Industry and policy developments
1) on January 18, 2022, the State Council issued the "14th five year plan" for the development of modern comprehensive transportation system, proposing that by 2025, the high-speed railway network with a speed standard of 250 kilometers and above should be adopted to cover more than 95% of cities with a population of more than 500000. Looking forward to 2035, a modern high-quality national comprehensive three-dimensional transportation network with convenience, smoothness, economy, efficiency, safety, reliability, green intensity and advanced intelligence will be basically completed, "National 123 travel transportation circle" (one hour commute in metropolitan areas, two-hour access in urban agglomerations and three-hour coverage in major cities in China) and "global 123 express logistics circle" (one-day delivery of express goods in China, two-day delivery in neighboring countries and three-day delivery in major cities in the world) have been basically formed and have basically become a transportation power.
2) on January 17, 2022, Ning Jizhe, director of the finance Associated Press and the National Bureau of statistics, said at a press conference on January 17 that policies such as moderately advanced infrastructure investment are being made. Since the second half of last year, the pace of issuing special bonds of local governments has been accelerated, and the investment in the central budget has been accelerated. 102 key projects identified in the 14th five year plan have been launched one after another. The "two new and one heavy" projects have been constructed in an orderly manner, namely new infrastructure, new urbanization, major transportation and water conservancy projects.
Market review and prospect this week
This week (1.17-1.21), the construction industry (Shenwan building decoration index) increased by + 2.99% (HS300 was + 1.11%). The top five increases in the industry are Lingnan Eco&Culture-Tourism Co.Ltd(002717) (+ 28.61%), Hongrun Construction Group Co.Ltd(002062) (+ 14.69%), Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (+ 13.56%), Shenzhen Institute Of Building Research Co.Ltd(300675) (+ 12.27%), China Communications Construction Company Limited(601800) (+ 11.53%); The top five industry declines this week were Cofco Engineering & Technology Co.Ltd(301058) (- 12.58%), Qingdao Greensum Ecology Co.Ltd(300948) (- 11.73%), Shanghai Geoharbour Construction Group Co.Ltd(605598) (- 10.84%), Jiangsu Libert Inc(605167) (- 9.13%), Zhejiang Southeast Space Frame Co.Ltd(002135) (- 8.64%).
From the perspective of the overall P / E ratio of the industry, the P / E ratio (TTM) of the architectural decoration industry was 10.9 times as of January 21, up from last week. The industry's price to book ratio (MRQ) was doubled, up from last week. Current industry price earnings ratio (TTM) is the lowest, with top 5 Shaanxi Construction Engineering Group Corporation Limited(600248) (2.99), China State Construction Engineering Corporation Limited(601668) (4.33), China Railway Construction Corporation Limited(601186) (4.40), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (5.68), China Railway Group Limited(601390) (5.69); The lowest price to book ratio (MRQ) is China Railway Construction Corporation Limited(601186) (0.56), Shenzhen Grandland Group Co.Ltd(002482) (0.64), Beijing Orient Landscape & Environment Co.Ltd(002310) (0.66), China Communications Construction Company Limited(601800) (0.68), China State Construction Engineering Corporation Limited(601668) (0.70).
The building decoration industry (SW) rose by + 2.99% this week, stronger than the performance of Shanghai Composite Index (+ 0.04%), Shanghai and Shenzhen 300 (+ 0.11%) and Shenzhen Component Index (- 0.86%) this week. The weekly increase ranked fourth among the 28 primary industries of sw28. A total of 55 companies in the construction industry recorded an increase this week, accounting for 38%; The number of companies that exceeded the increase of the industry index (+ 2.99%) this week was 25, accounting for 17%. The construction industry recorded an increase this week, the number of companies increased, the number of companies that exceeded the increase of the industry decreased significantly, and the industry ranking increased by 22 compared with last week (26th). From the structure of this week's increase, the top targets of this week's increase are mainly garden engineering, urban rail construction and housing construction. The increase of Lingnan Eco&Culture-Tourism Co.Ltd(002717) (+ 28.61%) of the subject matter of garden engineering ranked first in the industry this week; The increase of Hongrun Construction Group Co.Ltd(002062) (+ 14.69%), Shenzhen Urban Transport Planning Center Co.Ltd(301091) (+ 6.96%) and Shenzhen Institute Of Building Research Co.Ltd(300675) (+ 12.27%) and Shenzhen Capol International&Associatesco.Ltd(002949) (+ 8.24%) of urban rail construction targets ranked among the top 10 in the industry this week; The Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (+ 13.56%) of water conservancy projects, China Communications Construction Company Limited(601800) (+ 11.53%) of road and bridge construction targets and Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (+ 11.37%) of steel structures all increased by more than 10% this week; Both China Railway Group Limited(601390) (+ 7.41%) for railway construction and China National Chemical Engineering Co.Ltd(601117) (+ 6.87%) for chemical engineering increased by more than 5% this week.
