The introduction of the dual-carbon “1+N” top-level design further clarifies China’s carbon emission reduction roadmap with clean energy, recycling, energy conservation and efficiency enhancement, and carbon sequestration as the core. The first is the continuous construction of the national carbon trading market (the quota trading market has entered the first clearing cycle, and the national CCER market is expected to open). Secondly, the policy for carbon emission reduction in the heavy industry system (the focus in 2021 will be electricity) will also be accelerated across the board. We expect that the performance growth trend of the environmental protection sector will continue to be upward, and the increase in operating assets will drive the continuous optimization of cash flow. In the context of the continuous enhancement of carbon attributes, the release of emerging downstream demands such as recycled plastics, recycling of hazardous wastes and lithium extraction from salt lakes will bring about the development of the industry. A new opportunity comes.
The “carbon reduction” attribute of renewable resources will be explored, and many fields such as waste plastics and waste non-ferrous metals are optimistic. Looking at the emission reduction experience of EU companies, the use of energy alternatives and recycled materials is the general trend. In the context of dual carbon, the addition of renewable raw materials will become an important means for industrial enterprises to reduce carbon. my country’s renewable resource system is evolving from the “front-end recycling-driven” model of version 1.0 to the “back-end demand-driven” model of version 2.0, which is expected to improve the efficiency of the recycling system for recycled waste, and at the same time, it will promote the profitability of recycled material manufacturers. It is expected that companies with channel advantages and technological advantages will rapidly expand their scale and usher in a double increase in valuation performance, focusing on the direction of recycled plastics and hazardous waste recycling, which have dazzling performance growth.
The waste incineration industry has both the attributes of emission reduction (CCER) and recycling (industrial park model), and the opportunity to reshape the valuation is now. (1) “Emission reduction” attribute? CCER: According to the statistics of previous cases reported by CCER, each ton of waste incineration instead of coal burning and landfill can reduce CO2e emissions by 0.3 to 0.5 tons; (2) “recycling” attribute, the policy in 2021 is expected to promote about 100 cities to carry out “no “Waste City” construction, and clarify the “two networks integration” of solid waste + recycling. We expect that under the “incineration +” park model, the synergy of domestic waste/hazardous waste/industrial solid waste will be more economical. At present, the PE of incineration companies is only 9-12 times in 2022. The prices of such projects in the primary and secondary markets are inverted, and the valuation of public offering reits has exceeded that of listed companies, so there is a lot of room for valuation improvement.
Focus on opportunities such as thermal power flexibility retrofits. The National Energy Work Conference clarified that the focus of work in 2022 includes giving full play to the role of coal as a “ballast stone” and the basic adjustment role of coal power, accelerating the transformation of coal power flexibility, promoting the development of pumped storage power stations + new energy storage, and promoting the improvement of the electricity price mechanism , to promote electricity market-oriented transactions, etc. Considering the current situation of coal-dominated energy in my country, it is very important to give full play to the basic adjustment role of coal power, that is, to give full play to the functions of joint dispatch + peak shaving and energy storage. Considering the long-term coordination of thermal coal prices and the gradual rationalization of the coal-electricity linkage mechanism, the inflection point of thermal power units’ profitability is expected, and the transformation of units to peak shaving and energy storage attributes, the valuation level of thermal power assets is expected to increase.
At present, the growth of fixed investment is slowing down, combined with the weak recovery of consumption and weakening of export support, the downward pressure on the economy has increased significantly, and the policy of stabilizing growth is expected to heat up. Looking forward to 2022, it is expected that real estate investment will continue to decline, and manufacturing investment will continue to recover, but the intensity may be weakened. Infrastructure investment needs to increase efforts to hedge the decline in real estate investment. At the same time, considering that important meetings will be held in the second half of 2022, it is necessary to To create a “stable and healthy economic environment”, infrastructure is expected to be strengthened. Under the escort of the policy, it is expected that the economy will run smoothly, the total investment will slow down but not stall, and transformation, upgrading and pattern reshaping will still be the main keynote of the development of the construction industry.
