Industry and policy developments
1) on January 4, 2022, 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 comprehensively promote residential roof intelligent photovoltaic system in conditional urban and rural areas, encourage new government investment in public welfare buildings and promote Cecep Solar Energy Co.Ltd(000591) roof system. Carry out regional photovoltaic distributed application demonstration with intelligent photovoltaic system as the core and new technologies such as energy storage and building power demand response as the carrier. Improve the application level of building intelligent photovoltaic. Actively carry out the building construction demonstration of “light storage, direct and flexible” integrating photovoltaic power generation, energy storage, DC distribution and flexible power consumption.
2) on January 4, 2022, the general office of the Ministry of housing and urban rural development, the general office of the national development and Reform Commission and the general office of the Ministry of Finance jointly issued the notice on further clarifying the requirements for the transformation of old urban communities and published the measurement standard for the transformation of old urban communities. Cities and counties are encouraged to attract and cultivate large-scale operators for the transformation of old urban communities. It is encouraged to attract and cultivate various professional institutions and other social forces to participate in the planning, design, financing, construction, operation and management of transformation projects through government procurement, paid use of new facilities and implementation of asset rights and interests without adding hidden debts of local governments.
Market review and prospect this week
Benefiting from the driving tone of steady growth policy, the basic orientation of high-quality leaders in the industry and the improvement of the valuation of construction + new business, the overall market performance of the construction industry has been strong recently, which has verified the previous judgment on the valuation repair of the current round of construction sector, and will continue to be optimistic about the market performance of the “two new and one heavy” infrastructure leaders and the layout of “construction +” new business sector in the future. This week (1.4-1.7), the construction industry (Shenwan building decoration index) increased by + 3.54% (HS300 was – 2.39%). The top 5 industry increases were Shanghai Geoharbour Construction Group Co.Ltd(605598) (+ 29.06%), Shenzhen Grandland Group Co.Ltd(002482) (+ 24.69%), Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (+ 21.60%), Shenzhen Capol International&Associatesco.Ltd(002949) (+ 14.59%), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (+ 13.27%); The top 5 industry declines this week were Shenzhen L&A Design Holding Limited(300949) (- 11.97%), Center International Group Co.Ltd(603098) (- 10.13%), Huadian Heavy Industries Co.Ltd(601226) (- 9.44%), Shenzhen Minkave Technology Co.Ltd(300506) (- 8.76%) and Fujian Yongfu Power Engineering Co.Ltd(300712) (- 8.10%).
From the perspective of the overall P / E ratio of the industry, the P / E ratio (TTM) of the architectural decoration industry was 10 times as of January 7, an increase compared with last week. The industry price to book ratio (MRQ) was 0.98 times, up from last week. The current industry’s price earnings ratio (TTM) is the lowest, top 5 Shaanxi Construction Engineering Group Corporation Limited(600248) (2.97), China State Construction Engineering Corporation Limited(601668) (4.26), China Railway Construction Corporation Limited(601186) (4.46), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (5.44), China Railway Group Limited(601390) (5.57); The lowest price to book ratio (MRQ) is China Railway Construction Corporation Limited(601186) (0.57), China Communications Construction Company Limited(601800) (0.66), China State Construction Engineering Corporation Limited(601668) (0.69), China Railway Group Limited(601390) (0.69), Beijing Orient Landscape & Environment Co.Ltd(002310) (0.72).
The building decoration industry (SW) rose by + 3.54% this week, stronger than the Shanghai Composite Index (- 1.65%), Shanghai and Shenzhen 300 (- 2.39%), and Shenzhen Component Index (- 3.46%), ranking third among the 28 first-class industries in sw28. A total of 98 companies in the construction industry recorded an increase this week, accounting for 67%; The number of companies with an increase of more than the industry index (+ 3.54%) this week was 52, accounting for 36%. The construction industry recorded an increase this week, the number of companies decreased, the number of companies with an increase of more than the industry decreased, and the industry ranking increased by 18 compared with last week (No. 21). From the structure of this week’s increase, the top targets of this week’s increase are mainly professional engineering, steel structure and road and bridge construction. The increase of Shanghai Geoharbour Construction Group Co.Ltd(605598) (+ 29.06%), Cofco Engineering & Technology Co.Ltd(301058) (+ 10.67%), steel structure plate Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (+ 21.60%), Hangxiao Steel Structure Co.Ltd(600477) (+ 12.83%), road and bridge construction and survey and design plate Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (+ 13.27%), China Design Group Co.Ltd(603018) (+ 11.24%) and Jsti Group(300284) (+ 8.32%) was higher this week; In addition, the subject Shenzhen Grandland Group Co.Ltd(002482) (+ 24.69%) in the decoration sector increased by more than 20%, the subject Shenzhen Capol International&Associatesco.Ltd(002949) (+ 14.59%) in the housing construction sector increased by more than 10%, and the subject Hongrun Construction Group Co.Ltd(002062) (+ 8.87%) in the urban rail construction sector ranked among the highest in the industry.
