Weekly market of construction industry
The industry rose and fell in the week. This week (4.11-4.15), the building decoration industry (SW) fell 5.48%, weaker than the performance of Shanghai Composite Index (- 1.25%), Shanghai and Shenzhen 300 (- 0.99%) and Shenzhen Component Index (- 2.60%), ranking 28th among the 31 primary industries of SW, and the industry ranking fell 27th compared with last week (No. 1). In terms of molecular sectors, the decline in Chemical Engineering (- 2.90%), housing construction (- 3.98%) and basic municipal engineering (- 4.54%) was small, and the performance of decoration sector was the weakest (- 9.15%).
Performance of individual stocks in a week. This week, a total of 9 companies in CITIC construction industry recorded an increase, accounting for 6.16%; 45 companies, accounting for 30.82%, rose more than the industry index (- 5.48%) this week. The number of companies that rose in the construction industry this week decreased compared with last week, and the number of companies that outperformed the industry this week decreased compared with last week. The top 5 gainers of the industry are Wuhan Nusun Landscape Co.Ltd(300536) (5.75%), ST sea reclamation (5.62%), Shanghai Prosolar Resources Development Co.Ltd(600193) (4.95%), Beijing New Space Technology Co.Ltd(605178) (4.61%), Cofco Engineering & Technology Co.Ltd(301058) (2.28%); The top 5 industry declines this week were Suwen Electric Energy Technology Co.Ltd(300982) (- 19.63%), Shanghai Hyp-Arch Architectural Design Consultant Co.Ltd(301024) (- 19.84%), Xinjiang Beixin Road & Bridge Group Co.Ltd(002307) (- 20.45%), Zhejiang Southeast Space Frame Co.Ltd(002135) (- 20.92%), Shenzhen Strongteam Decoration Engineering Co.Ltd(002989) (- 24.54%).
Industry valuation. From the perspective of the overall P / E ratio of the industry, as of April 15, the P / E ratio (TTM) of the architectural decoration industry was 10.81 times and the industry P / B ratio (MRQ) was 0.96 times. The P / E ratio and P / B ratio of the industry decreased compared with last week. Compared with the SW primary industry, PE in the construction industry ranks the third from the bottom, higher than steel and banks; Pb valuation ranks the penultimate in all primary industries, higher than that of banks. At present, the top 5 lowest price earnings ratio (TTM) of the industry are Shaanxi Construction Engineering Group Corporation Limited(600248) (3.23), China Railway Construction Corporation Limited(601186) (4.52), China State Construction Engineering Corporation Limited(601668) (4.91), China Railway Group Limited(601390) (6.04), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (6.64); The lowest price to book ratio (MRQ) is ST Meishang (0.47), China Railway Construction Corporation Limited(601186) (0.54), Beijing Orient Landscape & Environment Co.Ltd(002310) (0.59), Shenzhen Grandland Group Co.Ltd(002482) (0.65), China Communications Construction Company Limited(601800) (0.71).
Industry dynamic analysis
This week (4.11-4.15), the overall market performance of the construction industry has been corrected, but the overall policy driving force and investment demand of the industry are still strong. The fundamentals of the company maintain a positive trend and hold optimistic expectations for the subsequent steady growth market. Recently, many ministries and commissions and central banks have spoken at the level of investment progress and capital supply, releasing positive signals of steady growth and overweight again.
On April 15, the national development and Reform Commission held a press conference to introduce the situation of actively expanding effective investment, and proposed to implement various policies and measures to actively expand effective investment, so as to play an important role in stabilizing the macro-economic market. The national development and Reform Commission will focus on key areas such as infrastructure, manufacturing and high-tech industries, social and people's livelihood, strengthen the guarantee of capital elements, accelerate the formation of physical workload of projects, stimulate the vitality of social investment, promote the sustained and stable growth of investment, and plan to reserve a number of major projects to enhance the stamina for the continuous expansion of effective investment.
