The building materials sector underperformed the CSI 300 index this week. Building materials and construction index this week
Fell 7.3% / 6.4% respectively, underperforming the CSI 300 index by 3.1 / 2.2 percentage points. We believe that the main reasons why the sector underperformed the market are: 1) affected by the epidemic, the price of some building materials products fell in the original small peak construction season, and 2) the performance of some building materials enterprises in the annual report and the first quarter fell sharply, affecting the sentiment of the sector. 3) Bulk energy prices are still high, and investors are worried about the damage to the gross profit margin of the sector.
The macro data is still relatively weak, and the investment in water conservancy environment has accelerated. This week, the state released the main economic data of the first quarter. Due to the impact of epidemic control on demand and the shortage of funds in the real estate industry chain, the macroeconomic data is still relatively weak.
Total: in 2022q1, the growth rate of fixed asset investment was 9.3%, down 2.9 percentage points from January to February, of which the growth rate of infrastructure investment was 8.5%, the growth rate of real estate development investment was 0.7%, corresponding to the growth rate of investment in a single month in March - 2.4%.
Real estate: in 2022q1, the construction area of real estate was - 17.5% year-on-year, corresponding to - 22.2% year-on-year in March. The cement output decreased by 12.1% from January to March, reflecting the weak demand at the construction end; The completion end performed slightly better, with a year-on-year completion area of - 11.5%, corresponding to a year-on-year decline of 15.5% in the area completed in March.
Infrastructure construction: the overall investment growth rate is 8.5%. In terms of breakdown, the growth rate of road investment is 3.6%, which is generally stable. The growth rate of railway investment is - 2.9%, which is 5.1% narrower than the decline from January to February. In infrastructure investment, Q1 investment in water conservancy, environment and public facilities management increased by 8%, which is the main driving force to support the growth of infrastructure investment.
Since the escalation of epidemic control in key cities at the end of March, the state has repeatedly expressed its determination to stabilize growth, and further released liquidity by reducing the reserve requirement. According to wind data and our statistics, the issuance of special bonds of local governments was advanced in 2022, and the key projects approved by the national development and Reform Commission from 2021h2 were also significantly accelerated compared with the previous ones. In addition, there were abundant orders from central enterprises, and the certainty of steady growth of infrastructure throughout the year was still strong. Under the pressure of economic fundamentals, the steady growth sector still had strong allocation value.
Pay attention to the policy of further stabilizing growth at the end of April. An economic conference is expected to be held at the end of April to plan the next economic work on the basis of analyzing and studying the economic situation in the first quarter. We judge that if the 5.5% economic growth target set by the two sessions is maintained, the support for loose macro policies and stable growth is expected to be further increased. It is suggested to focus on the impact of the real estate chain and epidemic prevention policies on the manufacturing industry and consumption side.
Focus on three main lines: consumption of building materials, construction +, steady growth. 1) Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) is the first choice of our real estate chain. Yuhong takes the lead in the industry, completes the organizational structure adjustment in 18q4, and sinks the channel in 2020. At present, the proportion of channels such as public construction integration company, real estate centralized procurement, other engineering business departments, civil construction and partners is the best, which can effectively control risks and provide growth beyond the industry. At the same time, the overall consumer building materials sector has entered the configuration area, and the valuation has been fully adjusted. Next, the catalyst is the decline of bulk prices in the upstream. It is recommended that Skshu Paint Co.Ltd(603737) , Guangdong Kinlong Hardware Products Co.Ltd(002791) , Keshun Waterproof Technologies Co.Ltd(300737) , Zhejiang Weixing New Building Materials Co.Ltd(002372) , Monalisa Group Co.Ltd(002918) and so on. If consumer building materials are started, pay attention to the glass sector at the completion end; 2) "Construction +" sector: a Qingdao East Steel Tower Stock Co.Ltd(002545) is the first choice for our "construction +" chain. Potash fertilizer judges that due to the further fragmentation of the global supply chain and the outbreak of demand in the inflationary environment, the prosperity continues to rise, and the company will enter the upward channel of double increase in volume and price in 202225; B recommend Jchx Mining Management Co.Ltd(603979) , the overseas expansion of the main business of mining clothing accelerates, the self owned mines are gradually put into operation, and gradually enter the outbreak stage from 2023 to 2024. At present, the resource options with high valuation and cost performance under the market value. C steel structure companies with extended application to enter BIPV business; 3) Shandong Hi-Speed Road&Bridge Co.Ltd(000498) is the first choice for the stable growth chain of infrastructure construction. The repeated epidemic in many places across the country and the increasing economic pressure once again highlight that stable growth will be one of the main lines of the whole year. The company has abundant orders on hand, and the intensity of infrastructure planning such as highway and railway in Shandong Province ranks first in the country.
Risk tips
The demand is lower than expected, the cost is higher than expected, and there are systemic risks.
