommendation; 3) Accelerate the use of recovered funds and encourage advanced models: for projects with issued infrastructure REITs, it is necessary to strengthen the tracking and supervision of the use of recovered funds, coordinate and accelerate the preliminary work and construction progress of new projects to be invested with recovered funds, and form physical workload as soon as possible, which is conducive to promoting a virtuous circle of funds. All localities are encouraged to introduce targeted support measures in combination with their own conditions. Enterprises that successfully issue infrastructure REITs can give priority support in terms of funds and play a demonstration and leading role. The introduction of the opinions will help all localities pay more attention to REITs, mobilize the participation enthusiasm of local enterprises, accelerate the preparation and application process of projects, help enterprises with more REITs infrastructure projects to revitalize stock assets and improve project investment capacity, Focus on China Communications Construction Company Limited(601800) (with the largest scale of assets in hand, it is expected to significantly benefit from the acceleration of infrastructure REITs).
Investment suggestions: looking forward to 2022, under the background of steady growth, the construction sector is expected to continue to meet the momentum of valuation improvement, focusing on three directions: 1) new power system: the new power system has high investment efficiency and large current demand, and is expected to become the follow-up key force direction under the background of steady growth. It is expected to focus on recommending and paying attention to the leading Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) of central enterprises in green power construction and operation, And private distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) , enterprise energy efficiency control expert Acrel Co.Ltd(300286) ; 2) Construction of affordable housing: affordable housing is expected to become one of the important starting points for common prosperity, non speculation in housing and housing and steady growth next year. It is expected to show a high boom. It is recommended to focus on Shenzhen Capol International&Associatesco.Ltd(002949) , Shanghai Construction Group Co.Ltd(600170) , China State Construction Engineering Corporation Limited(601668) ; 3) Undervalued blue chip: at present, the overall valuation of central enterprises is still at the lowest range in history, and the expected improvement of infrastructure is expected to promote valuation repair. It is recommended and focused on China Communications Construction Company Limited(601800) , China National Chemical Engineering Co.Ltd(601117) , China Railway Group Limited(601390) , China Railway Construction Corporation Limited(601186) . In addition, continue to focus on recommending Runa Smart Equipment Co.Ltd(301129) experts in heating and energy saving system and Dongzhu Ecological Environment Protection Co.Ltd(603359) actively distributing forestry carbon sink.
Risk tips: policy promotion is less than expected, epidemic impact is more than expected, accounts receivable risk, overseas operation risk, etc.
