The Zhitong Finance App learned that Dongxing Securities released a research report saying that from January to October 2024, the new contract amount for foreign-contracted projects signed nationwide was 1.26 trillion yuan, an increase of 16.60% over the previous year; in US dollars it was 177.65 billion US dollars, an increase of 15.30% over the previous year. The level of urbanization in China reached only 66.16% at the end of 2023. There is still a certain gap between developed countries, and there is still plenty of room for infrastructure construction in China. However, as the global competitiveness of China's central enterprise construction leaders increases, overseas development will bring more room for development. In particular, the “Belt and Road” co-construction country is in a stage of rapid development. Combined with the advancement of China's “Belt and Road” policy, China's central enterprise construction leaders will also usher in a period of opportunity for overseas development.

Dongxing Securities's main views are as follows:

The growth rate of new contracts signed by China for overseas engineering contracts remained at a high level in 2024, and the share of Belt and Road co-construction countries continued to rise.

From January to October 2024, the new contract amount for foreign-contracted projects signed nationwide was 1.26 trillion yuan, up 16.60% year on year; in US dollars it was 177.65 billion US dollars, up 15.30% year on year. The cumulative number of new contracts signed from January to December 2023 ended two years of year-on-year decline, with a year-on-year increase of 4.5%. Beginning in 2024, the cumulative amount of new contracts signed for the foreign-contracted engineering business continued to increase year-on-year. The cumulative amount of new contracts signed in January-July increased 25% year-on-year. Among the new contracts signed for overseas projects, the share of “Belt and Road” co-construction countries is also constantly increasing. From January to October 2024, the total amount of new contracts signed by the “Belt and Road” co-construction countries was 148.64 billion US dollars, an increase of 15.70% over the previous year; the cumulative number of new contracts signed by the “Belt and Road” co-construction countries accounted for more than 80% of the total contract amount for foreign-contracted projects since 2024.

As China's “Belt and Road” policy continues to advance, the Belt and Road co-construction countries have become major regions for overseas projects. Not only have new contract amounts maintained a high growth trend, but the completion status of foreign-contracted projects has also maintained a steady growth trend. The cumulative amount of foreign-contracted projects completed from January to October 2024 was 884.2 billion yuan, an increase of 3.20% over the previous year; the cumulative completion amount has continued to grow steadily since May 2022.

Listed construction companies of central enterprises have outstanding competitive advantages overseas, and new orders have generally maintained a good growth rate.

China's central enterprises and leading listed companies in the construction industry all have global competitiveness. Central enterprise construction leaders are not only the main force in implementing China's “Belt and Road” policy, but also have a strong overall competitive advantage in the global market. China Construction ranked 14th in the 2024 “Fortune” 500 list, and “Engineering News Record” ranked first among the 250 largest engineering contractors in the world; China Railway ranked 39th and 2nd respectively. China Railway Construction ranked 43rd in the world's top 500 list; China Communications Construction ranked 63rd; China Power Construction ranked 105th.

China Railway Construction ranked 3rd among ENR's 250 largest contractors, China Communications Construction ranked 3rd among ENR's world's largest international contractors, China Chemical ranked 16th among ENR's 250 global engineering contractors, China Power Construction ranked 6th among the ENR Global 250 Global Contractors and 8th with 250,000 international contractors, Sinoma International ranked 43rd among ENR's 250 largest international contractors, and China Metallurgical ranked 5th among ENR's 250 global contractors.

Leading listed construction companies from various central enterprises have maintained a high growth trend in new overseas orders.

In RMB terms, in the first three quarters of 2024, China Construction signed new overseas orders of 158.4 billion yuan, up 88.12% year on year; China Construction signed new overseas orders of 265.162 billion yuan, up 24.66% year on year; China Power Construction signed new contract orders of 176.003 billion yuan, up 15.42% year on year; Sinoma International signed new overseas orders of 30.204 billion yuan, up 6.30% year on year; China Metallurgical signed new orders of 60.76 billion yuan, a year-on-year increase of 85.20%.

In addition, there are also leading listed companies of construction central construction companies that have declined in new overseas orders: China Railway's new overseas contract orders were 123.23 billion yuan, down 3.17% year on year; China Railway Construction signed new overseas orders of 105.294 billion yuan, down 10.12% year on year. This is expected to be related to China Railway and China Railway Construction's strict control of contract quality. China Chemical signed new overseas orders of 65.717 billion yuan, a year-on-year decrease of 22.72%, mainly due to the high base for the same period last year.

Overseas expansion opens up more room for central enterprise construction leaders to develop.

After nearly 20 years of rapid development in China, the level of domestic infrastructure has been greatly improved. However, the level of urbanization in China reached only 66.16% by the end of 2023, and there is still a certain gap compared to developed countries. There is still plenty of room for infrastructure construction in China. However, as the global competitiveness of China's central enterprise construction leaders increases, overseas development will bring more room for development. In particular, the “Belt and Road” co-construction country is in a stage of rapid development. Combined with the advancement of China's “Belt and Road” policy, China's central enterprise construction leaders will also usher in a period of opportunity for overseas development.

Investment suggestions: The Politburo meeting of the Central Committee on December 9, 2024 proposed “implementing a more active fiscal policy and moderately loose monetary policy in 2025”, “strengthening unconventional countercyclical adjustment”, and “improving investment efficiency and expanding domestic demand in all aspects”. The implementation of active policies will improve demand in the construction industry. We continue to be optimistic that leading central construction companies will benefit more. In addition, overseas development has accelerated under global competitiveness. It is recommended to continue to recommend China Communications and Construction (601800.SH). It is recommended to focus on China Construction (601668.SH), China Chemical (601117.SH), China Energy Construction (), China Railway (), China Railway (), China Railway (), China Railway Construction (), China Energy Construction (), and China 601868.SH 601390.SH 601186.SH 601618.SH Leading central enterprises such as Power Construction (601669.SH).

Risk warning: The effect of real estate policies is lower than expected, and the effect of local government debt conversion is lower than expected.