[core view of this week] infrastructure related sectors increased significantly this week, mainly due to the improvement of market stable growth expectation and the organization’s position adjustment to the undervalued sector at the beginning of the year. In the first half of this year, there was great downward pressure on the economy. It is necessary to strengthen infrastructure and have a certain financial foundation. The special bond funds are expected to form a joint force in the first half of this year. At the same time, according to our grassroots research on infrastructure design enterprises, there are signs of improvement in infrastructure at present. Infrastructure construction is expected to continue to heat up, and the construction sector is expected to meet the driving force of valuation improvement. The key points are: 1) new power system: energy infrastructure is an important direction of steady growth. We focus on recommending and paying attention to the leading Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) of green power construction and operation of central enterprises (the added performance of purchased real estate into high-quality power grid auxiliary assets, pe13x), China Energy Engineering Corporation Limited(601868) (pe12x), and the leading Suwen Electric Energy Technology Co.Ltd(300982) (pe24x) of private distribution network EPCO, Enterprise energy efficiency control expert Acrel Co.Ltd(300286) (pe32x), etc; 2) Affordable housing construction: affordable housing is an important foothold of the two strategies of “common prosperity” and “housing without speculation”, which is expected to become one of the important starting points for steady growth. It is mainly recommended to Shenzhen Capol International&Associatesco.Ltd(002949) (pe15x), Shanghai Construction Group Co.Ltd(600170) (pe8x), China State Construction Engineering Corporation Limited(601668) (housing construction orders accelerated significantly in December, pe4x); 3) Steel structure leaders: steel structure continues to benefit from capital construction overweight and manufacturing investment repair. Most leaders have more layout in BIPV and other fields. Recently, the Ministry of industry and information technology issued a document to accelerate the application of building “light storage direct and flexible” technology, and the national energy administration also issued a document to promote rural farmers to build new energy and related industries such as distributed photovoltaic, ushering in new development opportunities for the industry, Key recommendations Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe12x), Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe20x); 4) Undervalued blue chips: at present, the overall valuation of infrastructure blue chips is at the lowest range in history, and the expected improvement of infrastructure is expected to promote the valuation repair. It is recommended to focus on central construction enterprises China Communications Construction Company Limited(601800) (pe6.3x), China Railway Group Limited(601390) (pe4.9x), China Railway Construction Corporation Limited(601186) (pe4.0x), infrastructure design leaders China Design Group Co.Ltd(603018) (pe7x), Jsti Group(300284) (pe11x). In addition, continue to focus on Dongzhu Ecological Environment Protection Co.Ltd(603359) (CCER is expected to restart within this year, pe13x) and Runa Smart Equipment Co.Ltd(301129) (pe24x) experts in heating and energy saving system.
The acceleration of infrastructure is expected to heat up, and the sector is expected to welcome the momentum of valuation improvement and continue to recommend the main line of steady growth. In the first half of this year, there was great downward pressure on the economy, and it is necessary and capable to increase infrastructure: 1) in terms of necessity, real estate investment or “toughness is difficult” and export growth may be weak under the high base. Infrastructure, as an important tool for counter cyclical regulation, needs to be strengthened; 2) In terms of capacity (funds and projects), since August last year, China has intensively issued more than 1.3 trillion special bonds. This year, the amount of 1.46 trillion special bonds approved in advance has also been issued. It is expected to accelerate the issuance in January to provide a source of funds for infrastructure improvement in the first half of this year. Meanwhile, the approval of fixed asset projects by the national development and Reform Commission has been significantly accelerated since November last year, which is expected to support the improvement of infrastructure in the first half of the year. 3) In terms of pre indicators, “infrastructure development and design first”, the design is located at the forefront of the infrastructure industry chain. This week, we conducted grass-roots research on a number of local leading design institutes. For example, a design leader in Jiangsu said that he obviously felt the increase of infrastructure project information. It is expected that more infrastructure projects will be implemented after the provincial and municipal Party Congress and people’s Congress are held this month, After the Spring Festival, the signs of strength will be more obvious; A provincial infrastructure design institute in Henan said that the previously reserved infrastructure projects in the province are gradually starting in the near future, and the follow-up investment is expected to accelerate.
