Industry and policy developments
1) on January 11, 2022, the national development and Reform Commission and the Ministry of water resources jointly issued the water security plan for the 14th five year plan. The plan specifies that by 2025, the ability to prevent flood and drought disasters, the ability to save, intensively and safely use water resources, the ability to optimize the allocation of water resources, the ability to protect and control rivers and lakes will be further strengthened, and the national water security guarantee ability will be significantly improved.
2) on January 11, 2022, the Ministry of housing and urban rural development proposed to increase policy support for finance, land and public services and expand the supply of affordable rental housing. During the 14th Five Year Plan period, 40 key cities initially planned to add 6.5 million units (rooms), which is expected to help 13 million new citizens and young people alleviate their housing difficulties. At the same time, we will continue to ensure public rental housing, develop housing with common property rights according to local conditions, and steadily promote the transformation of shantytowns.
Market review and prospect this week
This week (1.10-1.14), the construction industry (Shenwan building decoration index) fell by - 4.94% (HS300 was - 1.98%). The top 5 industry increases were 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%), S.P.I Landscape Design Co.Ltd(300844) (+ 12.16%), Jiangsu Libert Inc(605167) (+ 11.31%); The top 5 industry declines this week were China National Chemical Engineering Co.Ltd(601117) (- 14.23%), Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (- 14.22%), Shanghai Geoharbour Construction Group Co.Ltd(605598) (- 13.38%), Shenzhen Grandland Group Co.Ltd(002482) (- 13.2%) and Sinosteel Engineering & Technology Co.Ltd(000928) (- 12.64%).
From the perspective of the overall P / E ratio of the industry, the P / E ratio (TTM) of the architectural decoration industry was 9.54 times as of January 14, down from last week. The industry price to book ratio (MRQ) was 0.93 times, down from last week. Current industry price earnings ratio (TTM) is the lowest, with top 5 Shaanxi Construction Engineering Group Corporation Limited(600248) (2.91), China State Construction Engineering Corporation Limited(601668) (4.08), China Railway Construction Corporation Limited(601186) (4.24), China Railway Group Limited(601390) (5.29), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (5.45); The lowest price to book ratio (MRQ) is China Railway Construction Corporation Limited(601186) (0.54), China Communications Construction Company Limited(601800) (0.61), Shenzhen Grandland Group Co.Ltd(002482) (0.65), China Railway Group Limited(601390) (0.66), China State Construction Engineering Corporation Limited(601668) (0.66).
The building decoration industry (SW) fell by - 4.94% this week, weaker than the performance of Shanghai Composite Index (- 1.63%), Shanghai and Shenzhen 300 (- 1.98%) and Shenzhen Component Index (- 1.35%) this week. The weekly increase ranked 26th among the 28 primary industries of sw28. A total of 28 companies in the construction industry recorded an increase this week, accounting for 19%; 115 companies, accounting for 799%, rose more than the industry index (- 4.94%) this week. The construction industry recorded a rise this week, with a significant decrease in the number of companies, an increase in the number of companies whose performance exceeded the industry increase, and the industry ranking fell 23 places compared with last week (No. 3).
From the structure of this week's increase, the top targets of this week's increase are mainly decoration and water conservancy projects. The increase of Shenzhen Magic Design & Decoration Engineering Co.Ltd(002856) (25.33%), Decai Decoration Co.Ltd(605287) (+ 13.09%), Shanghai Fengyuzhu Culture Technology Co.Ltd(603466) (+ 11.13%), Shenzhen Jiang&Associates Creative Design Co.Ltd(300668) (+ 5.96%) and Shenzhen Jianyi Decoration Group Co.Ltd(002789) (+ 5.36%) in the decoration sector ranked among the top 10 in the industry this week; The target Gansu Engineering Consulting Group Co.Ltd(000779) (+ 16.26%) of water conservancy engineering sector increased by more than 15% this week; In addition, the Anhui Transport Consulting & Design Institute Co.Ltd(603357) (+ 10.19%) of the subject matter of road and Bridge Survey and design increased by more than 10% this week.
