[core view of this week] in the economic data in December, real estate investment fell sharply year-on-year in a single month, while important indicators such as new construction, land acquisition and capital availability showed an accelerated downward trend; In December, the nominal rate of social zero also slowed significantly year-on-year, and the consumption remained depressed due to the repeated epidemic, which showed that the current downward pressure on the economy was still large. On the other hand, the recent series of management policies have continuously demonstrated China’s determination to stabilize growth. Infrastructure, as a government led investment field, is expected to bear fruit in a short term and play a pillar role in stabilizing growth. The infrastructure boom is expected to improve. The key points are: 1) undervalued blue chips: the overall valuation of infrastructure blue chips is at the lowest range in history, and the expected improvement of infrastructure is expected to promote the valuation repair, It is recommended to focus on China State Construction Engineering Corporation Limited(601668) (pe4.1x), China Communications Construction Company Limited(601800) (pe6.4x), China Railway Group Limited(601390) (pe5.0x), and China Design Group Co.Ltd(603018) (pe8x), a leader in infrastructure design; 2) Four directions with high business elasticity: a) affordable housing: this week’s working meeting of the Ministry of housing and urban rural development proposed to build and raise 2.4 million affordable rental housing units this year, a significant increase of 156% year-on-year. The development of affordable rental housing is expected to enter an accelerated period, with emphasis on Shenzhen Capol International&Associatesco.Ltd(002949) (pe14x) and Shenzhen Ridge Engineering Consulting Co.Ltd(300977) (pe18x); b) Steel structure: steel structure continues to benefit from the accelerated investment in infrastructure, manufacturing and affordable housing. At the same time, the development of bapv / BIPV brings incremental demand to the industry. It is recommended that Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe11x), Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe19x); c) New power system: the new infrastructure represented by the new energy infrastructure has great demand and high investment efficiency, and is expected to become the focus of the follow-up. It focuses on recommending and paying attention to Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (pe13x), China Energy Engineering Corporation Limited(601868) (pe12x), private distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) (pe22x), enterprise energy efficiency control expert Acrel Co.Ltd(300286) (pe31x); d) Urban pipe network: Recently, the management instructed that the pipeline transformation and construction must be taken as an important infrastructure project in the 14th five year plan. The demand for energy-saving transformation of urban heat supply network is expected to be accelerated. The leader in heating energy saving Runa Smart Equipment Co.Ltd(301129) (pe22x) is recommended.
In December, the growth rate of fixed investment turned positive, infrastructure and manufacturing industries were repaired, and real estate accelerated downward. From January to December 2021, fixed investment increased by 4.9% year-on-year, 0.3 PCT slower than that from January to November, and 3.9% higher than the compound growth rate of 19 years, which is in line with the expectation as a whole. In December, it increased by 2.1% year-on-year, ending three consecutive months of decline. Among them, the infrastructure has been significantly improved, the manufacturing industry has continued to repair, driving the overall growth rate of fixed investment back to positive, while real estate investment has accelerated downward. Specifically: 1) infrastructure: in 2021, infrastructure investment (excluding electricity, etc.) increased by 0.4% year-on-year, 0.1 PCT slower than that from January to November, 0.6 PCT lower in a single month, and the decline narrowed by 3 PCT; Infrastructure investment (full caliber) increased by 0.2% year-on-year, accelerated by 0.4 PCT from January to November, increased by 3.7% year-on-year in a single month, and significantly accelerated by 11 PCT from November, ending seven consecutive months of negative growth. In December, infrastructure investment improved significantly. It is expected that the new and old infrastructure will start to work gradually due to the accelerated issuance and use of early-stage special bonds. In terms of breakdown, in December, the supply of electric heating gas and water increased by 8.1% year-on-year, accelerating by 9.5 PCT, which is expected to be mainly due to the accelerated investment in new power systems and other fields; Transportation, warehousing and postal services increased by 7.1% year-on-year, with a significant acceleration of 16.6 PCTs. It is expected that the central government will accelerate the implementation of large-scale projects such as railways and highways; The management of Water Conservancy Environment and public facilities decreased by 0.3% year-on-year, narrowed by 7.7 PCT, and improved significantly. However, municipal and other investments are still in the negative growth range subject to the control of implicit debt. 2) In terms of real estate: from January to December 2021, real estate investment increased by 4.4% year-on-year, slowed down by 1.6 PCT compared with January to November, decreased by 13.9% year-on-year in December, and expanded by 9.6 PCT compared with November, showing an accelerated downward trend. In a single month in December, the year-on-year growth rate of sales area was – 15.6% (former value – 14.0%), the year-on-year growth rate of new construction area was – 31.2% (former value – 21.0%), the year-on-year growth rate of land acquisition area was – 33.2% (former value – 12.5%), and the year-on-year growth rate of funds in place was – 19.3% (former value – 7.0%). Most important indicators have significantly accelerated the downward trend, and the fundamentals of the real estate industry still need more policy adjustments and time to wait. 3) In terms of manufacturing: from January to December 2021, manufacturing investment increased by 13.5% year-on-year, with a compound growth rate of 5.4% in two years. In December, it increased by 11.8% year-on-year, accelerating 1.8 PCT compared with November, continuing the repair trend. Among them, the investment in high-tech manufacturing industry increased by 22.2% in 2021, faster than the overall manufacturing industry. From January to December, the investment in technological transformation of manufacturing industry increased by 13.6% year-on-year, 0.1 PCT higher than the overall growth rate, and has been higher than the overall growth rate since 2021.