In terms of investment direction, we focus on four main lines: 1) new power system: at present, the demand for new energy infrastructure is large and the investment efficiency is high, which is an important direction for steady growth. We focus on recommending and paying attention to the green power construction and operation of central enterprises Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) , the private distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) , and the enterprise energy efficiency control expert Acrel Co.Ltd(300286) ; 2) Affordable housing construction: affordable housing is an important foothold of the two strategies of “common prosperity” and “no speculation in housing”, which is expected to become one of the important starting points for steady growth this year. It is recommended to focus on the leader in affordable housing design Shenzhen Capol International&Associatesco.Ltd(002949) , the leader in affordable housing construction in Shanghai Shanghai Construction Group Co.Ltd(600170) , and the leader in affordable housing construction in China China State Construction Engineering Corporation Limited(601668) ; 3) Steel structure leader: the downstream of steel structure is mainly government and industrial customers, who continue to benefit from capital construction overweight and manufacturing investment repair, with emphasis on Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) ; 4) Undervalued blue chips: at present, the overall valuation of infrastructure blue chips is at the lowest range in history, and the expected improvement of infrastructure is expected to promote the valuation repair. It is recommended to focus on central construction enterprises China Communications Construction Company Limited(601800) , China Railway Group Limited(601390) , China Railway Construction Corporation Limited(601186) and infrastructure design leaders China Design Group Co.Ltd(603018) , Jsti Group(300284) .
In 2022, the installation speed of distributed photovoltaic will increase, and steel structure and Microgrid enterprises are expected to benefit mainly. This week, our outsourcing industry special topic “bapv / BIPV development accelerates, how to treat its economy?”, It is considered that in the context of double carbon, the construction market will accelerate the transformation to green and low-carbon. Bapv / BIPV is one of the important implementation methods to realize low-carbon and zero carbon buildings. It is expected to show excellent growth in the promotion of double carbon goals in the medium and long term. From the perspective of industry scale, we estimate that the installable market scale of construction bapv / BIPV stock exceeds trillion, and the installable scale of new construction bapv / BIPV exceeds 140 billion every year, with broad market space. In this context, construction + photovoltaic manufacturing enterprises are breaking industry barriers and jointly accelerating the layout of bapv / BIPV market. The industry is developing rapidly. From the perspective of economy, we statically calculate that the payback period of bapv / BIPV investment in industrial plants is 8-9 years / 6-7 years respectively, and the payback period of bapv / BIPV investment in public buildings is 5-6 years / 4-5 years respectively. However, considering that the current distributed photovoltaic industry continues to introduce promotion measures, component prices tend to decline and industrial electricity prices tend to rise, the bapv / BIPV dynamic payback period is expected to be further shortened in the future to improve the overall economy of the project. From the perspective of industry promotion policies, this week, the Ministry of industry and information technology and other five ministries and commissions issued the action plan for innovation and development of intelligent photovoltaic industry (2021-2025), which proposed to actively carry out the construction demonstration of “light storage, direct and flexible” building integrating photovoltaic power generation, energy storage, DC distribution and flexible power consumption. At the same time, the Energy Bureau issued the implementation opinions on accelerating the transformation and development of rural energy and helping rural revitalization, Support rural areas to use farmers\’ idle land and farm house roofs to build distributed photovoltaic and other new energy and related industries, and allocate a certain proportion of energy storage, local consumption and surplus electricity on the Internet. With the continuous promotion of policies, we believe that 2022 may be a big year for the installation of distributed photovoltaic, and the bapv / BIPV industry is expected to accelerate its growth. We recommend actively cooperating with upstream component manufacturers to jointly expand Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Long Yuan Construction Group Co.Ltd(600491) and pay attention to Center International Group Co.Ltd(603098) ; And the micro grid sector Suwen Electric Energy Technology Co.Ltd(300982) (the promotion of photovoltaic business continues smoothly, and the ability to obtain orders for distributed photovoltaic + household energy storage is strong), Acrel Co.Ltd(300286) (actively promote the construction of micro grid projects and continue to benefit from the development of distributed new energy).
The national CCER market is expected to restart within this year and is optimistic about the garden leader with outstanding forestry carbon sequestration development capacity and resource reserve. Lai Xiaoming, chairman of Shanghai Environment Group Co.Ltd(601200) energy exchange, said in an interview with the media this week that the country is actively preparing to restart the filing and issuance of national certified voluntary emission reduction (CCER) projects, and the national CCER market is expected to restart in 2022.