Interpretation of policies / highlights of this week
On January 17 this week, the National Bureau of statistics released the national economic operation data for 2021. In 2021, the national fixed asset investment (excluding farmers) was 54454.7 billion yuan, a year-on-year increase of 4.9%; It increased by 8.0% over 2019, with an average growth of 3.9% in the two years. On a month on month basis, investment in fixed assets (excluding farmers) increased by 0.22% (month on month + 0.03%) in December.
In 2021, infrastructure investment (excluding power, heat, gas and water production and supply industries) increased by 0.4% year-on-year, of which the investment in water conservancy management industry increased by 1.3%; Investment in public facilities management decreased by 1.3%; Investment in road transportation industry decreased by 1.2%; Investment in railway transportation industry decreased by 1.8%. In terms of the growth rate of the current month, the growth rate of infrastructure investment (excluding electric heating gas and water) in December 2021 was - 0.57%, which was 0.57 PCT narrower than that in December. The growth rate of generalized infrastructure investment in December was 1.30%, which changed from the year-on-year decline in November to positive growth.
In terms of sub items, the cumulative investment in road transportation industry in 2021 decreased by 1.20% year-on-year. From the growth rate of the current month, the year-on-year growth rate of investment in December 2021 was - 10.49%, which was a significant expansion compared with the decline in November. The year-on-year growth rate of investment in railway transportation industry was - 1.8%. From the perspective of single month investment, the investment in railway transportation industry decreased by 2.63% year-on-year in December, from year-on-year growth in November to year-on-year decline.
The investment growth rate of water conservancy management industry was 1.3%. From the growth rate of the current month, the investment growth rate in December 2021 was - 5.95%, which was narrower than that in November. The growth rate of investment in ecological protection and environmental governance was - 2.6%, which was larger than that from January to November. In 2021, the investment growth rate of public facilities management industry was - 1.2%, which was narrower than that from January to November, but the completed investment accounted for more than 40% of the total completed infrastructure investment (excluding electric heating gas and water).
Overall, in December 2021, the growth rate of infrastructure investment in the narrow and broad sense improved, with a year-on-year growth rate of - 0.57% and 1.30% respectively, with a month on month growth rate of + 3.04 PCT and + 4.49 PCT respectively. From the perspective of sub sectors, the monthly investment growth rate of water conservancy management industry, public facilities management industry and electric heating, gas and water production and supply industry has increased.
On January 18, 2022, the national development and Reform Commission held a press conference in January, proposing to appropriately advance infrastructure investment and accelerate the promotion of 102 major projects in the 14th five year plan.
In the near future, the steady growth policy has been increasing, and the development of infrastructure can be expected. The central economic work conference in 2022 expressed strong expectations for steady growth with the word "steady". 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. The January 22 meeting of the national Standing Committee once again emphasized that steady growth should be placed in a more prominent position and effective investment should be expanded.
This week, the national development and Reform Commission proposed to accelerate the implementation of 102 major projects and key projects of special planning in the outline of the 14th five year plan. At present, the steady growth policy continues to increase, and the infrastructure underpinning is expected to be strong. Benefiting from the implementation of the policy, the infrastructure sector is expected to usher in new development opportunities, and the growth rate of infrastructure investment is expected to increase in 2022h1. In terms of capital supply and liquidity, monetary policies have been introduced intensively, and special bonds have been issued to ensure the funds of major construction projects. Recently, the monetary policy has been actively promoted, the policies have been intensively introduced and implemented, and the reduction of reserve requirements and interest rates have been implemented one after another. The central bank has proposed to open the monetary policy toolbox a little larger and maintain the stability of the total amount, which will play a positive role in improving market liquidity, supporting the financing of the real economy and boosting market confidence. 21q4 China has issued a total of 1.2 trillion yuan of local government special bonds, which is expected to form physical investment in 22q1. Previously, the Ministry of finance has issued a new special debt limit of 1.46 trillion yuan in 2022 to all localities in advance. According to the contents of the meeting of the national development and Reform Commission and the requirements of "funds follow the project", the local government special bonds issued in the fourth quarter of last year will be implemented into specific projects as soon as possible, Pay close attention to the issued quota, strive to form more physical workload in the first quarter of this year, and local government special bonds effectively ensure the capital supply of major infrastructure projects.
In terms of construction demand, the planning of major projects has been intensively released, and the strong demand has contributed to the increase of investment growth. In 2021, the national development and Reform Commission approved 90 fixed asset investment projects with a total investment of 775.4 billion yuan, mainly in transportation, energy, water conservancy, information and other industries. Recently, the national and local levels have successively issued the "14th five year plan" and the construction plans for transportation construction, water conservancy construction and affordable housing in 2022. The construction volume is huge, and major projects in many regions have been started intensively, focusing on key areas such as major transportation, energy and water conservancy, new infrastructure and so on. Recently, the State Council issued the development plan of modern comprehensive transportation system in the 14th five year plan. According to the plan, the focus areas of future transportation investment include high-speed railway, expressway, urban rail transit and intercity railway construction driven by the construction of metropolitan area and urban agglomeration. The demand for infrastructure is strong and is expected to continue.