Interpretation of policies / highlights of this week
This week, the general office of the Ministry of housing and urban rural development, the general office of the national development and Reform Commission and the general office of the Ministry of Finance jointly issued the notice on further clarifying the requirements for the transformation of old urban communities and published the measurement standard for the transformation of old urban communities. Cities and counties are encouraged to attract and cultivate large-scale operators for the transformation of old urban communities. It is encouraged to attract and cultivate various professional institutions and other social forces to participate in the planning, design, financing, construction, operation and management of transformation projects through government procurement, paid use of new facilities and implementation of asset rights and interests without adding hidden debts of local governments. As an important part of urbanization, the transformation of old residential areas in China has been advancing rapidly since 2019. As of 2019, 170000 old urban residential areas have been reported to need transformation. The Ministry of housing and urban rural development said that it will actively innovate the investment and financing mechanism for the transformation of old urban residential areas and attract social forces to participate. On July 20, 2020, the general office of the State Council issued the guiding opinions on comprehensively promoting the transformation of old urban communities. The opinions emphasizes that in 2020, 39000 old urban communities will be newly renovated, involving nearly 7 million households. By 2022, the institutional framework, policy system and working mechanism for the transformation of old urban communities will be basically formed; By the end of the 14th Five Year Plan period, we will strive to basically complete the transformation of old urban communities that need to be transformed by the end of 2022 in combination with the actual situation of all localities. According to the government work report in 2021, 53000 old urban communities will be reconstructed. According to the statistics and reports of various regions, 54700 old urban communities will be newly renovated from January to November 2021. In terms of provinces, except Tibet (63.9%), all the other 30 provinces, regions, cities and Xinjiang production and Construction Corps have completed their annual plans.
Compared with new projects, the key and difficult points of old city reconstruction are the balance between demolition and reconstruction and retention on the basis of existing building areas, the functional completeness and rationality of urban reconstruction planning and design, and the refinement of construction stage, which puts forward higher requirements for design and planning. The sub areas involved include municipal roads, community landscape greening, re laying of water and electricity pipe network The civil engineering and decoration construction of the building body, as well as the supplement and expansion of supporting commercial medical and other functional facilities. Due to the scattered layout of the community and the relatively limited size of individual buildings, which are mostly carried out in EPC mode, the planning and design requirements are higher for the reconstruction and upgrading projects of large communities or cultural blocks. In addition, compared with traditional infrastructure projects and large-scale housing construction, the construction cycle of the reconstruction projects of old communities is relatively short (about 0.5-1 year), The payment collection cycle and cash flow level of the project may be improved, and the design companies and municipal / housing construction enterprises mainly engaged in urban planning / housing survey and design may benefit from the above urban reconstruction market.
At the same time, due to the high requirements for government financial funds for the reconstruction of old residential areas, we believe that the implementation progress of the reconstruction of first and second tier cities with better government financial resources may be faster than that in other regions.
This week, the roof photovoltaic system was promoted again. On January 4, 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) (later referred to as the “action plan”), which proposed to comprehensively promote residential roof intelligent photovoltaic system in conditional urban and rural areas, encourage new government investment in public welfare buildings and promote Cecep Solar Energy Co.Ltd(000591) roof system. Carry out regional photovoltaic distributed application demonstration with intelligent photovoltaic system as the core and new technologies such as energy storage and building power demand response as the carrier. Improve the application level of building intelligent photovoltaic. Actively carry out the building construction demonstration of “light storage, direct and flexible” integrating photovoltaic power generation, energy storage, DC distribution and flexible power consumption.
