Q1 infrastructure construction is expected to make efforts, and the logic of steady growth is further strengthened
From January to march of the year, the investment in real estate development / narrow infrastructure / broad infrastructure / manufacturing industry was + 0.7% / + 8.5% / + 10.5% / + 15.6% year on year respectively, and the investment in real estate development / narrow infrastructure / broad infrastructure / manufacturing industry in March was – 2.4% / + 8.8% / + 11.8% / + 11.9% year on year respectively. Previously, we judged that Q1 was the honeymoon period for infrastructure development. Investment data and orders from central state-owned enterprises further verified our view. Considering that the recent epidemic may delay the recovery of real estate sales and consumption, the steady growth of infrastructure investment is expected to be further strengthened in the short term. We are firmly optimistic about the logic of infrastructure investment under the main line of steady growth, and pay attention to the subdivided fields such as energy infrastructure, water conservancy and pipe network, as well as Shandong, Sichuan Investment opportunities in Anhui and other regions.
Article 23 of the central bank releases positive information and solves pain points in infrastructure construction
Recently, the central bank and the safe jointly issued the notice on doing a good job in epidemic prevention and control and financial services for economic and social development, proposing 23 measures to support the real economy, and Article 11 proposes to increase the support for effective investment, including financial institutions to increase the support for major projects, projects benefiting the people and making up for weaknesses (water conservancy, transportation, pipe network, municipal administration) and new infrastructure, and reasonably purchase local government bonds, According to the principle of marketization, ensure the reasonable financing needs of financing platforms, ensure the implementation of projects under construction, do a good job in PPP financial support, and increase support for regions with slow growth. Municipal investment accounts for nearly 45% of infrastructure in a narrow sense. Previously, constrained by implicit debt management, local municipal investment has maintained low growth or negative growth. In the future, if the financing capacity of the financing platform is improved, local municipal investment is expected to pick up marginally, bringing greater flexibility to infrastructure investment.
The monthly growth rate of Q2 infrastructure is still expected to exceed 5%
We expect that 22q2 infrastructure is still expected to maintain a high boom, and the growth rate of broad / narrow infrastructure in 2022 is 6.1% / 5.0% respectively. From the perspective of actual demand, we believe that the prosperity of the infrastructure industry in the first half of 2022 is higher than that in the second half of 2022. It is expected that the narrow infrastructure growth rate of 22h1 / H2 will be 6.8% / 3.6%, and the broad infrastructure growth rate of 22h1 / H2 will be 8.4% / 4.2%; In a single quarter, considering that the recent repeated epidemic may delay the recovery of real estate sales and consumption, 22q2 infrastructure investment is still expected to maintain a high growth. We estimate that the monthly growth rate is still expected to exceed 5%. 22q3 infrastructure growth still has a good rebound foundation on the basis of low base, and the prosperity of infrastructure industry is expected to continue to 22q3 in 2022.
Market Review
Last week, the construction (CITIC) index fell 5.84%, the Shanghai and Shenzhen 300 index fell 3.32%, and all three sub sectors fell. Among the individual stocks, Beijing Qianjing Landscape Co.Ltd(603778) (+ 16.19%), Hunan Huakai Cultural And Creative Co.Ltd(300592) (+ 11.13%), Hualan Group Co.Ltd(301027) (+ 9.23%), Shanghai Geoharbour Construction Group Co.Ltd(605598) (+ 7.91%) and Misho Ecology & Landscape Co.Ltd(300495) (+ 7.59%) led the increase.
Investment advice
Under the medium and long-term growth dimension of “construction +” leader, enterprises with “new energy” and “chemical” industries have gradually entered the performance cashing period, and their performance is expected to grow high. Under the dimension of valuation restoration of value varieties, the leaders of local state-owned enterprises are expected to enjoy the high boom of regional infrastructure, and the profit elasticity brought by the improvement of operating efficiency has initially appeared. In the medium and long term, there are both opportunities for steady growth and report quality improvement. The increase of market share of central enterprises supports the continuous growth of revenue. After the completion of leverage reduction, roe still has obvious upward elasticity. With the continuous strengthening of the profit release ability and willingness of central enterprises, It also has strong elasticity of valuation and repair.
Risk tips: Infrastructure & real estate investment went down more than expected, new energy & chemical business expansion was less than expected, the concentration of assembled leaders was less than expected, and the progress of efficiency improvement in the reform of central enterprises and state-owned enterprises was less than expected.