Interpretation of policies / highlights of this week
Steady growth
Premier Li Keqiang chaired an executive meeting of the State Council on January 10 to deploy and accelerate the promotion of major projects identified in the outline of the 14th five year plan and special plans, and expand effective investment.
The meeting pointed out that the current economic operation is at the threshold of climbing over the ridge. We should put steady growth in a more prominent position, implement the strategy of expanding domestic demand, insist on not engaging in "flood irrigation", and expand targeted final consumption and effective investment, which is of great significance to withstand the new downward pressure and ensure the stable operation of the economy in the first quarter and the first half of the year. First, we should accelerate the implementation of 102 major projects and key projects of special planning in the outline of the 14th five year plan. Focusing on the construction of infrastructure such as food and energy security, advanced manufacturing, transportation and communication, affordable housing and other fields, we will ensure financing, land use and energy use. Simplify the procedures for the projects listed in the plan and qualified, especially the major water conservancy projects that have been demonstrated for many years, and adopt the way of work relief to enable some migrant workers who are temporarily unemployed to have work and income. Second, according to the requirement that funds follow the project, the 1.2 trillion yuan of local government special bond funds issued in the fourth quarter of last year should be transferred to specific projects as soon as possible. We will pay close attention to issuing the special bonds issued this year, make good use of the investment in the central budget, leverage more social investment, and strive to form more physical workload in the first quarter. Third, we should deepen the reform of the investment examination and approval system and study and issue policies to revitalize stock assets.
The central economic work conference in 2022 focuses on stability and expresses strong expectations for steady growth. In the macro policy part, the meeting proposed to ensure the intensity of fiscal expenditure and accelerate the progress of expenditure. At the same time, it was mentioned for the first time that infrastructure investment should be carried out moderately in advance, indicating that infrastructure is expected to become an important starting point for this round of steady economic growth, and the annual infrastructure investment plan in 2022 is expected to be laid out in advance. In terms of capital supply, the accelerated issuance of local government special bonds in the second half of 2021 is expected to form physical investment in 2022. Recently, the Ministry of finance has issued a quota of 1.46 trillion yuan of new special debts in 2022 to all localities in advance. In this regard, the Ministry of Finance said it would continue to strengthen supervision and promote the issuance of quotas in advance in the first quarter of next year, Provide strong support for stabilizing the macro-economic market. In 2022, the special bonds will be mainly used in nine major directions: transportation infrastructure, energy, agriculture, forestry and water conservancy, ecological and environmental protection, social undertakings, urban and rural cold chain and other logistics infrastructure, municipal and industrial park infrastructure, major national strategic projects and indemnificatory housing projects. It is expected that the prosperity of the infrastructure industry in the first half of 2022 will pick up compared with 2021h1, and the infrastructure investment is expected to be marginally improved. Benefiting from the driving tone of steady growth policy, the basic orientation of high-quality industry leaders and the improvement of the valuation of construction + new business, we continue to be optimistic about the market performance of "two new and one heavy" infrastructure leaders and the layout of "construction +" new business segments.
Water conservancy construction
On January 11 this week, the national development and Reform Commission and the Ministry of water resources jointly issued the water security plan for the 14th five year plan. The plan specifies that by 2025, the ability to prevent flood and drought disasters, the ability to save, intensively and safely use water resources, the ability to optimize the allocation of water resources, the ability to protect and control rivers and lakes will be further strengthened, and the national water security guarantee ability will be significantly improved.
Recently, water conservancy construction related plans have been intensively released. Last week, the Ministry of water resources issued the guidance on the implementation of major national water network projects (hereinafter referred to as the guidance), and the general office of the Ministry of water resources issued the implementation plan for the implementation of major national water network projects during the 14th Five Year Plan period (hereinafter referred to as the implementation plan), It defines the main objectives of accelerating the construction of major national water network projects, focusing on improving the optimal allocation system of water resources and systematically deploying various tasks and measures.
