The Zhitong Finance App learned that Guoxin Securities released a research report saying that after a continuous correction in the second half of 2023, the valuation level of construction stocks has fallen back to an all-time low. If you consider the lower valuation level of Hong Kong stocks of central construction enterprises, the dividend appeal of some construction blue chip stocks has increased significantly. Urban village renovation policies are strongly supported, and the 2024 order release is highly deterministic. It is recommended to focus on layout opportunities for relevant targets; at an inflection point in the electronics industry cycle, clean room engineering is expected to fully benefit from the recovery in industry capital expenditure. Clean room engineering technology is complicated, competitive barriers are high, and profit margins are large. It is recommended that layout design and clean room system integration leaders are leading.
▍ The main views of Guoxin Securities are as follows:
The valuation correction is sufficient, and blue chips for central enterprises with high dividends are recommended at the bottom.
After experiencing a correction in valuation, the current average net market ratio of the eight major construction central enterprises is only 0.60, which is the lowest level in history, and there is very limited room for the valuation to continue to decline. Although the dividend ratio for construction stocks is small, considering the lower valuations (especially the lower valuation level of Hong Kong stocks), the dividend rate for some of the underlying stocks is relatively impressive.
The transformation of urban villages is in progress, and there is strong certainty about order volume.
Following the inclusion of urban village renovation projects in the scope of special debt support, the regulations intend to push banks to set up special loans for urban village renovation to provide them with financing support. Stock transformation is expected to be the focus of strengthening fiscal policies and expanding domestic demand for a long time to come. Urban village renovation in megacities is expected to drive at least 7.8 trillion yuan in investment, and the average annual investment amount of urban renewal projects in broad terms is expected to exceed 1.5 trillion yuan.
According to local urban renewal plans, the current urban village renovation mainly uses a mixed transformation model, which includes major demolition and minor renovation. The general process can be divided into several stages of planning/development/survey/design/construction/decoration/completion, corresponding to different construction periods and investment ratios.
Assuming a demolition ratio of 20%, the overall renovation period is about 4-8 years. Of these, investment in the construction phase can reach 45%, investment in decoration accounts for 17%, and investment in engineering consulting services such as planning, investigation and inspection accounts for about 5%.
Risk warning:
Downward macroeconomic risk; risk that policy implementation falls short of expectations; risk that approval progress of major projects falls short of expectations.