Investment advice
In the past 22 years, the investment scale of water conservancy projects, "two new and one heavy" and affordable housing has increased relatively, which is expected to bring more infrastructure demand than expected.
1) 150 major water conservancy projects are accelerated, and the annual investment is expected to exceed expectations. The State Council, the national development and Reform Commission and the Ministry of water resources recently issued documents calling for accelerating the construction progress of 150 major water conservancy projects. In terms of annual investment plan, about 800 billion yuan of water conservancy investment will be completed in 2022, an increase of 6% over the average completion of water conservancy investment in 20192021; In terms of completion, the national water conservancy investment in 22q1 was 107.7 billion yuan, an increase of 35% over the same period in 21 years.
2) "two new and one heavy": it is expected to become an important starting point for local investment. "Two new and one heavy" includes the construction of new infrastructure, new urbanization, transportation, water conservancy and other major projects. As of April 18, the investment amount of major projects disclosed by comparable provinces in 2022 increased by 23.8% year-on-year.
3) affordable housing: combined with the objectives of the 14th five year plan and local policy trends, we expect that the construction scale of affordable housing in 2022 may exceed expectations. In 2021, 940000 affordable rental housing units were started and raised nationwide. During the "14th five year plan" period, 40 cities plan to increase 6.5 million affordable rental housing units, with an average annual increase of 1.3 million units, an increase of 38% year-on-year compared with the construction started in 21 years.
In terms of sectors, we continue to be firmly optimistic about the central enterprises of undervalued construction, and suggest to layout along two main lines:
1) recommend new energy infrastructure central enterprises: China Energy Engineering Corporation Limited(601868) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) . Both companies benefited from stable growth in the short term, higher than expected growth in new energy infrastructure orders in the medium term, and long-term transformation of new energy investment and construction. Considering the compound annual growth rate of performance of about 15% in the next three years, the current China Energy Engineering Corporation Limited(601868) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) performance corresponds to 10.4 times and 10.3 times of PE in 22 years respectively, and the value is underestimated.
2) recommend traditional infrastructure central enterprises: China Railway Construction Corporation Limited(601186) , Metallurgical Corporation Of China Ltd(601618) , pay attention to China Railway Group Limited(601390) , China Communications Construction Company Limited(601800) .
China Railway Construction Corporation Limited(601186) : at present, the company's PE valuation is 8%, which is at the absolute bottom of history, and the margin of safety is sufficient. The company's orders expanded rapidly, and the revenue and net profit attributable to the parent company increased steadily. From 2015 to 2021, the CAGR of the company's newly signed orders, revenue and net profit attributable to the parent company were 20%, 9% and 11% respectively.
Metallurgical Corporation Of China Ltd(601618) : Currently, the company's PE valuation quantile is 23%, and the valuation quantile is low. Project contracting business benefits from steady growth and "double carbon" strategy; 22 year resource development business or contribution performance flexibility. The company's nickel output in 21 years is 32.5% 10000 tons and 3000 tons of cobalt. The average spot price of LME nickel from January to April of 22 was 29200 US dollars / ton, up 58% from 18500 US dollars / ton in the whole year of 21.
Downstream: the investment is divided into "warm and cold". In March, the fixed investment in infrastructure construction increased by 8.8% year-on-year in a single month
Capital side: in March, the M2 balance was 249.8 trillion yuan, and the new social finance was 4.65 trillion yuan. The issuance rhythm of special bonds in March was much ahead of the same period last year, and the cumulative year-on-year decrease of urban investment bonds was 8.6%.
Investment side: the cumulative fixed asset investment is + 9.3% year-on-year, and the cumulative infrastructure investment is + 8.5% year-on-year.
(1) real estate: in March, the cumulative investment in real estate development was + 0.7% year-on-year, and the area of land acquisition / sales continued to decline;
(2) capital construction: in March, the capital construction investment (excluding power) accumulated + 8.5% year-on-year;
(3) industry: in March, the cumulative fixed asset investment in manufacturing and mining industry was + 15.6% and + 19.0% year-on-year.
Demand side: PMI of construction industry rose to 58.1% in March.
Infrastructure: major projects: as of April 18, 25 provinces have released the investment amount of major projects in 2022, with a total investment of nearly 13.4 trillion, and the total investment of comparable provinces increased by 23.8% year-on-year.
Upstream: in March, cement and glass prices were - 0.8% and - 1.5% month on month, and steel prices rose
Building materials: on April 15, the comprehensive index of building materials was 173.56 points, a month on month increase of + 1.6%, a year-on-year increase of + 2.8%; The price indexes of cement and glass were - 0.8% and - 1.5% month on month, respectively.
Retail sales of building materials: from January to March, the cumulative retail sales of construction and decoration materials reached 40.6 billion yuan, an increase of 3.8% year-on-year.
Steel: on April 15, the unit prices of rebar, medium sector, high-speed wire and round steel increased by 4.6%, 2.8%, 4.4% and 1.9% month on month respectively.
Construction equipment: the sales volume of excavators in March decreased by 63.6% year-on-year, and the operating hours in March decreased by 16.9% year-on-year.
Aluminum alloy temsector: in March, the PMI of aluminum alloy temsector development index was 57.3%, up 16.9pct month on month, of which the production index increased by 22.3pct to 58% month on month, and the new order index increased by 17.8pct to 57.1% month on month.
Assembled sector tracking
Policy: on April 13, 2022, Jinan Municipal Bureau of housing and urban rural development issued the "14th five year plan" for the development of prefabricated buildings in Jinan, which made it clear that by 2025, the market scale of prefabricated buildings will reach 100 billion yuan, and the proportion of prefabricated buildings in new buildings will not be less than 50%.
Orders: 22q1 Anhui Honglu Steel Construction(Group) Co.Ltd(002541) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) cumulative contract amount of newly signed orders were 6.013 billion yuan and 4.46 billion yuan respectively, with a year-on-year increase of + 14.7% and + 34.0%.
Infrastructure sector tracking
Orders from central construction enterprises: 22q1, China Railway Construction Corporation Limited(601186) , China Railway Group Limited(601390) , Metallurgical Corporation Of China Ltd(601618) , China State Construction Engineering Corporation Limited(601668) , China National Chemical Engineering Co.Ltd(601117) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) newly signed contracts were 465.9, 6057, 3191, 835, 1039 and 247.6 billion yuan respectively, with a year-on-year increase of 1.5%, 84.0%, 13.7%, 12.6%, 90.1% and 7.0% respectively. The total newly signed amount of the above six construction central enterprises in 22q1 was 2.58 trillion yuan, an increase of 23.0% over the total newly signed amount of 2.10 trillion yuan in 21q1.
PPP warehousing projects: the amount of new warehousing projects in February was 100282 billion yuan, a year-on-year increase of + 297.6%.
Risk tips
Covid-19 epidemic rebounded in China; The growth rate of infrastructure investment is lower than expected; The growth rate of real estate investment is lower than expected; The penetration rate of prefabricated buildings increased less than expected.
