Special topic of this week: how to treat the follow-up water conservancy investment? Steady growth should be put in a more prominent position, with emphasis on major water conservancy projects
On the policy side, the national standing committee meeting on January 10 called for placing steady growth in a more prominent position, deploying and accelerating the promotion of major projects identified in the outline of the 14th five year plan and special plans, expanding effective investment, and emphasizing infrastructure such as food and energy security, advanced manufacturing and high-tech industries, transportation, logistics and network communication For the construction of urban affordable housing and other key areas, a coordination mechanism shall be established to ensure the financing, land use, energy use and other factors. We should simplify the relevant procedures for the projects listed in the plan and qualified, especially the major water conservancy projects that have been demonstrated for many years in the early stage. We should promote the implementation of them, and adopt the methods of work relief, so that some migrant workers who are temporarily unemployed can have work and income. We believe that this meeting continues the tone of steady growth of the Politburo meeting in December, At the same time, the intensity of water conservancy investment has been significantly increased. We believe that this round of steady growth may pay more attention to structural force rather than total elasticity.
According to the investment data, at the 2022 national water conservancy work conference held by the Ministry of water resources on January 6, the investment in water conservancy construction was 757.6 billion yuan in 2021, 67 of 150 major water conservancy projects have been approved, and 62 projects have been started. We judge that with the implementation of major projects of the national water network in 2022, the national water conservancy construction investment is expected to accelerate.
Market Review
Last week, the construction (CITIC) index fell 4.64%, the Shanghai and Shenzhen 300 index fell 1.80%, and all three sub sectors fell. Among the stocks, Huitong group (+ 61.39%), Shenzhen Magic Design & Decoration Engineering Co.Ltd(002856) (+ 25.33%), Gansu Engineering Consulting Group Co.Ltd(000779) (+ 16.26%), Decai Decoration Co.Ltd(605287) (+ 13.09%) and S.P.I Landscape Design Co.Ltd(300844) (+ 12.16%) 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 value variety valuation restoration, local state-owned enterprise leaders are expected to enjoy the high prosperity of regional infrastructure. The profit elasticity brought by the improvement of operating efficiency has initially appeared. There are opportunities for both steady growth and report quality improvement in the medium and long term. 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, they also have strong elasticity of valuation 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.
