Chinese construction companies recently announced that new contracts signed in 2019 totaled 2.864 trillion yuan, up 9.0%. Construction business totaled 2.4821 trillion yuan, up 6.6%, and real estate business 381.8 billion yuan, up 27.9%. Comments:
The growth rate of infrastructure orders picked up rapidly in December, and the real estate construction and sales increased rapidly in the whole year. Construction business steady improvement, real estate business high growth ” Situation. The growth rate of new contracts in construction business recovered for the first time after 2016, with a growth rate of 6.6%, slightly higher than that in 2018, and a monthly growth rate of 35.7% in December 2019. Among them, the housing construction business was 195.04 billion yuan, up 16.1% with the same increase, which was the main driving force for the improvement of the construction business, while the infrastructure business was 518.3 billion yuan, with a negative growth of 18.4%, but the monthly growth rate was 28.1% in December. The contract sales volume of real estate business reached 381.8 billion yuan, up by 27.9%. Its subsidiary China overseas real estate is the main body of real estate business. The sales volume of China overseas real estate ranked the seventh in 2019, with a total contract sales volume of 377.2 billion Hong Kong dollars. More than 300 billion in sales. Echelon growth averaged 12.7 percent.
Housing 2020 orders or continuation of the toughness, countercyclical regulation under construction order is expected to gradually recover in recessive debt under the strict supervision of local government since 2018, parts of the government order payment schedule or affected by a certain, company infrastructure orders to undertake strategic contraction scale in 2019, at the same time, on the one hand, through their clinging to the receivable link operating cash flow pressure, on the other hand, fully grasp the real estate sales recovery in 2019, take a project investment and high toughness of market environment, expand the scale of real estate construction and the sales contract, so as to maintain steady growth performance.
We think in the first half of 2020 special bonds for strengthening infrastructure support, countercyclical regulation demand still exist under the condition of the company infrastructure orders growth is expected to continue ascending trend, constructed the order completed in area of growth is expected recovery still has a good toughness, and real estate industry concentration ascending trend or persist in the medium term, real estate sales business also is expected to maintain steady growth.
We believe that the company has a strong business structure advantage. The three businesses of infrastructure, housing construction and real estate sales are complementary to each other to some extent, thus promoting the steady improvement of the company's overall performance. In the first three quarters of the year, the company realized the operating revenue of 973.6 billion yuan, increasing by 15.8%, and the asset-liability ratio declined. In addition, the company has the advantage of financing cost compared with private construction enterprises, so the company is expected to gradually land orders in the future. At present, the significant increase in the support of special debt for infrastructure construction and the recent policy of reserve requirement reduction by the central bank are all helpful to improve the fund problem in the process of order landing.
In terms of investment behavior, some negative factors have been playing a role before or due to them. For example, exchange purchase of etfs by state-owned enterprises constitutes substantial reduction of holdings and selling pressure in the secondary market, as well as reduction of holdings by individual institutions. But in late 2019 and early 2020, factors in investment behavior are likely to reverse, generating positive factors for building sector valuations, such as large allocations of ETF funds. In addition, judging from the northbound capital flow of shanghai-hong kong stock connect in the past month, China state construction has entered the top 10 net purchase amount in the past month. We believe that with the gradual entry of foreign capital and ETF funds, the company may have entered the window period of valuation repair.
Investment advice
The company has enough orders in hand, and the three businesses of infrastructure construction, housing construction and real estate sales are complementary to each other, thus promoting the steady improvement of the company's overall performance. With the leading advantage of central construction enterprises gradually emerging this year, under the background of the current improvement of counter-cyclical adjustment demand and the central bank's RRR reduction, central construction enterprises are expected to benefit more from the improvement of macro factors. We are optimistic about the company's future steady growth, and suggest to focus on the company's investment opportunities at the current valuation position.