According to the guiding opinions, a number of national water network backbone projects will be built by 2025, the construction of provincial, municipal and county water networks will be implemented in an orderly manner, and the ability of water security will be further improved. In terms of improving the optimal allocation system of water resources, a number of major water diversion and transfer projects and key water source projects have been completed, with a new water supply capacity of 29 billion cubic meters; The guarantee level of water supply in urban and rural areas was further improved, and the popularization rate of tap water in rural areas reached 88%; The irrigation and drainage backbone project system in large and medium-sized irrigation areas has been gradually improved, with an additional and restored effective irrigation area of 15 million mu; The level of digital, networked, intelligent and refined dispatching has been effectively improved.
At the local level, Anhui Province and Shandong Province have successively issued the planning objectives of water conservancy project construction in 2022. On January 11, Anhui Provincial Department of water resources proposed to implement the construction of Anhui water network in 2022, improve the project system of flood control, drought resistance and disaster reduction, improve the ability of optimal allocation of water resources, and fully implement the water diversion project for the masses in Northern Anhui. We will accelerate the construction of major water conservancy projects and strive to complete an investment of more than 20 billion yuan in key water conservancy projects throughout the year. On January 14, Shandong provincial water conservancy work conference focused on the "four systems" of building water resources allocation system, water disaster prevention system, water ecological protection system and intelligent water network system. In 2022, Shandong Province will ensure to complete the investment of 50 billion yuan in water conservancy construction, accelerate the construction of key water conservancy projects, strengthen the transformation and quality improvement of village water supply projects, and strive to complete the investment of more than 4.8 billion yuan in the whole year Improve water supply conditions in 5000 villages.
No. 1 central document of China put forward water conservancy investment in 2011 in the next ten years to reach four trillion. In 2018, the investment in water conservancy construction exceeded four trillion yuan, and four trillion of the investment target was completed two years ahead of schedule in 2018. Over the past few years, the annual investment scale has increased significantly, from 545.2 billion yuan in 2015 to 757.6 billion yuan in 2021, and maintained an annual investment scale of more than 700 billion yuan for three consecutive years from 2019 to 2021. According to the information of the Ministry of water resources, in 2021, China will invest 757.6 billion yuan in water conservancy construction; 67 of 150 major water conservancy projects have been approved and 62 have been started in total; 11000 kilometers of small and medium-sized rivers have been treated, and 175 key mountain torrents have been treated; The popularization rate of rural tap water reached 84%, the maintenance of 99000 rural water supply projects was completed, and 512 large and medium-sized irrigation areas were continued to build supporting facilities and modernized.
The rapid growth of China's investment in water conservancy construction has a very obvious pulling effect on related industries. Water conservancy investment plays a great role in stabilizing growth, expanding domestic demand and stabilizing employment. In May 2020, the government work report included water conservancy investment in the "two new and one heavy". In July 2020, the national standing committee studied and deployed 150 major water conservancy projects from 2020 to 2022, and clearly put forward that major water conservancy investment can only be strengthened and can not be weakened. In the 2020 government report, it was proposed to focus on supporting the "two new and one heavy" construction, including strengthening the construction of major projects such as transportation and water conservancy, The central economic work conference in December 2021 still emphasized two new and one heavy construction, and the water conservancy investment welcomes the development dividend again. In the future, the scale of water conservancy investment is considerable. It is suggested to pay attention to Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , Anhui Construction Engineering Group Corporation Limited(600502) of high-quality projects in the water conservancy sector and Gansu Engineering Consulting Group Co.Ltd(000779) of Water Conservancy Survey and design in Northwest China.
Affordable housing construction
On January 11 this week, the State Council Information Office held a press conference on the "14th five year plan" public service plan (hereinafter referred to as the "plan"), in which basic public services emphasize housing security, involving three aspects: public rental housing, shantytowns transformation and rural dilapidated housing transformation, and inclusive non basic public services emphasize actively promoting the improvement of housing conditions, including affordable rental housing There are four aspects: property right housing, transformation of old urban communities and housing provident fund.
