Starting from the third quarter, the leading performance will turn around and accelerate. (1) The base number in the third quarter of 2022 will decrease from the previous quarter. For example, the growth rate of the second/third quarter of 2022:China Railway14%/5%,China Communications Construction10%/-9%,China Railway Construction8%/-5 %,China MCC14%/-29%,China Chemical50%/11%,Northern World38%/-50%, andChina Engineering World80%/20%. (2) The growth rate of orders on hand is higher than the growth rate of revenue. For example, the growth rate of orders on hand/revenue growth rate in mid-2023 is:China Railway8%/5%,China Communications Construction Company18%/0.5%,China Railway Construction29% /0.1%,Sinoma World20%/-0.8%. (3)profitrequired forequity incentivesis higher than the mid-term report. For example, theequity incentiverequirements for net profit growth in 2023/mid-term 2023:China Railway12%/7%,China Communications Construction Company8%/3%,Sinoma World16%/7%,China's chemical industry15%/11%.
The policy funds for the Golden, Nine and Silver Ten peak seasons are in place to accelerate physical workload and accelerate future performance. (1) Special bonds are required to be issued in September and used up in October. Issuance is accelerated: 66% of new special bonds will be completed in the first seven months of 2023 (95% in the same period last year). In August, local bonds issued nationwide increased by 1.3 trillion yuan. 70 million yuan and special bond issuance of 0.6 trillion yuan (0.2 trillion in the same period last year) were invested in infrastructure, accounting for 70%, an increase of 6 percentage points. (2)Monetarypolicy to reduce costs: On August 15, the central bank lowered the open market reverserepurchaseand MLFinterest ratesby 10bp and 15bp respectively, and on August 21, the 1-year LPRinterest ratewas lowered by 10bp. (3) High-frequency data began to improve: the construction business activity index in August rose by 2.6 percentage points to 53.8% (the reversal ended the consecutive declines in the past four months), and the construction new orders index rose by 2.2 percentage points to 48.5%.
Real estate sales are accelerating, and the Belt and Road Initiative is making great strides. (1) Real estate development and sales growth in the first half of 2023:China Railwayincreased by 67% (down 31% in the same period last year),China Railway Constructionincreased by 39% (down 45% in the same period last year),China Constructionincreased by 30% (in the same period last year) down 15%). (2) Overseas revenue growth in the first half of 2023:China Railway16% (all 5%),China Railway Construction10% (all 0.1%), China Communications Construction 10% (all 0.5%),China Engineering World19% (all 3%) accounted for 52%, andthe North World96% (93% overall) accounted for 51%. (3) Growth rate of overseas orders in the first half of 2023: China Communications Construction Company 22% (11% overall) accounting for 16%,Sinoma World205% (68% overall) accounting for 53%,China Steel World96% (-9% overall) Accounted for 51%.
Zhongte estimates that the valuation of state-owned enterprises under the Belt and Road Initiative is close to the historical bottom. In the future, increased policies and accelerated performance will drive the market to bottom out. (1) Central enterprises recommend China Railway Construction/China Communications Construction/ China Railway Construction / China Metallurgical Corporation , etc., One Belt and One Road (asset injection) recommends Xinjiang Communications Construction /Sinoma World/ Northern World / China Engineering Industry / China Steel World , etc., and local recommendations Shanghai Construction Engineering / Planning General Institute / Huashe Group , etc., real estate recommendation China Construction / Honglu Steel Structure , etc. (2) Low valuation: At the first summit in 2017, PE Sinoma World’s highest was 25 times and is now 11 times, Sinosteel World’s highest is 37 times and is now 14 times, and Northern World’s highest is 44 times and is now 17 times. (3)PB China Railway 0.64 ( CRRC 1.1)/China Communications Construction 0.62 ( China Merchants Highway 1.1)/ China Railway Construction 0.50 ( Beijing-Shanghai High-speed Railway 1.3)/ China Construction 0.61 ( China Merchants Shekou 1.3)/China Metallurgical Corporation's PB is 0.79 times, and a maximum of about 80% of the space is needed to raise financing PB to 1.25 times. (4) In 2014, the PE of One Belt and One Road my country Railway reached a maximum of 39 times and is now 4.7 times, my country Railway Construction has a maximum of 23 times and is now 4.0 times, and China Communications Construction has a maximum of 20 times and is now 7.1 times.
Risk warning: Microeconomic policy risks, infrastructure investment lower than expected, etc.