In 2021, the revenue of the industry accelerated, and the net profit attributable to the parent decreased year-on-year due to the influence of the real estate industry. In 2021, the total revenue of the construction industry (SW) increased by 15.31% year-on-year, the gross profit increased by 14.89% year-on-year, and the net profit attributable to the parent decreased by 3.84% year-on-year. The revenue growth of the construction industry increased by 1.15 PCT compared with the year-on-year growth in 2020, ranking 16th among all primary industries of SW, exceeding the growth rate of fixed investment and infrastructure investment in the same period. The growth rate of net profit attributable to the parent company (- 3.84%) decreased significantly by 8.82 PCT compared with that in 2020, mainly due to the tight policy regulation of China’s real estate industry in 2021, the debt default of some real estate enterprises, the pressure on the operation of decoration and engineering consulting services, and the significant increase of credit impairment of many companies, which dragged down the growth rate of net profit attributable to the parent company. By sector, in 2021, except for the year-on-year decrease in the revenue of the decoration sector, the revenue of other sub sectors recorded positive growth, and the revenue growth of all sub sectors increased to varying degrees; The net profit attributable to the parent company of housing construction, professional engineering and infrastructure construction achieved positive growth year-on-year, higher than the industry level, and the performance growth rate increased significantly year-on-year, while the performance of decoration and engineering consulting services decreased significantly year-on-year.
In 2021, the overall profitability declined, the asset liability ratio was stable, and the operating capacity was improved. In 2021, the gross profit margin of the construction industry was 11.22%, down slightly by 0.04 PCT year-on-year, and the overall net profit margin was 2.83%, down 0.43 PCT compared with 2020, roe was 7.73%, down 1.03 PCT year-on-year, mainly due to the decline of gross profit margin of decoration and engineering consulting services and the high increase of credit impairment loss. In terms of sub sectors, the comprehensive gross profit level of construction sub industries such as housing construction, infrastructure construction and professional engineering is still low, but the year-on-year decline is no more than 0.1 PCT. In 2021, the asset liability ratio of the construction industry was stable at 74.10% (year-on-year + 0.01pct), and the debt ratio of infrastructure, professional engineering and engineering consulting services decreased. The operating cash flow of all secondary sectors of the construction industry maintained a positive inflow, and the overall net operating cash flow was 68.394 billion yuan, a year-on-year decrease of 69.60%. In 2021, the overall operation capacity of the construction industry was improved, and the inventory turnover rate and accounts receivable turnover rate reached the highest level in the same period of five years.
The revenue performance of 2022q1 increased steadily, and the sector differentiation was obvious. In 2022q1, the construction industry as a whole achieved steady growth, with a year-on-year increase in operating revenue of 13.50% and a year-on-year increase in net profit attributable to the parent company of 10.47%. Affected by the real estate industry, the revenue and performance of decoration and engineering consulting services fell year-on-year, with a year-on-year decrease of 5.73% and 6.27% respectively, and a year-on-year decrease in net profit attributable to the parent company of 65.93% and 42.67% respectively. The revenue and performance of housing construction, infrastructure and professional projects all achieved positive growth year-on-year, The growth rate of parent net interest rate was 13.16%, 11.72% and 20.26% respectively. In 2022q1, the gross profit margin and net profit margin of the construction industry decreased year-on-year, respectively 9.29% (year-on-year -0.48 PCT) and 2.99% (year-on-year -0.13 PCT). The gross profit margin of each sub sector decreased compared with 2021q1. Except for the net profit margin of professional engineering, the net profit margin of the other four sub sectors decreased year-on-year, among which the profitability of decoration and engineering consulting services decreased significantly.
Fangjianji Jianguo enterprise has strong business toughness, and decoration and engineering consulting continue to be under pressure. By sector, due to the policy regulation and capital pressure of the real estate industry, it has a great impact on the growth rate of newly signed orders for decoration and engineering consulting and the collection progress of undertaken projects. In 2021 and 2022q1, the operating performance of decoration and engineering consulting services continued to be under pressure, the growth rate of revenue slowed significantly, and the net profit attributable to the parent decreased year-on-year. Central enterprises and local state-owned enterprises are still the absolute main force of the industry. In 2021, the top 10 enterprises in terms of revenue and net profit attributable to parent enterprises are construction central enterprises and local state-owned enterprises. The total proportion of revenue and net profit attributable to parent enterprises is as high as 84.82% and 97.87% respectively, and the industry concentration remains at a high level. In 2021, the growth rate of business and parent net profit of central enterprises and local state-owned enterprises increased significantly, which was much higher than the overall growth level of the construction industry. In 2022q1, the central construction enterprises still maintained the rapid growth of revenue and net profit attributable to their parents. Some local state-owned enterprises were affected by the local epidemic control and operation, and the growth of revenue performance slowed down. Overall, the newly signed orders of central enterprises and state-owned enterprises in 2021 and 2022q1 have increased rapidly, with sufficient orders on hand and strong performance guarantee, reflecting strong business toughness and comprehensive advantages.
