EB Securities: Easing of Russia-Ukraine conflict gives birth to reconstruction market, focus on benefiting targets in construction and building materials sector.

EB SECURITIES released a research report stating that the recent Russia-Ukraine conflict has reached a crucial turning point, with the US and Russia holding high-level talks in Saudi Arabia on February 18 and reaching a consultation mechanism, raising expectations for a peace agreement. Ukrainian President Zelensky clearly stated that he "hopes to obtain security guarantees and end the Russia-Ukraine conflict by the end of this year." According to the World Bank's assessment, by the end of 2023, Ukraine's direct economic losses will reach $152 billion, with severe infrastructure damage and a reconstruction funding gap exceeding $750 billion, of which over 60% is for infrastructure needs, covering energy, transportation, housing, and other areas. Key recommendations include Puyang Refractories Group (002225.SZ), Anhui Honglu Steel Construction (002541.SZ), and a focus on international engineering companies and the eight major construction central enterprises. EB SECURITIES' main points are as follows: Events: The recent Russia-Ukraine conflict has reached a crucial turning point, with the US and Russia holding high-level talks in Saudi Arabia on February 18 and reaching a consultation mechanism, raising expectations for a peace agreement. Ukrainian President Zelensky clearly stated that he "hopes to obtain security guarantees and end the Russia-Ukraine conflict by the end of this year." The US and Russia have reached consensus on four principles, and the Russia-Ukraine conflict is expected to further ease After more than four hours of talks, the US and Russia reached agreement on four principles, including restoring the functionality of their respective embassies in Washington and Moscow, finding a solution to end the Russia-Ukraine conflict, considering geopolitical and economic cooperation between the US and Russia after the conflict ends, and ensuring that these processes move forward efficiently. The four principles are: 1) "To restore the functionality of our missions in Washington and Moscow so that we can continue along this path, we need to have diplomatic facilities operating normally." 2) "We will send a high-level team from my country to help with negotiations and to find a sustainable and acceptable solution to the Russia-Ukraine conflict." 3) "Start discussing, thinking, and examining the geopolitical and economic cooperation that may arise after the end of the Russia-Ukraine conflict." 4) "The five of us here today (the five representatives of the US and Russia in the talks) ... will continue to be involved in this process to ensure that it moves forward in an effective manner." The reconstruction needs after the Russia-Ukraine conflict are huge, with a focus on recommending Puyang Refractories Group and Anhui Honglu Steel Construction, as well as suggesting a focus on international engineering companies and the eight major construction central enterprises. According to the World Bank's assessment, by the end of 2023, Ukraine's direct economic losses will reach $152 billion, with severe infrastructure damage, a reconstruction funding gap exceeding $750 billion, of which over 60% is for infrastructure needs, covering energy, transportation, housing, and other areas. Key recommendations include Puyang Refractories Group and Anhui Honglu Steel Construction, and a focus on international engineering companies and the eight major construction central enterprises: Puyang Refractories Group: Before the Russia-Ukraine conflict, Ukraine was one of the company's top overseas sales markets, and will directly benefit from post-war reconstruction. The Serbia factory (with a designed capacity of 30,000 tons of magnesia carbon bricks and 10,000 tons of amorphous materials) has been completed and put into operation, effectively radiating the Eastern European market. Anhui Honglu Steel Construction: With the company's customized steel structure products, it follows domestic construction companies going abroad, and also benefits from the release of reconstruction demand after the end of the Russia-Ukraine conflict. Four major international engineering companies: Norinco International Cooperation has a high proportion of overseas income, mainly in the field of power engineering, and is expected to prioritize the acceptance of power and transportation reconstruction orders; China Camc Engineering relies on the geographic advantage of the China-Belarus Industrial Park adjacent to Ukraine, and can quickly radiate the reconstruction demand for Ukraine; Sinoma International Engineering, Sinosteel Engineering & Technology are technologically advanced in the fields of cement, metallurgy, and industrial facilities, fitting the repair needs of Ukraine's energy and industrial systems. Risk warning: Geopolitical risks, significant fluctuations in exchange rates, reconstruction demand falling short of expectations.