[core view of this week] in this week’s special topic, we focused on combing the real estate chain targets in the construction industry and relevant investment opportunities. We believe that the six ministries and commissions have actively stated to stabilize the real estate recently, and the policy confidence has been strongly boosted. Considering the wide correlation between the real estate industry and the economy, it is expected to be one of the focus of the follow-up steady growth policy. The real estate policy is expected to continue to relax and the intensity is expected to increase. Although it still needs more time to wait for the real estate fundamentals to bottom out and recover, the sharp decline in the stock prices of real estate chain enterprises in the early stage has reflected most pessimistic expectations, and the improvement of policy correction is expected to drive the valuation repair of relevant companies in the short term. In the medium and long term, it is recommended to pay attention to the “leftovers are the king” of leading enterprises with healthy customer structure and strong ability to resist risk impact, and accelerate the improvement of market share in the future. At the same time, the steady development of the real estate industry is also conducive to the improvement of the overall operation quality. Core recommendation China State Construction Engineering Corporation Limited(601668) (gold stock in March, core beneficiary of steady growth of real estate infrastructure, high-quality assets of CNOOC real estate to be revalued, pe4.1x), focusing on Suzhou Gold Mantis Construction Decoration Co.Ltd(002081) , Zhejiang Yasha Decoration Co.Ltd(002375) , Shenzhen Capol International&Associatesco.Ltd(002949) , Shenzhen Ridge Engineering Consulting Co.Ltd(300977) , etc.
We believe that steady growth is still the main line at present. In addition to the real estate chain, the infrastructure chain mainly recommends the leader of central enterprises China Communications Construction Company Limited(601800) (pe5.9x) and high growth local state-owned enterprises Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (pe4.6x); China National Chemical Engineering Co.Ltd(601117) (Tianchen Qixiang new material project has successfully produced superior acrylonitrile products with stable production and operation, pe8.9x). In addition, recently, green building related policies have been intensively issued, and the development of photovoltaic buildings (BIPV / bapv), prefabricated buildings, green energy-saving transformation, green building materials and other subdivided fields is expected to accelerate. Key recommendations: 1) steel structure leaders Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe10x), Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe15x) benefiting from the rapid development of photovoltaic buildings and green construction methods; 2) Construction support equipment leasing leader Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) (aerial work platform industry is booming, Q1 profit is expected to achieve high growth, pe16x); 3) Micro grid leader Acrel Co.Ltd(300286) (pe25x), distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) (pe20x) and heating energy-saving transformation leader Runa Smart Equipment Co.Ltd(301129) (pe17x) benefiting from the growth of building energy conservation and consumption reduction demand.
The six ministries and commissions actively stated their position to stabilize real estate, and their policy confidence was strongly boosted. Recently, the Finance Committee held a meeting and proposed to effectively revitalize the economy in the first quarter. For real estate enterprises, it is necessary to timely study and put forward effective risk prevention and resolution solutions, and put forward supporting measures for the transformation to a new development model. Subsequently, the central bank, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, Ministry of finance, safe and other ministries and commissions responded to the statement to stabilize the expectations of key industries such as real estate, such as delaying the pilot expansion of real estate tax, encouraging M & A loans, and cooperating to effectively resolve the risks of real estate enterprises. Policy confidence has been strongly boosted again.
The real estate industry is related to many areas of the economy and is expected to be one of the focus of the follow-up steady growth policy. The real estate industry is one of the pillar industries of China’s economy. It has a large body and is directly or indirectly related to multiple industries. The pulling effect is obvious. If it continues to weaken, it will have a great impact on the economy as a whole. First, the downward growth rate of real estate construction will affect the demand of upstream cement, steel, machinery and other industries, and the slowdown in completion will also drag down the consumer demand of downstream decoration, household appliances and other household appliances. Secondly, the income from real estate land transfer accounts for a high proportion of the income from local government funds. If the income from land transfer slows down significantly, it will also affect the development of infrastructure, shed reform and other related fields. Finally, the credit risk of the real estate industry may have an impact on some banks, trusts and other financial institutions, affecting their willingness and ability to invest in financing. Therefore, stabilizing the expectations of the real estate industry and making appropriate adjustments to the early policies to make the real estate industry return to the trend of stable development is expected to be one of the main directions of the follow-up stable growth policy. The real estate policy is still expected to continue to relax and the intensity is expected to increase, especially on the demand side and real estate financing side, so as to promote the continuous improvement of the fundamental expectations of the industry.
The policy is expected to improve, and the short-term valuation of real estate chain companies is expected to be repaired. The current real estate policy is expected to have basically bottomed out, but looking back on the experience of the last round of real estate regulation, the cycle from policy adjustment to investment recovery is about 13 months. Therefore, it is expected that more policy efforts and time will be needed for the substantial improvement of the fundamentals of the real estate industry. Previously, the stock price of real estate chain companies generally fell sharply, and the stock price has reflected most pessimistic expectations. Therefore, it is expected that the change of current policy expectations is expected to drive the valuation of real estate chain related companies, such as real estate construction, decoration, real estate design, real estate Gardens and other enterprises to repair in the short term.