From January to February 2022, the national investment increased by 12.2%, an increase of 7.3 percentage points over the whole year of 2021, achieved a good start, and achieved positive results in stabilizing investment. Since March, affected by the epidemic, the investment has been under pressure. It is expected that the investment will maintain a steady growth in the first quarter. In terms of infrastructure segments, the investment in transportation and water conservancy construction in 2022q1 has performed well. So far, the national development and Reform Commission has approved 32 fixed asset investment projects with a total investment of 520 billion yuan, including 24 and 8, mainly in transportation, water conservancy, energy, high technology and other industries. According to the data of the Ministry of water resources and the national development and Reform Commission, from January to March, the national water conservancy investment was 107.7 billion yuan, an increase of 35% year-on-year. From January to March, the fixed asset investment in transportation industries such as railway, highway, water and navigation is expected to be about 636 billion yuan, an increase of about 9.8% year-on-year.
In terms of capital supply, on April 15, the central bank announced that it would reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the 5% deposit reserve ratio). This reduction is a comprehensive reduction, releasing a total of about 530 billion yuan of long-term funds. The central bank pointed out that the purpose of this RRR reduction is to optimize the capital structure of financial institutions, increase the long-term stable capital sources of financial institutions, enhance the capital allocation capacity of financial institutions, and increase support for the real economy. The second is to guide financial institutions to actively use the RRR reduction funds to support industries and small, medium and micro enterprises seriously affected by the epidemic. Third, the RRR reduction reduces the capital cost of financial institutions by about 6.5 billion yuan per year, which can promote the reduction of social comprehensive financing cost through the transmission of financial institutions. From January to March 2022, local governments across the country issued new special bonds of 1.25 trillion yuan, accounting for more than 33% of the annual limit. The main investment fields include urban and rural / municipal / industrial park construction, transportation facilities and livelihood services / social undertakings, shantytowns reconstruction, etc. the issuance progress has been significantly accelerated, which is expected to boost the growth of infrastructure investment.
At the micro level, the orders of central construction enterprises from January to February achieved positive year-on-year growth, the scale of new major project contracts signed by local state-owned enterprises increased rapidly, and the new orders signed by some central and local state-owned enterprises increased sharply in 2022q1, such as China Railway Group Limited(601390) (YoY + 84.0%), China National Chemical Engineering Co.Ltd(601117) (YoY + 90.05%), Anhui Construction Engineering Group Corporation Limited(600502) (YoY + 85.13%). The high-quality leaders are basically good.
Recently, due to epidemic factors, the construction progress of many projects may be less than expected. In order to hedge the impact of the epidemic on investment, the steady growth policy is expected to increase again. We continue to be optimistic about the follow-up market performance of the construction industry. It is suggested to focus on the "two new and one heavy" infrastructure leaders, including construction central enterprises, regional infrastructure leaders and high-quality targets of infrastructure survey and design. At the same time, the marginal improvement policy of the real estate industry continues, and the favorable policy expectation in the future is relatively strong. The high-quality central enterprises and local state-owned enterprises that layout the real estate business usher in the valuation repair. The market performance of the real estate chain design, decoration and consumer building materials sector is worth looking forward to. We believe that the short-term performance is more in the beta market that follows the real estate industry policy to relax the valuation repair. In the medium and long term, the performance is reversed, the cash flow is excellent In companies with sufficient orders, the action force is still sufficient.
Investment advice this week
At present, the tone of steady growth is clear, fiscal expenditure is increased, infrastructure investment data is bright from January to February, investment in water conservancy and transportation construction is high from January to March, policy implementation has achieved initial results, the demand for two new and one heavy construction in the construction industry is clear, local construction plans are huge, capital supply is sufficient, and the follow-up steady growth is expected to continue to increase, This week, we continue to recommend high-quality infrastructure targets that benefit from the "two new and one heavy" under the steady growth target. At the same time, we suggest to pay attention to the design, decoration and real estate construction companies related to the real estate chain that benefit from the marginal improvement of the policies of the real estate industry. In addition, the company's performance is expected to be expected due to the sufficient orders on hand in the early stage and the better than expected performance of 22q1, including:
1) 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) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) and other central construction enterprises, Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) and other regional infrastructure leaders, with excellent order performance and significant valuation advantages, are the main force to increase infrastructure and the main beneficiaries of steady growth and moderate improvement of industry concentration;
2) Anhui Transport Consulting & Design Institute Co.Ltd(603357) , high-quality survey and design targets at the front of the industrial chain, give priority to the steady growth of infrastructure and the high growth of infrastructure demand in the province during the 14th Five Year Plan period;
3) Shenzhen Capol International&Associatesco.Ltd(002949) , the leader of real estate design, benefited from the marginal improvement of policies in the real estate industry and the release of demand for prefabricated building construction during the 14th Five Year Plan period;
4) Zhejiang Tiantie Industry Co.Ltd(300587) , a leading enterprise in urban rail vibration reduction, has a solid industry position, strong technical and brand strength and high performance, which fully benefits from the release of urban rail construction demand promoted by the new infrastructure;
2022 industry investment perspective
In 2022, the construction industry is expected to usher in multiple development opportunities of fundamentals, policy driven and "construction +", and the industry is in the undervalued range, with prominent investment value.