Investment view
In 2022, the construction industry will continue to embrace the "new economy" and actively integrate into the "double carbon" national strategy, and green buildings are expected to rise. At present, China's economy is facing downward pressure, steady growth and cross cycle regulation are approaching, and the construction industry is expected to usher in the dual development opportunities of policy driven and "construction +". From the perspective of policy, the active fiscal policy should improve efficiency, pay more attention to accuracy and sustainability, ensure the intensity of fiscal expenditure and speed up the progress of expenditure. It is expected that local special bonds are expected to be launched in the first half of the year, the "two new and one heavy" construction is expected to be overweight, and the infrastructure investment is moderately advanced, which is worth waiting for. Monetary policy should be flexible and moderate, and maintain reasonable and abundant liquidity. There are expectations of reducing reserve requirements and interest rates in 2022. The easing of monetary policy is conducive to the development of the industry. Moreover, fiscal policy and monetary policy should be coordinated and linked, and cross cyclical and counter cyclical macro-control policies should be organically combined. The policy is expected to become a major driving force for the "spring agitation" of the industry in 2022. At the same time, the construction industry actively embraces the "new economy" and actively layout Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) around "construction +". BIPV, energy storage and carbon sequestration have become the key layout fields of listed companies. Some companies Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) have begun to show signs and are expected to continue to make efforts in the future, so as to improve the valuation level of companies and industries. In addition, industry leaders and regional leaders will continue to cultivate traditional businesses, expand the whole industrial chain and extend upstream and downstream around traditional businesses, and fully benefit from the improvement of industry concentration. The release of future performance is sustainable. We believe that the construction industry has both a "white horse" with good performance and extremely low valuation, and a "dark horse" with "construction +" layout and standing at the market outlet. The overall trend of the industry is good, with fundamental support and policy catalysis, and "construction +" can improve the valuation space. It is an industry with "advance, attack and retreat" and is optimistic about the overall trend of the construction industry in 2022.
Configuration mainline recommendations
The overall fundamentals of the construction industry have improved. Industry leaders and regional leaders have benefited from the "national advance and people retreat" and the improvement of industry concentration. Both newly signed orders and performance have increased rapidly. At the same time, the construction industry actively embraces the "new economy" and the "construction +" era is coming, opening up the future development space of the company. 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 construction of "two new and one heavy", and central construction enterprises and regional infrastructure leaders are the main beneficiaries of "national advance and people retreat" and the improvement of industry concentration. The newly signed orders and performance are bright, and the valuation advantage is very significant. It is suggested to pay attention to China State Construction Engineering Corporation Limited(601668) , China Communications Construction Company Limited(601800) , China Railway Construction Corporation Limited(601186) , Metallurgical Corporation Of China Ltd(601618) and other central construction enterprises and Shandong Hi-Speed Road&Bridge Co.Ltd(000498) , Anhui Construction Engineering Group Corporation Limited(600502) and other regional infrastructure leaders. At the same time, urban rail design and vibration reduction will fully benefit from the release of urban rail transit demand under the construction of new urbanization. It is recommended to focus on Guangzhou Metro Design & Research Institute Co.Ltd(003013) and Zhejiang Tiantie Industry Co.Ltd(300587) .
(2) pumped storage beneficiary company. With the change of energy structure, power supply security has been put on the agenda, and energy storage has become the main means to solve power security. 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 have 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 recommended to focus on 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) .
(3) prefabricated buildings. We believe that under the background of carbon peak and carbon neutralization goal, the prefabricated construction field mainly in the form of concrete structure and steel structure will continue to fully benefit from the further improvement of the prosperity of the industry and the release of demand, 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) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Zhejiang Southeast Space Frame Co.Ltd(002135) .
(4) new power construction. Under the background of new power system construction with new energy as the main body, construction enterprises involved in the field of power construction are expected to benefit from the improvement of power grid investment and construction, operation and maintenance demand, and the release of BIPV and energy storage demand. It is recommended that Suwen Electric Energy Technology Co.Ltd(300982) the leader of power construction and operation on the user side, Hangzhou Shenhao Technology Co.Ltd(300853) the private enterprise with high-quality power intelligent inspection, and Zhejiang Southeast Space Frame Co.Ltd(002135) , Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) , Tus-Design Group Co.Ltd(300500) of BIPV layout Shenzhen Zhongzhuang Construction Group Co.Ltd(002822) and Dongzhu Ecological Environment Protection Co.Ltd(603359) of carbon sink layout.
Risk tips: epidemic control is not as expected, policy implementation is not as expected, economic downside risk, PPP promotion is not as expected, fixed asset investment is declining, local financial growth is slow, etc