Building photovoltaic system has significant advantages, which can enhance the beauty of buildings, reduce energy consumption of buildings, reduce carbon dioxide emission, and have large development space. In the past two years, a number of policies were issued to promote the development of building photovoltaic system. In September 2020, the Ministry of housing and urban rural development issued several opinions on accelerating the industrialization of new buildings, which clearly proposed to promote the development of intelligent construction technology, promote the application demonstration of intelligent photovoltaic application, promote the application of photovoltaic power generation system combined with buildings, and improve the convenience and comfort of buildings. BIPV ushered in new opportunities for development. In June 2021, the National Energy Administration issued the notice on submitting the county (city, district) roof distributed photovoltaic development pilot scheme, which plans to carry out the county (city, district) roof distributed photovoltaic development pilot nationwide, requiring that the total roof area of Party and government organs can not be less than 50% according to the proportion of photovoltaic power generation, schools, hospitals The total roof area of public buildings such as village committees can be no less than 40% based on photovoltaic power generation, and the total roof area of rural residents can be no less than 20% based on photovoltaic power generation. In October 2021, the CPC Central Committee and the State Council jointly issued the opinions on promoting green development of urban and rural construction and the opinions on completely, accurately and comprehensively implementing the new development concept and doing a good job in carbon peak and carbon neutralization, encouraging the integrated and innovative development of intelligent photovoltaic and green buildings, accelerating the optimization of building energy consumption structure and carrying out building roof photovoltaic action. The action plan once again emphasizes the promotion of photovoltaic roof system in residential roofs and government buildings.
In distributed building photovoltaic, BIPV is a technology that integrates Cecep Solar Energy Co.Ltd(000591) power generation equipment and building materials. It belongs to the integration field of photovoltaic and building materials industry. China State Construction Engineering Corporation Limited(601668) the large scale of roof area provides a solid resource foundation for the development of roof BIPV, and is relatively more applicable in public buildings, industrial buildings and other fields. The promotion and implementation of BIPV puts forward new requirements for the construction industry from design, construction to operation and maintenance, covering multiple disciplines such as architecture, structure and power system, bringing new opportunities for the development of relevant enterprises in all links. At present, some enterprises in the construction industry are based on their main business and expand the construction photovoltaic business. The construction industry pays attention to the leading Seiko trunk ditch of steel structure engineering, Zhejiang Southeast Space Frame Co.Ltd(002135) and the private enterprise Suwen Electric Energy Technology Co.Ltd(300982) of the whole industrial chain layout of operation and maintenance of power design consulting engineering.
The central economic work conference in 2022 focuses on stability and expresses strong expectations for steady growth. In the macro policy part, the meeting proposed to ensure the intensity of fiscal expenditure and accelerate the progress of expenditure. At the same time, it was mentioned for the first time that infrastructure investment should be carried out moderately in advance, indicating that infrastructure is expected to become an important starting point for this round of steady economic growth, and the annual infrastructure investment plan in 2022 is expected to be laid out in advance.
In terms of capital supply, the accelerated issuance of local government special bonds in the second half of 2021 is expected to form physical investment in 2022. Recently, the Ministry of finance has issued a quota of 1.46 trillion yuan of new special debts in 2022 to all localities in advance. In this regard, the Ministry of Finance said it would continue to strengthen supervision and promote the issuance of quotas in advance in the first quarter of next year, Provide strong support for stabilizing the macro-economic market. In 2022, the special bonds will be mainly used in nine major directions: transportation infrastructure, energy, agriculture, forestry and water conservancy, ecological and environmental protection, social undertakings, urban and rural cold chain and other logistics infrastructure, municipal and industrial park infrastructure, major national strategic projects and indemnificatory housing projects. It is expected that the prosperity of the infrastructure industry in the first half of 2022 will pick up compared with 2021h1, and the infrastructure investment is expected to be marginally improved.