The overall fundamentals of the construction industry are improving. In particular, the rapid growth of orders from central infrastructure enterprises and local infrastructure leaders will help improve performance. It will take the lead in benefiting from the release of infrastructure demand under the goal of stable growth. At the same time, it will actively layout new businesses, improve comprehensive strength and help valuation repair.
The policy is expected to become another driving force for the upward trend of the industry in 2022. In the near future, the steady growth policy will continue to increase, the active fiscal policy should improve the efficiency, the local special debt can be expected, the monetary policy should be flexible and appropriate, and the liquidity should be reasonable and abundant, which will help promote the construction of "two new and one heavy", and the acceleration of infrastructure investment is worth looking forward to.
The construction industry actively embraces the "new economy" and actively layout Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) . BIPV, energy storage and carbon sequestration have become the key areas of layout of listed companies. Some companies Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) have achieved initial results and are expected to continue to make efforts in the future to help improve the valuation level of companies and industries. 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.
On the whole, the construction industry has both "white horse" with good performance and extremely low valuation, and "dark horse" with layout of "building +" and standing at the market outlet. The overall trend of the industry is good, with fundamental support and policy catalysis. In addition, the "building +" helps to improve the valuation and is optimistic about the overall trend of the construction industry in 2022.
Suggestions on medium and long-term configuration
The overall fundamentals of the construction industry are improving. Industry leaders and regional leaders have benefited from the "national advance and people retreat" and the improvement of industry concentration. Both new 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 leaders and the "double carbon" background:
(1) "two new and one heavy" infrastructure leaders. Central construction enterprises and regional infrastructure leaders will fully benefit from "two new and one heavy" construction, and central construction enterprises and regional infrastructure leaders will fully benefit from the "two new and one heavy" construction. And central construction enterprises and regional infrastructure leaders are the main beneficiaries of "the country advances, the people retreat, the industry concentration increases, and the industry concentration increases. The new orders and performance are bright, and the valuation advantage is quite significant. It's suggested to focus on China State Construction Engineering Corporation Limited(601668) \ the valuation advantage is obvious. The new orders and performance and valuation advantage is very obvious. It's obvious valuation advantage is obvious. It's recommended to focus on China State Construction Engineering Corporation Limited(601668) andother regional infrastructure leaders. 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. Guangzhou Metro Design & Research Institute Co.Ltd(003013) and Zhejiang Tiantie Industry Co.Ltd(300587) .
(2) high quality target of infrastructure survey and design Anhui Transport Consulting & Design Institute Co.Ltd(603357) , the front-end of the industrial chain gives priority to benefiting from the release of infrastructure demand under the goal of stable growth. During the 14th Five Year Plan period, the scale of planned infrastructure investment in many provinces increased significantly, the leading order contracting advantage of high-quality design was significant, and the market share could be increased.
(3) 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 own 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. 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) .
(4) prefabricated buildings. We believe that under the background of carbon peak and carbon neutralization goal, the prefabricated construction field mainly in the form of concrete structure and steel structure will continue to fully benefit from the further improvement of the industry prosperity and the release of demand, 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) .
(5) new power construction. Under the background of new power system construction with new energy as the main body, construction enterprises involved in the field of power construction are expected to benefit from the improvement of power grid investment and construction, operation and maintenance demand, and the release of BIPV and energy storage demand. It is recommended that Suwen Electric Energy Technology Co.Ltd(300982) , Zhejiang Southeast Space Frame Co.Ltd(002135) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Tus-Design Group Co.Ltd(300500) , Shenzhen Zhongzhuang Construction Group Co.Ltd(002822) and Dongzhu Ecological Environment Protection Co.Ltd(603359) .
Risk tips: epidemic control is not as expected, policy implementation is not as expected, economic downside risk, PPP promotion is not as expected, fixed asset investment is declining, local financial growth is slow, etc