The current “dual carbon” 1+N policy system has been gradually improved, the top-level design has been released, and various supporting and detailed policies have been introduced one after another, which is expected to accelerate the green development of the construction industry. Focus on two directions. 1) Green energy transformation, accelerated construction of new power system. During the “14th Five-Year Plan”, the construction of green power such as wind power and photovoltaics has been accelerated, the energy bases have strengthened their leading positions, and the leaders of central enterprises rely on industrial chain and capital advantages to extend clean energy power generation potential; the demand for new energy consumption has increased and the development of distributed energy has accelerated. Energy, distribution network, and smart power consumption are expected to become the key directions of future power investment. We are optimistic about private leaders with leading qualifications, flexible mechanisms, and comprehensive service capabilities, which are expected to grow rapidly in the future. 2) The reform of green buildings is deepening, and the development of prefabricated buildings and photovoltaic buildings is optimistic. The policy requires that by 2025, newly constructed buildings in cities and towns will fully meet the green building standards, and prefabricated buildings will reduce the consumption of raw materials and energy. BIPV/BAPV is an important way to achieve low-carbon buildings. Under the background of distributed new energy promotion, it is expected to usher in rapid development, focusing on the follow-up business progress of construction companies that cooperate with leading industrial chains such as photovoltaic modules.
With the recent fine-tuning of real estate policies, industry financing tends to improve. In the 2014-2015 control cycle, it took about 13 months from policy adjustment to investment bottoming out. It is expected that more policies and time will be needed for the industry fundamentals to bottom out. In the short term, the Central Economic Work Conference focuses on promoting the construction of affordable housing, which is expected to become one of the important starting points for common prosperity and stable growth in 2022, and related design, construction, and decoration leaders are expected to gain new growth points. In the medium and long term, the real estate industry will change from “quantity” to “quality”. Leading enterprises with strong capital strength and strong ability to resist risks and shocks are expected to “remain the king”. The layout strengthens the competitive advantage, and it is expected to accelerate the increase of market share in the future. After the stable development of the real estate industry and the release of risks, the quality of operation is also expected to improve.
The current trend of the military sector is generally healthy, and there is reason to remain optimistic about the market outlook. According to our recently released “Summary of the Third Quarterly Report of the Military Industry Sector”, 82 targets with military product revenue or net profit attributable to the parent account for more than half of the target, the net profit attributable to the parent in 2020 will increase by a median year-on-year of 23.2%, and the net profit attributable to the parent in the first three quarters of 2021. The median profit growth rate is 44.7%. If the growth rate in the previous three quarters is extrapolated to the whole year, the cumulative increase in net profit attributable to the parent in 2020 and 2021 will be 78.3%. From June 2015 to the end of June 2021, the military industry sector was in a downward channel. Since July 1, 2020, the China Securities Military Industry Index has increased by 66.43%, which is highly matched with the performance increase.
As the first year of the “14th Five-Year Plan”, the military industry needs to achieve a milestone in 2021. Judging from the financial data of the first three quarters, the upstream segmental growth has spread to the systemic acceleration of the entire industry. Financial reporting information is open and fair, which is the best way to build market consensus. Compared with other manufacturing industries horizontally, the demand in the military industry is outstanding in terms of prosperity, certainty and sustainability. The “blue chip” of the main target of the military industry is the general trend, and the “guerrilla” investment attributes and volatility are expected to be significantly weakened.
Looking forward to 2022, the military industry is full of demand and the production capacity is in an orderly manner. Under the background of the structural acceleration of industry demand, a number of military industry targets are expected to achieve rapid growth in performance, and the upward trend will remain unchanged. At present, most of the targets driven by the fundamentals of the military sector are in the 30-50x range. The compound performance growth rate in 2022-2023 is 30%-40%, and a considerable number of targets are still expected to maintain a growth rate of around 30% in 2024-2025. , the growth and valuation match is high. Considering the impact of the overall external environment, the potential valuation premium of the military sector is expected to gradually emerge.
Compared with other manufacturing industries horizontally, the military industry is characterized by strong top-level design, prominent planning attributes, and high mid-term demand certainty for companies related to the main battle equipment industry chain. Under the framework of the five-year plan, there is no significant change in the fundamentals of the industry. Looking at each segment of the military industry and each link of the industrial chain, market research and cognition are relatively sufficient, and there is no significant expected deviation in general. Looking forward to 2022, most of the targets driven by the fundamentals of the military sector, the income space mainly comes from the return on investment brought by performance growth. Looking at the vertical and horizontal dimensions: 1) Among the six major segments of the military industry, aviation, aerospace, and electronic equipment have significantly increased demand during the “14th Five-Year Plan” period; 2) In each link of the military industry chain, mid- and upstream enterprises rely on market share. The individual alpha brought about by the increase in rate, localization substitution or penetration rate can achieve a demand elasticity that significantly exceeds the industry. In addition, it is recommended to focus on the mid- and downstream enterprises in the aviation manufacturing industry whose performance growth rate driven by the learning effect and scale effect significantly exceeds the revenue growth rate, and the aero-engine industry chain whose demand persistence significantly exceeds the overall level of the aviation sector.