Investment view
In 2022, the construction industry will continue to embrace the “new economy” and actively integrate into the “double carbon” national strategy, and green buildings are expected to rise. At present, China’s economy is facing downward pressure, steady growth and cross cycle adjustment are approaching, and the construction industry is expected to usher in dual development opportunities of policy driven and “construction +”. From the perspective of policy, the active fiscal policy should improve efficiency, pay more attention to accuracy and sustainability, ensure the intensity of fiscal expenditure and speed up the progress of expenditure. It is expected that local special bonds are expected to be launched in the first half of the year, the “two new and one heavy” construction is expected to be overweight, and the infrastructure investment is moderately advanced, which is worth waiting for. Monetary policy should be flexible and appropriate, and maintain reasonable and abundant liquidity. There is an expectation of reducing reserve requirements and interest rates in 2022. The easing of monetary policy is conducive to the development of the industry. Moreover, fiscal policy and monetary policy should be coordinated and linked, and cross cyclical and counter cyclical macro-control policies should be organically combined. The policy is expected to become a major driving force for the “spring agitation” of the industry in 2022. At the same time, the construction industry actively embraces the “new economy” and actively layout Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) around “construction +”. BIPV, energy storage and carbon sequestration have become the key layout fields of listed companies. Some companies Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) have begun to show signs and are expected to continue to make efforts in the future, so as to improve the valuation level of companies and industries. In addition, industry leaders and regional leaders will continue to cultivate traditional businesses, expand the whole industrial chain and extend upstream and downstream around traditional businesses, and fully benefit from the improvement of industry concentration. The release of future performance is sustainable. We believe that the construction industry has not only a “white horse” with good performance and extremely low valuation, but also a “dark horse” with “building +” layout and standing at the market outlet. The overall trend of the industry is good, with fundamental support and policy catalysis, and “building +” can improve the valuation space. It is an industry with “advance, attack and retreat” and is optimistic about the overall trend of the construction industry in 2022.
Configuration mainline recommendations
The overall fundamentals of the construction industry have improved. Industry leaders and regional leaders have benefited from the “national advance and people retreat” and the improvement of industry concentration. Both newly signed orders and performance have increased rapidly. At the same time, the construction industry actively embraces the “new economy” and the “construction +” era is coming, opening up the future development space of the company. On the main line of configuration, we propose to actively layout the “construction +” new business sector around the “two new and one heavy” infrastructure leader and the “double carbon” background:
(1) “two new and one heavy” infrastructure leaders. Central construction enterprises and regional infrastructure leaders will fully benefit from the construction of “two new and one heavy”, and central construction enterprises and regional infrastructure leaders are the main beneficiaries of “national advance and people retreat” and the improvement of industry concentration. The newly signed orders and performance are bright, and the valuation advantage is very significant. It is suggested to pay attention to China State Construction Engineering Corporation Limited(601668) , China Communications Construction Company Limited(601800) , China Railway Construction Corporation Limited(601186) , Metallurgical Corporation Of China Ltd(601618) and other central construction enterprises and Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Regional infrastructure leaders such as Anhui Construction Engineering Group Corporation Limited(600502) . At the same time, urban rail design and vibration reduction will fully benefit from the release of urban rail transit demand under the construction of new urbanization, with emphasis on Guangzhou Metro Design & Research Institute Co.Ltd(003013) and Zhejiang Tiantie Industry Co.Ltd(300587) .
(2) pumped storage beneficiary company. With the change of energy structure, power supply security has been put on the agenda, and energy storage has become the main means to solve power security. As the most important way of energy storage, pumped storage has been strongly supported by national policies. In the future, pumped storage will enter a stage of rapid growth and encourage social capital to enter. Water conservancy and hydropower engineering enterprises have the construction and operation of pumped storage projects, and most of them have hydropower operation assets. It is possible to layout pumped storage power stations, which is expected to fully benefit the development of pumped storage in the future. It is recommended that Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , Guangdong No.2 Hydropower Engineering Company Ltd(002060) and Anhui Construction Engineering Group Corporation Limited(600502) .
(3) prefabricated buildings. We believe that under the background of carbon peak and carbon neutralization goal, the fabricated building field mainly in the form of concrete structure and steel structure will continue to fully benefit from the further improvement of industry prosperity and demand release, and is expected to become an important development field under the carbon neutralization goal. It is suggested to pay attention to Shenzhen Capol International&Associatesco.Ltd(002949) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Zhejiang Southeast Space Frame Co.Ltd(002135) .
(4) new power construction. Under the background of new power system construction with new energy as the main body, it is involved in power construction
