Changjiang Securities·2025-11-10 13:45Investment Rating - The report maintains a "Positive" investment rating for the construction and engineering sector [9] Core Views - The construction sector exhibits characteristics such as low valuation, low institutional holdings, large market capitalization, and stable outlook for quality targets. The report identifies four key investment directions within the construction industry: 1) Companies with strong Q3 performance and short-term earnings certainty 2) High dividend yield stocks providing a safety cushion 3) Strong long-term growth potential 4) Large-cap stocks with low absolute valuations [5][6][7] Summary by Sections Valuation Metrics - As of the latest closing, the Jiangsu Construction Index has a PE ratio of 12.83, ranking 28th across all industries, with a 10-year percentile of 68.5%. The PB ratio stands at 0.84, ranking 31st, with a 10-year percentile of 16.22%. Notably, the construction sector and the banking sector are the only indices within the Jiangsu framework that are trading below book value [5][6] Institutional Holdings - The construction sector has historically low institutional holdings, which may reflect a weak outlook for the industry and a lack of attention from investors. This could lead to undervaluation of high-quality construction stocks [6] Market Capitalization - The construction sector has a limited number of listed companies, with eight major state-owned enterprises collectively valued at 941.19 billion, accounting for 47% of the Jiangsu Construction Index's market capitalization. These enterprises play a crucial role in stabilizing economic growth and are likely to be favored in a market shift towards undervalued sectors [6][7] Investment Directions - Direction One: Focus on companies with strong Q3 earnings, such as Sichuan Road and Bridge, China Chemical, and others, which show robust growth and sufficient order backlogs [7] - Direction Two: Invest in high dividend yield stocks like Jianghe Group (6.2%), Sichuan Road and Bridge (5.6%), and others, which provide a strong holding safety net [7] - Direction Three: Target companies with strong long-term growth potential, such as Honglu Steel Structure and others benefiting from semiconductor capital expenditure [7] - Direction Four: Invest in large-cap stocks with low absolute valuations, including eight major state-owned enterprises that are all trading below book value [7]