Tianfeng Securities·2025-05-05 08:23Investment Rating - The industry rating is maintained at "Outperform the Market" [5] Core Viewpoints - The construction sector is under pressure, with Q1 2025 showing a revenue decline of 6% and a net profit drop of 8.4% year-on-year, influenced by the real estate downturn and tight local finances [2][15] - The steel structure segment achieved a positive revenue growth of 7.3% in Q1 2025, while other segments faced declines [15] - The issuance of special bonds is expected to accelerate, and fiscal policies are anticipated to stimulate domestic demand, which may lead to a recovery in the construction sector's fundamentals [2][15] Summary by Sections Fiscal Policy and Market Conditions - The construction sector's revenue in 2024 decreased by 4.1% year-on-year, and net profit fell by 14.4%, primarily due to the real estate industry's decline and local fiscal constraints [2][13] - Q1 2025 saw a continued decline in the construction sector, with revenue down 6% and net profit down 8.4% year-on-year, attributed to slower project commencement compared to the previous year [2][15] Operational Performance - The operating rate of asphalt plants was 30.7%, up 2.0 percentage points week-on-week, indicating a slight recovery in physical work volume [3][24] - Major construction companies like China Communications Construction and China State Construction reported year-on-year increases in new orders of 9.02% and 8.37%, respectively, in Q1 2025 [3][25] Investment Recommendations - Focus on investment opportunities in the central and western regions of China, particularly in infrastructure and cyclical professional engineering sectors [2][35] - Emerging business areas related to AI, clean rooms, and computing power are recommended for investment, alongside traditional construction blue-chip stocks [35][36] - Specific stocks recommended include China Communications Construction, China State Construction, and regional high-growth companies like Sichuan Road and Bridge [35][36]