建筑装饰行业：化债工作思路实质转变，建筑业如何受益

Investment Rating - The report assigns a "Buy" rating to several key companies in the construction and decoration industry, including Shandong Road and Bridge, Zhejiang Communications, Anhui Construction, and China Railway Construction [3]. Core Insights - The report highlights a significant shift in the approach to debt resolution, with a focus on alleviating local government debt pressure through a series of debt replacement initiatives, which have cumulatively issued over 17,384 billion CNY in special refinancing bonds as of November 2023 [1][13]. - The implementation of a 10 trillion CNY debt resolution fund is expected to substantially ease the repayment pressure on local governments, with projections indicating a reduction of hidden debt from 14.3 trillion CNY to 2.3 trillion CNY by 2028 [1][22]. - The construction industry is currently facing pressure on asset quality due to delayed payments from owners, with accounts receivable amounting to 80,399 billion CNY, representing 51.9% of total assets as of Q3 2024 [1][26]. Summary by Sections 1. Debt Resolution and Fiscal Policy Review - The report reviews four rounds of debt resolution efforts, noting that the first round from 2015 to 2018 involved issuing 12.18 trillion CNY in local government bonds to replace existing debt [1][13]. - The second round in 2019 focused on pilot programs in select provinces, issuing 157.9 billion CNY in replacement bonds [1][13]. - The third round from 2020 to 2022 utilized special refinancing bonds to provide liquidity to weaker regions, with significant issuance in major cities [1][13]. - The fourth round initiated in 2023 has introduced a comprehensive debt resolution plan, with a total of 17,384 billion CNY in special refinancing bonds issued to date [1][14]. 2. Impact of Previous Debt Resolutions on the Construction Industry - The construction industry has been under pressure due to the need for companies to pre-finance projects, leading to significant accounts receivable [1][24]. - The report notes that the cash flow situation in the construction sector has been tight, with total cash inflow from 2017 to 2023 amounting to 9,866 billion CNY, covering only 83.45% of net profit [1][26]. - The report emphasizes that the asset quality in the construction sector is expected to improve as debt resolution funds are implemented, potentially leading to a reduction in accounts receivable growth rates [1][24]. 3. Outlook for the Current Round of Debt Resolution - The report anticipates that the implementation of the 10 trillion CNY debt resolution fund will lead to improvements in both asset quality and demand within the construction sector [1][11]. - It suggests that construction companies focusing on high-quality development and cash flow improvement will benefit from the ongoing debt resolution efforts [1][11]. - The demand for EPC (Engineering, Procurement, and Construction) and investment projects is expected to recover as local government finances improve and funding becomes more accessible [1][11].