Construction and Engineering: Comments on fixed asset investment data from January to February 2022 – infrastructure growth continued to pick up, and the marginal growth rate of sales area improved

Event:

On March 15, 2022, the National Bureau of statistics released the fixed asset investment data from January to February of 22 years. From January to February 2022, the cumulative growth rate of fixed asset investment was 12.2%, and the previous value (from January to December 2021) was 4.9%; The cumulative growth rate of real estate development investment was 3.7%, and the previous value (January December 2021) was 4.4%.

Comments:

From January to February 2022, the cumulative investment in broad infrastructure construction was + 8.6% year-on-year, up from + 4.9pcts in December 21; The cumulative infrastructure investment in a narrow sense was + 8.1% year-on-year, up from + 8.7pcts in December of 21.

The growth rate of infrastructure construction in the broad / narrow sense rebounded, showing a trend of high before and low after 22 years. From January to February 2022, the year-on-year growth rate of infrastructure in broad / narrow sense rebounded significantly compared with the previous month, or mainly due to the gradual formation of physical workload after funds are in place. The capital level has obviously warmed up. From January to February, the cumulative amount of social finance was + 6.5% year-on-year (- 10.1% in the whole year of 21), of which the cumulative amount of government bond financing was + 153.3% year-on-year.

At the level of industry segmentation, the investment growth rate of electric heating and water combustion, transportation and storage, postal and water conservancy public facilities from January to February 2022 was + 11.7%, + 10.5% and + 6.0% respectively, which was + 3.6pcts, + 3.4pcts and + 6.3pcts respectively compared with December 21; In the fixed asset investment, the growth rate of investment in education, health and social work from January to February 2022 was + 19.8% and + 28.7% respectively year-on-year, compared with – 17.3pcts and + 20.7pcts respectively in December 21. Combined with the growth rate of investment in water conservancy and public facilities, education, health and social work, it is judged that the local government finance is making efforts. We judge that benefiting from the recovery of capital, the growth rate of infrastructure in the first half of 22 years may pick up, and the growth rate of infrastructure investment in the whole year of 22 years may show a trend of high before low.

From January to February of 2022, the newly started area increased by – 12.2% at the same time, up from + 19.0 PCTs in December of 21; The completed area increased by – 9.8% in the same period, compared with -11.7pcts in December of 21.

The decline in the growth rate of new construction narrowed, and the marginal growth rate of sales area warmed up. Land acquisition: in February 22, the transaction and construction of residential land in 100 large and medium-sized cities was – 74% year-on-year and – 22.8pcts month on month. Sales: from January to February 2022, the sales area was – 9.6% year-on-year, up from + 6.1pcts in December 21, or benefited from the continuous introduction of loose policies in the real estate industry recently, which was transmitted to the data level; Sales were – 19.3% year-on-year, up from – 1.5pcts in December of 21. As the growth rate of land acquisition and sales amount continues to weaken, it is judged that it has greatly inhibited the new construction in 22 years.

The completion growth rate fell, which was judged to be disturbed by the short-term capital of real estate enterprises, but the medium-term improvement trend did not change. From January to February of 22, the year-on-year growth rate of real estate development funds was – 17.7%, compared with + 1.6pcts in December of 21; Among them, the year-on-year growth rates of Chinese loans, self raised funds and personal mortgage loans were + 10.5pcts, + 3.7pcts and -8.9pcts respectively compared with December 21. Due to the periodic disturbance of capital, considering the national policy ideas of “guaranteed delivery” and “stricter management of pre-sale funds”, and combined with the reality that the completion cycle has not ended, it is judged that the growth rate of the completion end will continue to rise in the first half of 22 years.

Investment suggestion: we judge that the growth rate of infrastructure construction in the whole year of 22 years may show a trend of high before and low after. It is expected that the growth rate of new construction will remain sluggish in the medium and long term. We judge that the slowdown of completion growth is a phased disturbance, and the growth rate of completion end will continue to pick up in the first half of 22 years. Around the three directions we are optimistic about, we recommend: 1) the direction of central construction enterprises, including China State Construction Engineering Corporation Limited(601668) , China Communications Construction Company Limited(601800) , China Railway Group Limited(601390) , etc. 2) In the field of new energy for electric power, we recommend Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China energy construction. 3) In the field of assembly and equipment leasing, Anhui Honglu Steel Construction(Group) Co.Ltd(002541) , Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) , Hongxin construction and Jiangxi Geto New Materials Corporation Limited(300986) , are recommended. Other recommendations: Sinoma International Engineering Co.Ltd(600970) , suggestions: China Building Material Test & Certification Group Co.Ltd(603060) .

Risk tip: the growth rate of government bond financing is lower than expected, resulting in the lower than expected growth rate of infrastructure, the tight capital chain of real estate developers, and the completion recovery is lower than expected. The centralized land supply affects the capital arrangement of real estate enterprises, resulting in the lower than expected growth rate of new construction and the lower than expected growth rate of real estate investment.

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