Soochow Securities·2025-07-06 14:20Investment Rating - The report maintains an "Overweight" rating for the construction and decoration industry [1] Core Viewpoints - The construction PMI for June rose to 52.8%, an increase of 1.8 percentage points from the previous month, indicating a recovery in business activity. The civil engineering PMI has remained above 55.0% for three consecutive months, reflecting accelerated construction in infrastructure projects. New order and business activity expectation indices have also improved, suggesting better project outlooks [2][11][22] - Infrastructure investment has remained stable in the first five months, with high growth rates in water transportation and water management sectors. The report emphasizes the importance of monitoring the issuance of special bonds and the continuity of fiscal policies on physical output [2][11] - The report highlights the completion of the 800 billion yuan "two重" construction project list, which is expected to accelerate the implementation of key projects and stimulate regional demand, particularly in central and western regions [2][11] - The report anticipates that increased fiscal policy support and improvements in financing will gradually manifest in investment and physical output in the second half of the year, with a focus on infrastructure investment and key regional construction [2][11] Summary by Sections Industry Dynamics - The National Development and Reform Commission has allocated over 300 billion yuan to support the third batch of "two重" construction projects in 2025, with a total of 800 billion yuan planned for 1,459 projects, including major infrastructure and ecological restoration initiatives [14][15] - The June PMI data indicates a recovery in the construction sector, with the business activity index at 52.8% and the civil engineering index at 56.7%, suggesting robust construction activity [16][22] International Expansion - In the first five months of 2025, China's overseas contracting projects saw a 5.4% increase in revenue and a 13% rise in new contracts, with contracts in Belt and Road Initiative countries growing by 20.7% [3][12] - The report suggests that ongoing diplomatic negotiations and trade tensions may enhance cooperation in infrastructure projects, benefiting overseas engineering demand [3][12] Investment Opportunities - The report identifies high-growth areas in specialized manufacturing, energy conservation, and new energy-related infrastructure sectors, recommending companies with relevant transformation strategies [3][12] - Specific companies recommended for investment include China Communications Construction, China Power Construction, and China Railway, with additional attention to China Nuclear Engineering and China Chemical Engineering [2][11]