The inflow of social finance into infrastructure in Q1 is estimated to increase by 24% at the same time, which is expected to help the recovery of infrastructure boom. In 2022q1, social finance increased by 12.06 trillion yuan, another record high in the same period, with an increase of 1.77 trillion yuan year-on-year, mainly contributing to government bonds, loans and corporate bonds. In Q1, RMB loans increased by 8.34 trillion, an increase of 670 billion year-on-year. Residential loans decreased by 1.3 trillion year-on-year, including 910 billion yuan in the medium and long term, indicating that the demand for house purchase is under pressure. Corporate loans increased by 1.73 trillion year-on-year, mainly relying on short-term loans and bill volume, and medium and long-term loans decreased by 520 billion yuan year-on-year, indicating that financial institutions have a strong willingness to supply, but the demand of the real economy is still in the observation period. According to the calculation framework of social finance investment to infrastructure funds established by us, assuming that the index is composed of local bonds, corporate loans, corporate bonds and non-standard four parts, specifically, Q1 local bonds flowed into infrastructure 1106 billion yuan, an increase of 645.1 billion yuan year-on-year; The inflow of corporate loans was 1382.5 billion yuan, a year-on-year decrease of 182 billion yuan; The inflow of corporate bonds was 613.8 billion yuan, an increase of 52 billion yuan year-on-year; Non standard investment in infrastructure contracted by 43.1 billion yuan, a decrease of 83.7 billion yuan. According to the four items, Q1 social finance invested about 3059.2 billion yuan in infrastructure, with a year-on-year increase of 24.3%. In March, it was 1103.2 billion yuan in a single month, with a year-on-year increase of 32.7%, which was significantly improved compared with the growth rate of 2.3% in February, and is expected to help the recovery of infrastructure boom.
The epidemic has impacted the supply chain and further increased the impact on manufacturing and foreign trade. Recently, prevention and control measures have been upgraded in Ningbo, Kunshan, Jiaxing, Guangzhou and other places, and the scope of the epidemic has been expanding. In order to strictly prevent the import of the epidemic, many parts of the country closed some highway exports, resulting in poor highway transportation. In addition, Shanghai is a manufacturing and logistics center. The long-term closure may slow down the logistics and even interrupt the supply chain, which will have a greater impact on the manufacturing industry and foreign trade. For example, Weilai automobile has announced that it will temporarily stop production due to the impact of the supply chain; Some foreign trade orders show signs of transfer to other countries, which shows that the impact of the epidemic on the economy is further fermented.
Under the new situation, the steady growth policy needs to be “vigorously”, which is expected to drive the continuous expansion of the valuation of the construction sector. The management pointed out that China’s economy is facing a more complex environment such as the impact of the epidemic and the rise of commodity prices, “some uncertainties exceed expectations”, and the downward pressure on the economy has further increased. In this regard, it stressed that “policies and measures need to be taken forward and new plans should be studied”, At the same time, it is clear that local governments should “enhance the sense of urgency. Measures such as the issuance and use of special bonds and the commencement of construction of key projects need to be arranged and accelerated in advance. In the first half of the year, they should land in large part to form more physical workload”, “study the response plan in time and take more vigorous policies and measures as needed.” The recent series of statements show that the management has a firm and urgent attitude towards stable growth, and the follow-up policies need to be “vigorously” in order to stabilize the economy in the “reasonable operation range”. Therefore, we continue to be firmly optimistic about the main line of steady growth. It is expected that infrastructure and real estate will become the main focus. Considering policy support, post epidemic acceleration and low base in the second half of last year, the prosperity of the construction industry is expected to increase significantly in the second half of last year, which is expected to drive the continuous expansion of sector valuation.
Investment suggestions: focus and recommendations: 1) undervalued construction central enterprises China State Construction Engineering Corporation Limited(601668) (infrastructure + core beneficiary of steady real estate growth, high-quality assets of CNOOC real estate need to be revalued, pe4.7x), China Railway Group Limited(601390) (pe5.5x, Q1 orders increased by 84% more than expected), China Communications Construction Company Limited(601800) (pe7.7x, core beneficiary infrastructure REITs promotion), Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (pe12x), China Railway Construction Corporation Limited(601186) (pe4.2x), etc; 2) High growth local state-owned enterprise Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (pe5.8x); 3) Capital construction design leader China Design Group Co.Ltd(603018) (pe9x), Jsti Group(300284) (pe14x); 4) The steel structure leader benefited from the overweight of infrastructure construction and the rapid expansion of photovoltaic building demand, and is optimistic about Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe11x) and Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe16x).
Risk tips: the strength of steady growth policy fails to meet expectations, the epidemic repeatedly affects the construction progress, the risk of impairment of accounts receivable, the risk of sharp decline in real estate demand, and the risk of error in model calculation data.
