This week, the building materials sector outperformed the Shanghai and Shenzhen 300 index. This week, the building materials index rose 5.7%, outperforming the CSI 300 index by 3.3 percentage points, and the construction index rose 2.2%, slightly underperforming the CSI 300 index by 0.2 percentage points. We believe that the main reasons why the building materials sector outperformed the index are: 1) there are some signs of easing the conflict between Russia and Ukraine, and the market risk appetite has improved; 2) the market’s expectation of raw material costs has eased. 3) The market expects the real estate policy to increase and drive the consumption of building materials to stabilize.
The national standing committee will continue to emphasize steady growth and water conservancy investment, benefiting four types of enterprises. On March 29, the national standing committee meeting was held. The meeting emphasized the deployment of government bonds, the expansion of effective investment, and the promotion of making up weaknesses, strengthening the momentum and stable economic growth. At the same time, it required the commencement of a number of new water conservancy projects with mature conditions, including a number of water conservancy projects that have been included in the planning and mature conditions, such as the follow-up project of the South-to-North Water Transfer Project. The annual water conservancy investment can be completed by about 800 billion yuan (2021757.6 billion yuan, + 5.6% YoY). The national Standing Committee and the previous two sessions have particularly emphasized water conservancy investment. Under the background of increasing financial expenditure, the upward trend of water conservancy investment is relatively certain. However, we believe that in 2022, due to the preferential policy, the early planning and design enterprises will benefit more, and the order volume may increase steadily, while the relevant materials and construction demand may be released gradually after a lag of 0.5-1 year, and the four types of enterprises will benefit from the following industries:
Water Conservancy Design and Survey Enterprises: Shenzhen Water Planning & Design Institute Co.Ltd(301038) , Nanjing Research Institute Of Surveying Mapping & Geotechnical Investigation Co.Ltd(300826) , Zhengyuan Geomatics Group Co.Ltd(688509) . Material enterprises: pipe enterprises: Zhejiang Weixing New Building Materials Co.Ltd(002372) , ad shares, Guangdong Xiongsu Technology Group Co.Ltd(300599) , China Liansu, Fujian Superpipe Co.Ltd(300198) , concrete admixture enterprises Sobute New Materials Co.Ltd(603916) , Lets Holdings Group Co.Ltd(002398) , Guangdong Redwall New Materials Co.Ltd(002809) industries benefited. EPC Enterprises: Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) , Guangdong No.2 Hydropower Engineering Company Ltd(002060) , Anhui Construction Engineering Group Corporation Limited(600502) , Dayu Water-Saving Group Co.Ltd(300021) industries benefit. Intelligent water enterprises: Wpg (Shanghai) Smart Water Public Co.Ltd(603956) industry benefits.
In March, the decline of real estate accelerated, and investors’ overweight expectation on the policy of stabilizing real estate expanded to the consumption of building materials. According to Kerui data, in March 2022, the new supply area in 30 key cities decreased by 45% year-on-year, and the transaction area of new houses in 30 cities decreased by 47% (a cumulative year-on-year decrease of 39% in the first two months), and the year-on-year decline in a single month is still expanding. The monthly sales volume of the top 100 real estate enterprises was 511.54 billion yuan, a year-on-year decrease of – 52.7%. The overall performance of the top 100 real estate enterprises in Q1 decreased by 47% year-on-year. On the whole, the pressure on the real estate industry continued to increase in March. In terms of sub enterprises, central enterprises, state-owned enterprises and high-quality private enterprises performed relatively well. The monthly sales of China Resources and poly decreased by 20-22%. In addition, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Longhu group, ocean real estate and Yuexiu real estate announced their sales targets for 2022, all of which increased slightly compared with 2021. We believe that the further deterioration in the fundamentals of the real estate market has inspired the market’s expectations for the market to add more to the policy of the real estate chain. Last week, last week’s expectations were inspired by the further deterioration in the fundamentals of the real estate. Last week, last week, last week’s expectations for adding more to the policy of the real estate chain. Last week, consumer building materials such as Skshu Paint Co.Ltd(603737) 37 \ \lastweek, last week’s week’s Skshu Paint Co.Ltd(603737) 37373737 Skshu Paint Co.Ltd(603737) Skshu Paint Co.Ltd(603737) \uebd5 \ therefore, in the medium term, PEG has a good buying safety margin.
Focus on the “east east” combination, Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) + Qingdao East Steel Tower Stock Co.Ltd(002545) + Shandong Hi-Speed Road&Bridge Co.Ltd(000498) Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) is the first choice in our real estate chain. Yuhong is ahead of the industry. It has completed the organizational structure adjustment in 18q4 and sunk the channel in 2020. At present, the proportion of channels such as public construction integration company, real estate centralized procurement, other engineering business departments, civil construction and partners is the best, which can effectively control risks and provide growth beyond the industry Qingdao East Steel Tower Stock Co.Ltd(002545) is the first choice for our “construction +” chain. Potash fertilizer judges that due to the further fragmentation of the global supply chain and the outbreak of demand in the inflationary environment, the prosperity continues to rise, and the company will enter the upward channel of double increase in volume and price in 202225 Shandong Hi-Speed Road&Bridge Co.Ltd(000498) is the first choice for the stable growth chain of infrastructure construction. Recently, the epidemic situation in Shenzhen, Shanghai and other places has been repeated, and the economic pressure has increased. It once again highlights that stable growth will be one of the main lines of the whole year. The company has abundant orders in hand, and Shandong Province is in the forefront of the country’s infrastructure planning for roads and railways.
Risk warning: the demand is lower than expected, the cost is higher than expected, and there is systemic risk.
