The construction and building materials index outperformed the market this week. This week, the building materials and construction indexes rose by 1.3% / 4.3% respectively, outperforming the Shanghai and Shenzhen 300 index by 1.2 / 3.0 percentage points. The main reasons why we judge that the construction and building materials sector outperformed the market are: 1) there were many pullbacks in the first two weeks, and the concerns about the cost side and performance have been released; 2) this week, the country repeatedly expressed strong determination to stabilize growth, which eased the market's concerns about steady growth.
In April, the real estate continued its downward trend. According to Kerry's data, China's real estate demand continued to show a downturn in April 2022, superimposed with the upgrading of epidemic control in some cities. The monthly trading amount of Top100 real estate enterprises in April was 428.47 billion yuan, with a month-on-month ratio of - 16.2% and a year-on-year ratio of - 58.6%. The year-on-year decline was further expanded compared with March, and the overall sales scale from January to April was - 50.2% year-on-year. In addition, although several departments of the state released positive signals in terms of real estate enterprise funds, the financing of large-scale real estate enterprises remained low from January to April, and the liquidity pressure of most real estate enterprises remained unchanged.
The Politburo meeting reiterated its determination to stabilize growth. On April 29, the Politburo held a meeting with the overall goal of "preventing the epidemic, stabilizing the economy and ensuring safe development". The state emphasizes "strive to achieve the expected goal of economic and social development throughout the year and keep the economy running within a reasonable range", which reflects that although the current epidemic control task is relatively severe and the economy of some key cities is greatly affected, we still have the method and ability to maintain the growth target of 5.5% of GDP this year.
In terms of macro policy, the state emphasizes "making good use of all kinds of monetary policy tools" and "we should pay close attention to planning incremental policy tools, strengthen contingent regulation and control, and grasp the advance and redundancy of policies under the guidance of objectives". The probability of judging the country's comprehensive interest rate and standard reduction is limited, but the expression of "various monetary policy tools" shows that it is expected to expand the scope of policies and accurately stimulate more lines in the future.
In terms of real estate, the state still emphasizes the basic principle of housing without speculation, but still points out that "support all localities to improve real estate policies based on local conditions, support rigid and improved housing demand, optimize the supervision of commercial housing pre-sale funds, and promote the steady and healthy development of the real estate market", reflecting that the state still allows all localities to "implement policies according to the city". According to our summary, since 2022, the cities that have issued relaxation policies on real estate regulation (mainly including relaxing purchase restrictions and relaxing down payment) are mainly the third and fourth tier cities. We judge that there is still some room for policy relaxation in the second tier cities in the future.
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. In addition, China State Construction Engineering Corporation Limited(601668) , China Railway Group Limited(601390) , China Railway Construction Corporation Limited(601186) , China Communications Construction Company Limited(601800) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) and other steady growth industries benefited.
Risk tips
The demand is lower than expected, the cost is higher than expected, and there are systemic risks.