It is expected that the industry fundamentals will continue to improve in 2022, and the performance of key targets will be expected to increase. At present, the steady growth continues to increase, the construction demand of various provinces is strong, the issuance of special bonds is accelerated to ensure the supply of funds, “two new and one heavy” is still the key area of infrastructure construction, and the overall performance of 2022q1 infrastructure investment data is bright. Since March, due to the epidemic, the downward pressure on the economy has increased, and the construction progress of many projects may be less than expected. The expectation of steady growth has been strengthened again. Infrastructure is an important starting point for investment. We continue to be optimistic about the growth rate of infrastructure investment in 2022. At the same time, with the implementation of marginal relaxation policies in the real estate industry, the risk may gradually weaken and the fundamentals will pick up. The annual revenue performance of the construction industry is expected to maintain rapid growth, and the performance of high-quality construction central enterprises, local infrastructure leaders and survey and design companies can be released. From the nine targets that Anxin focuses on tracking and recommending, we expect that in 2022, there will be one with performance growth in the range of 30% – 40%, one with performance growth in the range of 20% – 30%, one with performance in the range of 15% – 20%, and five with performance in the range of 10% – 20%. In addition, some leading real estate chain design leaders are expected to pack light and release performance on the basis of full provision for bad debts in 2021.
Investment suggestions: the steady growth policy will continue to increase in 2022, the active fiscal policy should improve its efficiency, and the local special bonds can be expected to help promote the “two new and one heavy” construction. The acceleration of infrastructure investment is worth looking forward to. At present, the overall fundamentals of the construction industry are improving, especially the rapid growth of orders from central infrastructure enterprises and local infrastructure leaders, which 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 construction industry is expected to usher in policy driven, continuous improvement of fundamentals and multiple development opportunities of “construction +”. Moreover, the industry is in the undervalued range and the investment value is prominent. 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 the acceleration of “two new and one heavy” infrastructure construction under the steady growth. At present, the industry concentration has increased significantly, with the main trend of national advancement and people’s retreat, and the central construction enterprises and regional infrastructure leaders as the main beneficiaries. At the same time, the newly signed orders and outstanding performance and significant valuation advantages. It is recommended to pay attention to China State Construction Engineering Corporation Limited(601668) , China Railway Group Limited(601390) , China Communications Construction Company Limited(601800) , China Railway Construction Corporation Limited(601186) Metallurgical Corporation Of China Ltd(601618) and other central construction enterprises and regional infrastructure leaders such as Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) .
(2) high quality target of infrastructure survey and design Anhui Transport Consulting & Design Institute Co.Ltd(603357) , China Design Group Co.Ltd(603018) rank at the front of the industrial chain, give priority to benefiting from the release of infrastructure demand under the goal of steady growth. During the 14th Five Year Plan period, the scale of planned infrastructure investment in many provinces increased significantly, the advantage of contracting leading orders of high-quality design was significant, and the market share could be increased in time.
(3) pumped storage beneficiary company. With the advancement of the construction of new power system, the energy structure of China’s power system has gradually changed, and the demand for energy storage has increased. 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. It is suggested to pay attention to 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) real estate chain and prefabricated architectural design. At present, the marginal improvement of policies in the real estate industry and the expectation of subsequent relaxation are relatively strong, which helps the demand improvement of real estate chain design companies. At the same time, we believe that under the background of carbon peak and carbon neutralization goal, the field of prefabricated buildings mainly in the form of concrete structure and steel structure will continue to fully benefit from the further improvement of industry prosperity and demand release, 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) Zhubo Design Co.Ltd(300564) 。
Risk tips: the impact of the epidemic exceeded expectations, the risk of large macroeconomic fluctuations, the risk of declining investment growth, the intensification of industry competition, the risk that the promotion of relevant policies did not meet expectations, the risk of uncertainty in the company’s performance, etc.