Steady growth measures continued to increase, focusing on the four directions of undervalued blue chip and business elasticity. According to the economic data in December, real estate investment fell sharply year-on-year in a single month. At the same time, important indicators such as new construction, land acquisition and capital availability showed an accelerated downward trend; The nominal growth rate of social zero increased by 1.7% year-on-year, and the growth rate slowed down by 2.2 PCT. Due to the repeated impact of the epidemic, consumption is still relatively low. At present, there is great downward pressure on the economy. As a government led investment field, infrastructure is expected to bear fruit in a short term and play a pillar role in stabilizing growth. Recently, the government’s series of policies continue to highlight its urgent willingness to promote the accelerated implementation of investment: 1) at the sixth plenary meeting of the State Council this week, the premier also stressed the need to strive to climb over the barrier, stabilize the word, put steady growth in a more prominent position, continue to do a good job in the work of “six stabilities” and “six guarantees”, and significantly increase the implementation of macro policies, Launch more practical and hard moves conducive to boosting effective demand, strengthening supply guarantee and stabilizing market expectations; 2) At this week’s press conference, the national development and Reform Commission said that “we should appropriately advance infrastructure investment, accelerate the promotion of 102 major projects in the 14th five year plan, implement the special bonds issued by local governments in the fourth quarter of last year to specific projects as soon as possible, pay close attention to the issued amount, and strive to form more practical workload in the first quarter”; 3) In this week’s press conference, the central bank said that the current key goal is stability, and the policy requirement is force, and stressed the need for sufficient force, accurate force and forward force. Since the end of last year, a series of important meetings have continued to demonstrate China’s determination to stabilize growth. Infrastructure, as a government led investment field, is expected to bear fruit in a relatively short time, play a pillar role in stabilizing growth, and the infrastructure boom is expected to improve. The focus is on affordable housing, steel structure, new power system and urban pipe network with undervalued blue chips and high boom elasticity.
The construction of affordable housing has increased steadily, and the prefabricated building welcome machine. The working meeting of the Ministry of housing and urban rural development this week pointed out that “we should adhere to the simultaneous development of rent and purchase, and raise 2.4 million sets (rooms) of affordable rental housing for the whole year”. The raising target increased by 156% compared with last year, and the development of affordable rental housing is expected to enter the acceleration period. We believe that guaranteeing housing construction can stabilize the investment in the real estate industry in the short term, which is expected to become one of the important directions of steady growth this year. In the long term, it is also an important focus to achieve the two goals of “housing without speculation” and “common prosperity”. The follow-up administrative and financial resources are expected to focus on tilt, and the industry is expected to show excellent growth in the medium and long term. According to our calculation, it is expected to raise about 7.4 million affordable rental housing units nationwide in the 14th five year plan, and the total construction and installation investment is expected to reach 1.4 trillion yuan; Assuming that 1.94 million units of affordable housing will be newly built in 2022, it is expected to realize the construction and installation investment of about 240 billion yuan, accounting for about 2% of the real estate construction and installation investment (see the special report “steady growth of affordable housing construction and welcome opportunities for prefabricated buildings” issued this week for details).
