Key investment points
Event: the central finance and Economic Commission proposed to comprehensively strengthen infrastructure construction and build a modern infrastructure system
On April 26, the central financial and Economic Commission held its 11th meeting. The meeting emphasized comprehensively strengthening infrastructure construction and building a modern infrastructure system to lay a solid foundation for building a modern socialist country in an all-round way. The general secretary stressed: infrastructure is an important support for economic and social development. We should coordinate development and security, optimize the layout, structure, function and development mode of infrastructure, build a modern infrastructure system, and lay a solid foundation for building a modern socialist country in an all-round way; The central financial and Economic Commission is an important institutional arrangement for the Party Central Committee to lead economic work. All regions and departments should accurately understand the spirit of the decision-making and deployment of the central financial and Economic Commission and jointly promote the implementation of the decision-making and deployment.
We will lay out the construction of seven key areas and strengthen the construction of network infrastructure such as transportation, energy and water conservancy
At present, China’s infrastructure does not meet the needs of national development and security. It is of great significance to comprehensively strengthen infrastructure construction. The meeting proposed to strengthen the construction of network infrastructure such as transportation, energy and water conservancy, focus on networking, network supplement and chain strengthening, and strive to improve network efficiency. Focus on the following 7
Key areas:
1) accelerate the construction of the main framework of the national comprehensive three-dimensional transportation network, strengthen the planning and construction of coastal and inland ports and waterways, and optimize and improve the national water transport facility network; 2) Develop distributed smart grid, build a number of new green and low-carbon energy bases, and accelerate the improvement of oil and gas pipeline network; 3) Accelerate the construction of the main framework and arteries of the national water network, and promote the construction and modernization of key water sources, irrigation areas and flood storage and detention areas; 4) Strengthen the infrastructure construction of information, science and technology, logistics and other industrial upgrading; 5) Strengthen the construction of urban infrastructure, build a convenient and efficient intercity railway network, and develop urban (suburban) railways and urban rail transit; 6) Strengthen the construction of rural water supply facilities, improve rural water supply facilities, improve rural water supply facilities, and strengthen the construction of high-scale infrastructure, such as water conservancy and waste collection in rural areas; 7) We should strengthen the construction of national security infrastructure and accelerate the improvement of our ability to deal with extreme situations.
150 major projects continue to be promoted with sufficient funds, and the demand for water conservancy infrastructure in 22 years is expected to exceed expectations
We believe that at the current time point, the central financial and Economic Commission convened five ministries and commissions, including development and reform, industry and information technology, transportation, housing and construction, and water conservancy, to hold a high-level meeting to escort and clear the source of steady growth! From the perspective of sector investment, the expectation of water conservancy construction is the strongest, the project promotion and capital availability are higher than those in previous years, and the demand for water conservancy infrastructure in 22 years may be higher than expected. It is suggested to pay full attention to the fundamental changes of the water conservancy industry and grasp the investment opportunities of the sector:
In terms of projects, 150 major water conservancy projects have been continuously promoted. The types of projects include flood control and disaster reduction, optimal allocation of water resources, irrigation water saving and water supply, water ecological protection and restoration, and intelligent water conservancy. As of early March 2022, 68 of 150 major water conservancy projects have been approved and 63 have been started in total; The total investment is 1.29 trillion yuan.
In terms of funds, the central government plans to complete an investment of 800 billion yuan in water conservancy in 22 years, with a year-on-year increase of 4.2%, of which the investment in water resources allocation and the construction of river basin flood control and disaster reduction system accounts for more than 85%, continue to favor the central and western regions, old revolutionary base areas and other special regions, and arrange the central water conservancy investment in the western region to reach 46.2%; The water conservancy development fund was 60.6 billion yuan, with a year-on-year average of + 6%; 22q1 water conservancy special bonds of nearly 50 billion yuan and water enterprise bonds of 7.6 billion yuan, exceeding the total of 21 years.
Investment suggestion: central enterprises of low-level layout and undervalued buildings, preferably Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) , China Railway Construction Corporation Limited(601186)
China Railway Construction Corporation Limited(601186) : among the traditional central enterprises, the valuation is the lowest and relatively flexible. At the end of the 21st century, the company’s orders on hand were 4.38 trillion yuan, and the order guarantee ratio was as high as 4.29 times. With steady growth, the infrastructure logic was further strengthened, and the company’s order carry forward is expected to speed up. It is estimated that the net profit attributable to the parent company in 22-24 years will be 27.5 billion yuan, 30.3 billion yuan and 33.5 billion yuan respectively, with a compound growth rate of 11% in three years, corresponding to only 3.8 times of PE in 22 years. In the past three years, the average PE (TTM) was 5.6 times, and the head was 5.9 times higher than the weighted average PE (2022e) of traditional construction central enterprises.
Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) : giant of new energy infrastructure, with water conservancy and hydropower construction accounting for more than 50% of the city. The revenue of water conservancy and hydropower business in 21 years was 67 billion yuan, accounting for 17%. It has 18 special grade qualifications for general contracting of water resources and hydropower. It is estimated that the net profit attributable to the parent company in 21-23 years will be 9 / 105 / 12.1 billion yuan, with a compound growth rate of 15% in three years, and the current price corresponds to only 10 times that of PE in 22 years.
China Energy Engineering Corporation Limited(601868) : the giant of new energy infrastructure achieved a revenue of 12.7 billion yuan in water conservancy business in 21 years, accounting for 4%, with a year-on-year increase of + 35%. Gezhouba Group, a subsidiary of Gezhouba Group, has 6 special qualifications for general contracting of water conservancy and hydropower, and its water conservancy business covers the whole industrial chain. It is estimated that the net profit attributable to the parent company in 22-24 years will be 9.6/11/12.7 billion yuan, with a compound growth rate of 15% in three years, and the current price corresponds to only 10 times of PE in 22 years.
Risk tips
The growth rate of infrastructure fixed investment was lower than expected.
