China Galaxy Securities: Construction new orders prosperity rebounds, pipeline construction prosperity is high.

China Galaxy Securities released a research report stating that the new order prosperity of the construction industry is showing signs of improvement, while the growth rate of fixed asset investment continues to slow down. It is estimated that during the "13th Five-Year Plan" period, more than 700,000 kilometers of underground pipeline network will be constructed and renovated, with new investment demand exceeding 5 trillion yuan. It is recommended to moderately advance new infrastructure, optimize government investment, and build "Belt and Road" with high quality. Recommendations include stabilizing growth, high dividends, going international, new infrastructure, and regional development as main themes. Main points of China Galaxy Securities include: The new order prosperity of the construction industry is showing signs of improvement, while the growth rate of fixed asset investment continues to slow down In September, the Purchasing Managers' Index (PMI) for the construction industry was 49.3%, up by 0.2 percentage points from the previous month, the index for new orders in the construction industry was 42.2%, up by 1.6 percentage points from the previous month; the input price index for the construction industry was 47.2%, down by 7.4 percentage points from the previous month; the sales price index for the construction industry was 48.1%, up by 1.6 percentage points from the previous month; and the employment index for the construction industry was 39.7%, down by 3.9 percentage points from the previous month, indicating an improvement in industry prosperity. From January to September, the national fixed asset investment (excluding rural households) was 37.1535 trillion yuan, a decrease of 0.5% year-on-year, with the growth rate falling by 1 percentage point compared to the period from January to August. The growth rate of infrastructure investment is slowing down, the future prospects for pipeline construction are high From January to September, the broad infrastructure investment growth rate was 3.34%, a decrease of 2.08 percentage points from the previous period, and the narrow infrastructure investment growth rate was 1.1%, a decrease of 0.9 percentage points compared to the previous period. Among the three major sub-sectors of infrastructure, the investment in the production and supply of electricity, heat, gas, and water increased by 15.3% year-on-year, a decrease of 3.5 percentage points from the previous month; the investment in transportation, warehousing, and postal services increased by 1.6% year-on-year, a decrease of 1.1 percentage points from the previous month. In particular, the investment in railway transportation increased by 4.2% year-on-year, a decrease of 0.3 percentage points from the previous month; the investment in water conservancy, environmental protection, and public facilities management decreased by 2.4% year-on-year, a decrease of 2.2 percentage points from the previous month, with water conservancy management investment increasing by 3% year-on-year, a decrease of 4.4 percentage points from the previous month. As of September, local governments had issued a total of 3.68 trillion yuan in new special bonds, completing 83.6% of the issuance plan. As of October 14th, it was announced that 1.3 trillion yuan of special ultra-long-term national bonds had been issued, completing the annual issuance quota. Special bonds and ultra-long-term national bonds help expedite project implementation, expand effective investment, secure infrastructure investment funding sources. It is expected that infrastructure investment in the fourth quarter will continue to play a positive role in stabilizing growth. During the "13th Five-Year Plan" period, it is estimated that the construction and renovation of underground pipelines will exceed 700,000 kilometers, with new investment demand exceeding 5 trillion yuan. Moderately advanced new infrastructure, optimized government investment, and high-quality construction of the "Belt and Road" are recommended. The decline in real estate investment and sales slightly widened, while the decline in completions and new starts narrowed From January to September, real estate investment decreased by 13.9% year-on-year, with the decline expanding by 1 percentage point compared to the period from January to August; the sales area of commercial housing decreased by 5.5% year-on-year, with the decline expanding by 0.8 percentage points compared to the period from January to August, with the sales area of residential housing decreasing by 5.6% year-on-year, with the decline expanding by 0.9 percentage points; the sales of commercial housing decreased by 7.9% year-on-year, with the decline expanding by 0.6 percentage points compared to the period from January to August. Overall, the growth rate of real estate investment and sales area in the first nine months slightly widened. From January to September, the new construction area of residential buildings decreased by 18.9% year-on-year, with the decline narrowing by 0.6 percentage points compared to the period from January to August; the completed area of residential buildings decreased by 15.3% year-on-year, with the decline narrowing by 1.7 percentage points compared to the period from January to August. By 2025, it is expected that with the implementation of policies and the gradual reduction of commercial housing inventory, supply and demand in the real estate market will achieve balance, and the declines in new construction and completions are expected to continue to narrow. The combination of real estate policies has laid the direction for destocking the real estate industry. First-tier cities have responded quickly by reducing down payments and mortgage rates, accelerating the pace of real estate development, which is expected to promote structural improvement in supply and demand, accelerate financing for real estate enterprises, boost confidence in the real estate market, and potentially trigger a rebound in the real estate industry chain, achieving high-quality development. Investment Recommendations Recommend main themes such as stabilizing growth, high dividends, going international, new infrastructure, and regional development. 1) Start the construction of Yaxia hydroelectric projects and promote urban renewal vigorously. 2) The pipeline construction industry is prosperous, recommending stable growth infrastructure, high dividends, going international, mergers and acquisitions, etc. 3) Moderately advance new infrastructure, focus on the growth themes of low-altitude economy, welding of Siasun Robot & Automation, and computing power projects. 4) Focus on the improvement of supply and demand in Xinjiang coal chemical industry, nuclear power projects, clean room projects. Risk warning Risks of declining fixed-asset investment, risks of declining new contract orders, risks of lower-than-expected accounts receivable recovery, risks of increasing uncertainties in policies and external environments.