As affordable housing is a government led investment project and an important policy carrier leading the transformation and upgrading of the construction industry at the industrial level, it is expected that the government will put forward higher requirements for the assembly rate, green construction and intelligent construction standards of affordable housing, forming an industry demonstration benchmark. Focus on: 1) affordable housing construction: focus on recommending China State Construction Engineering Corporation Limited(601668) (national leader in affordable housing construction), Shenzhen Capol International&Associatesco.Ltd(002949) (leader in affordable housing design), China State Construction Engineering Corporation Limited(601668) International (MIC assembly technology is leading and has rich experience in residential projects); 2) Affordable housing is expected to accelerate the industrialization, informatization and green transformation of the construction industry: the leaders Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) of steel structure affordable housing and Shenzhen Ridge Engineering Consulting Co.Ltd(300977) of third-party evaluation of affordable housing are recommended.
The investment in urban heating pipe network is expected to speed up, focusing on the leader of heating energy saving Runa Smart Equipment Co.Ltd(301129) . Recently, the management instructed that the pipeline reconstruction and construction must be taken as an important infrastructure project in the 14th five year plan. Heating is an important part of urban pipe network. At present, the heating pipe network in many areas of China is aging seriously with the increase of service life, resulting in the waste of water resources and energy; On the other hand, there is often a lack of heating control means, resulting in excessive or insufficient heating and complaints from residents. Heating energy-saving transformation is an important means to improve the reliability, adjustability and operation efficiency of urban heat supply network. It is expected that with the acceleration of investment in urban heat supply pipe network, the market demand for heating energy-saving is expected to accelerate. Runa Smart Equipment Co.Ltd(301129) is a leader in heating energy conservation in China. The system products cover the core heating links such as heat sources, heat networks, heat stations and heat users, and can meet the needs of customers for differentiated and customized products. It is one of the few integrated production and development enterprises of heating management system software and hardware in China, and is expected to benefit from the transformation and construction of urban heating pipe networks in the short term. Sufficient power for medium and long-term growth: 1) regional development: while deeply cultivating Shandong, the province with the largest demand for heating, the company vigorously develops regional markets such as Xinjiang, Shanxi, Shaanxi and Henan. 2) New products: the company actively carries out the application of AI algorithm in the field of heating, and AI system products have begun to be promoted. 3) Capacity expansion: it is planned to build 600 sets / year intelligent modular heat exchange units and 20000 sets / year intelligent hydraulic balancing devices. The capacity is expected to double to ensure the sustained and rapid growth of the company. We expect the company to realize a net profit attributable to the parent company of RMB 168 / 237 / 323 million from 2021 to 2023, with a year-on-year increase of 29% / 41% / 36%, and the corresponding PE of the current stock price is 30 / 22 / 16 times respectively.
Investment suggestions: Recently, a series of management policies have continuously demonstrated China’s determination to stabilize growth. Infrastructure, as a government led investment field, is expected to take effect in a short term and play a pillar role in stabilizing growth. The infrastructure boom is expected to improve. The key points are: 1) undervalued blue chips: the overall valuation of infrastructure blue chips is at the lowest range in history, and the expected improvement of infrastructure is expected to promote the valuation repair, Focus on recommending central construction enterprises China State Construction Engineering Corporation Limited(601668) , China Communications Construction Company Limited(601800) , China Railway Group Limited(601390) , and infrastructure design leaders China Design Group Co.Ltd(603018) ; 2) Four directions with high business elasticity: a) affordable housing: the development of affordable rental housing is expected to enter an accelerated period, with emphasis on Shenzhen Capol International&Associatesco.Ltd(002949) , Shenzhen Ridge Engineering Consulting Co.Ltd(300977) ; b) Steel structure: steel structure continues to benefit from the accelerated investment in infrastructure, manufacturing and affordable housing. At the same time, the development of bapv / BIPV brings incremental demand to the industry. It is recommended that Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Anhui Honglu Steel Construction(Group) Co.Ltd(002541) ; c) New power system: the new infrastructure represented by new energy infrastructure has great demand and high investment efficiency, and is expected to become the focus of the follow-up. It is expected to recommend and pay attention to the leaders Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , China Energy Engineering Corporation Limited(601868) of central enterprises in power infrastructure, the leader of private distribution network EPCO Suwen Electric Energy Technology Co.Ltd(300982) , and the expert of enterprise energy efficiency control Acrel Co.Ltd(300286) ; d) Urban pipe network: the demand for energy-saving transformation of urban heat supply network is expected to accelerate, and the leader in heating energy saving Runa Smart Equipment Co.Ltd(301129) is recommended.
Risk tips: the risk of policy promotion is less than expected, the risk of epidemic impact is more than expected, the risk of accounts receivable, overseas business risk, etc.
