Investment Rating - The report maintains a "Positive" investment rating for the construction and engineering sector [8]. Core Insights - The year 2026 marks the beginning of the "14th Five-Year Plan," with a pragmatic growth target of "4.5%-5%" set during the Two Sessions, signaling strong support for stable growth. The report highlights the construction sector's defensive attributes and the potential for revaluation of undervalued state-owned enterprises (SOEs) [2][6]. - The construction sector is characterized by low valuations, low institutional holdings, large market capitalization, and stable outlooks for quality targets. The sector and the banking sector are the only two indices in the Yangtze River tertiary industry index that are trading below book value. The historically low institutional allocation to the construction sector may reflect a weak overall outlook for the industry, leading to some excellent construction targets being under-recognized and underpriced [6][12]. - Certain state-owned enterprises play a crucial role in stabilizing growth and the economy, with their political and economic significance highlighted. Some construction companies have shown steady operational performance due to their technical capabilities, market expansion abilities, and industry influence, which may allow them to achieve higher valuations compared to the sector [6][12]. Summary by Sections - **Market Dynamics**: The international oil price surge, driven by geopolitical tensions, enhances the competitiveness of coal chemical industries. The report recommends core quality SOE China Chemical, as the high oil price environment is expected to accelerate construction in the coal chemical sector [6][13]. - **Mineral Resources**: Geopolitical supply disruptions have highlighted the premium on strategic minerals. The demand for copper and cobalt is driven by global energy transitions and conflicts, with China Railway's mineral resource operations showing stable production figures [6][13]. - **Policy Support**: The government has proposed establishing a national low-carbon transition fund to foster new growth points in hydrogen energy and green fuels. Significant investments in power infrastructure are anticipated, with a 40% increase in the State Grid's investment for the 14th Five-Year Plan [6][13].