China Securities Co.,Ltd.: Seize Opportunities in the New Cycle of Building Decoration; Focus on New Models and New Directions

China Securities Co.,Ltd. released a research report stating that investment opportunities in the construction industry in 2027 lie in policy support and changes in demand structure. Within the new cycle, investment-stabilization policies improve project funding conditions, and the construction of the "Six Networks" clarifies investment priorities, driving engineering demand to concentrate on backbone networks, new-type facilities, and stock renewal. The transition of commercial housing to existing-home sales more closely links cash collection with completion and delivery, and shortening construction periods can reduce capital occupation, thereby giving industrialized construction a stronger economic driver. At the same time, investment in energy and AI-related industries continues to advance, providing incremental demand for specialized engineering. It is recommended to seize policy opportunities in key infrastructure and focus on growth opportunities brought by improved construction efficiency and industrial capacity expansion. China Securities Co.,Ltd.'s main views are as follows: Investment-stabilization policies are actively being deployed, with major projects and "Six Networks" construction driving demand The valuation level of the construction sector has fallen to a low level, with PB at the 0.7% percentile since 2014. Fixed asset investment grew 0.1% month-on-month in September, and the year-on-year growth rate for the first nine months was flat compared with the first eight months. Investment growth has stabilized marginally, and the revitalization of policy-based financial instruments and special bond quotas has increased project funding sources. The "15th Five-Year Plan" deploys 109 major projects, including the comprehensive advancement of the "Six Networks" construction covering water networks, new-type power grids, computing networks, next-generation communication networks, urban underground pipeline networks, and logistics networks. The focus of infrastructure is shifting toward key projects and improving quality and efficiency of existing assets. Under new real estate policies, the value of construction periods has increased, and steel structures and prefabricated decoration face application opportunities Commercial housing is undergoing an orderly transition to existing-home sales. For pre-sale projects subject to the new rules, mortgage disbursement is deferred until after completion filing, and the construction period directly affects developers' capital occupation. Based on an illustrative calculation of RMB1 billion in sales, a 70% mortgage ratio, and a 4% cost of capital, a one-year deferral increases capital costs by RMB28 million. Steel structures and MiC rely on parallel factory production and on-site construction to shorten construction cycles, while prefabricated decoration combines faster delivery with stock renewal demand, further highlighting the economic benefits of industrialized construction. Coal chemicals, offshore engineering, nuclear power, and clean engineering remain highly prosperous High oil prices enhance the relative competitiveness of coal chemicals and the attractiveness of deepwater oil and gas development, supporting demand for plant construction and FPSO modules. Nuclear power projects have been continuously approved, and units under construction form a sustained engineering workload. AI-related chip manufacturing and advanced packaging capacity expansion increase demand for cleanrooms, HVAC and mechanical and electrical systems, and process pipelines. In the first three quarters of 2026, investment in integrated circuit manufacturing grew 14.2% year-on-year, and relevant specialized engineering companies saw growth in orders on hand, providing support for subsequent business development. It is recommended to focus on key areas supported by investment-stabilization policies, as well as investment opportunities brought by improved construction efficiency and industrial capacity expansion In terms of major projects and "Six Networks" construction, water conservancy and power engineering benefit from backbone network and energy supporting construction. It is recommended to focus on companies such as China Railway and China Energy Engineering Corporation. For urban renewal, it is recommended to focus on companies such as China State Construction Engineering Corporation, China Communications Construction, and Shanghai Tunnel Engineering. For industrialized construction and prefabricated decoration, focus on companies such as Anhui Honglu Steel Construction, Changjiang & Jinggong Steel Building, and Metallurgical Corporation of China. In the specialized engineering field, for coal chemicals and nuclear power construction, it is recommended to focus on companies such as China National Chemical Engineering and China Nuclear Engineering Corporation, and to focus on the offshore engineering and cleanroom engineering sectors. Risk analysis 1. Construction progress is significantly affected by funding availability and natural conditions and may be delayed, thereby affecting revenue recognition; overseas engineering construction progress is also affected by local political and security environments. 2. A continued downturn in the real estate market may cause various adverse effects on construction companies. 3. The expansion of new energy businesses may fall short of expectations. Some traditional construction companies are entering new areas such as new energy consulting, engineering, and operations, and there may be risks of expansion failure.