Affordable housing is one of the key construction sectors in China during the 14th Five Year Plan period. Promoting affordable housing construction is an important measure for housing supply side structural reform. Since 2021, a number of affordable housing policies have been intensively released. In June 2021, the general office of the State Council issued the opinions on accelerating the development of indemnificatory rental housing, which defined the top-level design of the national housing security system for the first time, made it clear that the national housing security system will take public rental housing, indemnificatory rental housing and housing with common property rights as the main body, and put forward support measures in land, finance, examination and approval and central subsidies. The central economic work conference in December 2021 once again emphasized accelerating the development of long-term rental housing market and promoting the construction of indemnificatory housing. In January 2022, the "fourteenth five year plan" for public services was heavily released. On the basis of the goal of ensuring people's livelihood, it proposed that the inclusive non basic public services of housing should gradually realize the livability of housing, and emphasized actively promoting the improvement of housing conditions, including affordable rental housing, common property right housing, the transformation of old urban communities and housing provident fund.
In terms of the construction scale of affordable housing, in July 2021, the Ministry of housing and urban rural development proposed that during the "14th five year plan" period, the proportion of new affordable rental housing in the total supply of new housing should strive to reach more than 30%. This plan clearly wants to expand the supply of affordable rental housing, and proposed that during the "14th five year plan" period, 40 key cities preliminarily plan to add 6.5 million units (rooms).
At the local level, according to the information data of the Ministry of housing and urban rural development, up to now, 40 key cities in China have put forward the development goal of affordable rental housing in the 14th five year plan. According to the summary information of China construction network, Shanghai proposes to build and raise 400000 sets (rooms) of affordable rental housing during the 14th Five Year Plan period, accounting for about 40% of the total housing supply; Guangdong proposed to raise 740500 sets (rooms) of construction indemnificatory rental housing during the 14th Five Year Plan period; Jiangsu proposes to add 200000 indemnificatory rental houses during the 14th Five Year Plan period; Guangxi proposes to build 13900 affordable rental housing units this year. On December 31, 2021, Hefei housing security and real estate administration of Anhui Province issued a notice on printing and distributing the housing development plan of Hefei during the 14th five year plan. The plan specifies that during the 14th Five Year Plan period, 580000 new commercial houses are planned to be supplied in the city; Raise 150000 sets / room of affordable rental housing; 82800 sets of shantytowns have been newly constructed.
This year, these 40 cities plan to raise 1.9 million units (rooms) for the construction of affordable rental housing, which has doubled compared with 936000 units (rooms) last year.
We believe that the rapid promotion of affordable housing construction will help the development of prefabricated construction industry, and the application of prefabricated construction technology in affordable housing has favorable conditions in policy and technology. At present, there are still some problems in the development and implementation of prefabricated buildings in China, such as imperfect standard system and unclear cost advantage. Therefore, some real estate enterprises still hold a wait-and-see attitude towards the application of prefabricated buildings. Affordable housing is usually invested and constructed by the government. In government invested construction projects, the use of new building technologies, such as prefabricated building and BIM Technology, can effectively promote the application of prefabricated building. At the technical application level, the construction scale of affordable housing is large, the personalized demand of residents is low, the degree of house type standardization is stronger, and the house type and area are basically fixed, which provides a more favorable application scenario for prefabricated buildings, and the use of prefabricated construction can speed up the construction progress and shorten the construction period. At the policy level, the development of both needs the overall planning of the government. A number of policies at the national and local levels mention encouraging the application of prefabricated buildings in affordable housing. On October 25, 2021, the State Information Office held a press conference on opinions on promoting green development of urban and rural construction. Tian Guomin, director of the standard quota Department of the Ministry of housing and urban rural development, revealed at the meeting that the next step is to, It will guide local governments to actively apply prefabricated concrete structure in indemnificatory housing and commercial housing, and actively carry out pilot projects of steel structure housing. On December 30, the general office of the Ministry of housing and urban rural development disclosed the notice on strengthening the prevention and control of common problems in the quality of indemnificatory housing (Exposure Draft), which proposed that the general contracting mode should be adopted for the construction of indemnificatory housing, and vigorously promote the assembly and other green construction methods.
There is enough space for the construction of affordable housing in this round. It is suggested to pay attention to the market opportunities of prefabricated construction, including: 1) the leader of prefabricated architectural design Shenzhen Capol International&Associatesco.Ltd(002949) , the company's advanced level of prefabricated design, rich experience in the design of talent affordable housing, and has established a close cooperative relationship with government agencies in Guangdong to provide the company with talent affordable housing