CCER project refers to the project that can produce CCER emission reduction. According to the measures for the administration of Carbon Emission Trading (Trial) implemented from February 1, 2021, the types of CCER allowed under the background of the national carbon market include renewable energy, forestry carbon sink and methane utilization. Forestry carbon sequestration is an important part of CCER project. For every 1m3 of forest biomass, the average absorption of CO2 is 1.83 tons, and the cost of carbon dioxide removal is about 10-50 US dollars / ton. At present, the trading price of carbon emission quota in China’s carbon market is still low (about 50-60 yuan / ton), which is far from the price of EU carbon emission quota (EUA) exceeding 85 euros / ton. In the 2020 China carbon price survey report prepared by China Carbon Forum and other institutions, the carbon price for the national carbon market is expected to reach 49 / 71 / 93 / 167 yuan / ton in 2020 / 2025 / 2030 / 2050 respectively. In the future, with the continuous implementation of the “double carbon” policy, the value of carbon assets such as forestry carbon sequestration is expected to continue to highlight, the development intensity is expected to increase, and garden enterprises are expected to benefit from the increased demand for the construction and operation of carbon sequestration projects in China. It is mainly recommended that Dongzhu Ecological Environment Protection Co.Ltd(603359) (forestry carbon sequestration channels and professional strength are prominent, and forest management CCER projects have been signed in Sichuan, Fujian and other places), and pay attention to Tianjin Lvyin Landscape And Ecology Construction Co.Ltd(002887) Yueyang Forest & Paper Co.Ltd(600963) 。
Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) : divest the real estate into high-quality power grid auxiliary assets, thicken the performance and release the refinancing space. This week, the company announced that it plans to purchase real estate assets from the controlling shareholder power construction group and 18 high-quality power grid auxiliary assets. Each company is mainly engaged in the design and construction of power grid and thermal power, and some enterprises have other design and construction businesses such as municipal and infrastructure. According to the announcement, the total net profit of the placed assets will be 1.9 billion yuan / 100 million yuan from January to August 2020 / 2021 respectively; From January to August of 2020 / 2021, the invested assets will realize a net profit of RMB 100 million / – 1.8 billion respectively. Based on the profit in 2020, this transaction is expected to increase the company’s net profit by 1.8 billion yuan, accounting for 22% of the company’s net profit attributable to the parent company in 2020. The business structure of injected assets is similar to China Energy Engineering Corporation Limited(601868) . If calculated by 13 times the valuation of China Energy Engineering Corporation Limited(601868) 2022, it is expected to increase the market value of the company by 23.4 billion yuan, accounting for 18% of the current market value of the company. The company’s divestiture of real estate business may significantly ease the subsequent refinancing restrictions, which is conducive to the accelerated development of clean energy power generation and infrastructure investment projects requiring large capital expenditure.
Investment suggestions: the acceleration of infrastructure construction is expected to rise, which is expected to drive the improvement of the valuation of the construction sector. The key points are: 1) new power system: 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 green power construction and operation of central enterprises, as well as the leading Suwen Electric Energy Technology Co.Ltd(300982) of private distribution network EPCO and the expert Acrel Co.Ltd(300286) of enterprise energy efficiency management and control; 2) Affordable housing construction: key recommendations Shenzhen Capol International&Associatesco.Ltd(002949) , Shanghai Construction Group Co.Ltd(600170) , China State Construction Engineering Corporation Limited(601668) ; 3) Steel structure Faucet: key recommendations Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) ; 4) Undervalued blue chips: it is recommended to focus on China Communications Construction Company Limited(601800) , China Railway Group Limited(601390) , China Railway Construction Corporation Limited(601186) central construction enterprises, and China Design Group Co.Ltd(603018) , Jsti Group(300284) leaders in infrastructure design. In addition, continue to focus on Dongzhu Ecological Environment Protection Co.Ltd(603359) actively distributing forestry carbon sink and Runa Smart Equipment Co.Ltd(301129) experts in heating and energy saving system.
Risk tips: policy promotion is less than expected, epidemic impact is more than expected, accounts receivable risk, overseas operation risk, etc.