Strong ability to resist the impact and focus on the healthy capital structure of leading enterprises. The valuation repair caused by the expected improvement of the short-term industry may be holistic, but due to the different impact of credit risk in the real estate industry on different enterprises, there may be great differentiation in the stock price trend of subsequent real estate chain companies. It is suggested to select the target from the following two criteria: 1) the customer structure is healthy and does not rely on a single developer customer. The single customer business of some real estate chain enterprises accounts for a large proportion. After the corresponding real estate developer customers have credit risk, the accounts receivable and notes may have significant impairment losses, and the subsequent business development will also be adversely affected. The real estate chain companies with relatively scattered customers, central enterprises, state-owned enterprises and other real estate companies with high credit qualifications and a large proportion of developers may be subject to controllable credit impact and short adjustment time, which is expected to accelerate the increase of market share in the downturn of the industry. 2) Strong capital strength and strong ability to resist risk impact. Some real estate chain enterprises may face greater impairment risk and repayment pressure from suppliers. If their capital is weak, cash flow is poor and financing support is not timely, they may face significant operational risks due to the impact of this impairment. Even if the leading enterprises with strong capital strength, smooth financing channels and strong impact resistance have short-term impairment provision, it will not have a great negative impact on the overall operation.
The leader “the leftover is the king” is expected to accelerate the increase of market share. At the same time, the steady development of the real estate industry is conducive to the improvement of the overall operation quality of real estate chain enterprises. Since the end of last year, the credit risk of some large real estate developers has had a great impact on industrial chain enterprises. Some small and medium-sized construction enterprises may go bankrupt due to excessive concentration of customers and a large number of bad debt losses. Small and medium-sized enterprises without bad debts will be more cautious in their future operation and their expansion will slow down significantly. The leading enterprises that rely less on a single customer, have strong capital strength and strong ability to resist risk impact are expected to “take the rest as the king”. Relying on the forward-looking layout in the direction of industrialization and greening, they are expected to strengthen their competitive advantage and accelerate the increase of market share in the future. In addition, the real estate industry has entered a new era, with the weakening of high turnover characteristics. It is expected that the real estate chamber of Commerce will pay more attention to risk control, and the real estate industry is expected to develop more stably and orderly. As the construction party, the payment collection of construction enterprises is expected to be improved, the operation risk is expected to be reduced, and the overall operation quality will be improved.
Core recommendation China State Construction Engineering Corporation Limited(601668) , focusing on other high-quality leaders China State Construction Engineering Corporation Limited(601668) as the leader of real estate and construction of central enterprises, the core benefits from the steady growth policy of real estate and infrastructure. The financial leverage of CNOOC real estate, the core platform of real estate business, is stable and is expected to significantly benefit from the accelerated supply side reform of the real estate industry, and the value is expected to be revalued. The market share of the construction business is expected to continue to improve in the future, and the business structure will be continuously optimized, which is expected to drive the continuous improvement of the profitability and operation quality of the construction business.
This year marks the end of the three-year action plan for the reform of state-owned enterprises, which is expected to enhance the market value of the company. At present, the company’s valuation is at a historical low (Pb is only 0.69 times) and the dividend yield is 4.1%. The steady growth policy of real estate and infrastructure is expected to drive the valuation repair. Suggestions for other subjects: pay attention to the decorative faucets Suzhou Gold Mantis Construction Decoration Co.Ltd(002081) , Zhejiang Yasha Decoration Co.Ltd(002375) ; Housing construction design leader Shenzhen Capol International&Associatesco.Ltd(002949) ; Third party evaluation leader Shenzhen Ridge Engineering Consulting Co.Ltd(300977) .
Investment suggestion: steady growth is still the main line at present, and the follow-up real estate is expected to become the key direction of policy development. The real estate chain mainly recommends the leader of real estate and construction of undervalued central enterprises China State Construction Engineering Corporation Limited(601668) (gold stock in March); The capital construction chain mainly recommends China Communications Construction Company Limited(601800) , the leader of central enterprises, and high growth local state-owned enterprises Shandong Hi-Speed Road&Bridge Co.Ltd(000498) ; The manufacturing chain focuses on recommending chemical engineering leaders benefiting from the rise of oil price center China National Chemical Engineering Co.Ltd(601117) . The mandatory code for green buildings is about to be implemented, and the development of subdivided fields such as photovoltaic buildings (BIPV / bapv), prefabricated buildings, green energy-saving transformation and green building materials is expected to speed up. Key recommendations: 1) steel structure leader Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) , 2) building support equipment rental leader Zhejiang Huatie Emergency Equipment Science & Technology Co.Ltd(603300) ; 3) Micro grid leader Acrel Co.Ltd(300286) , distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) , heating energy saving transformation leader Runa Smart Equipment Co.Ltd(301129) , benefiting from the growth of building energy conservation and consumption reduction demand.
Risk tips: the risk of policy promotion is less than expected, the risk of epidemic impact is more than expected, the risk of accounts receivable, overseas business risk, etc.
