Deeply cultivate the prefabricated construction industry, and the integration of blue ocean photovoltaic buildings may become a new growth point

As one of the largest private construction enterprises in the construction market of the Yangtze River Delta, Longyuan Construction is constantly deepening its industrialization and innovation, embracing industry changes and seeking new growth poles. In the field of prefabricated construction industry, which has a broad prospect, the company has laid out ahead of schedule and has obvious competitive advantages. In addition, the company also actively promotes photovoltaic business to promote the integration of photovoltaic buildings.

On the market side, the company's determination to forge ahead has led to a continuous increase in orders. On January 27, the announcement of Longyuan Construction disclosed the main operating data of the fourth quarter of 2021. As of the end of December 2021, the company had undertaken 169 new projects in 2021, with a total amount of 18.985 billion yuan.

In the near future, the policy of stable growth has continued to increase, and the proactive fiscal policy should improve its effectiveness. Analysts believe that the "two new and one heavy" construction is expected to increase, and the investment in infrastructure is expected to be moderately advanced. In 2022, there are expectations of reducing reserve ratio and interest rate, and loose monetary policy is conducive to the development of infrastructure industry.

Deepen the blue ocean of prefabricated construction industry

Longyuan Construction is one of the largest private construction enterprises in the construction market of the Yangtze River Delta. Based on more than 40 years of practical experience in the construction field, it has formed four business segments: construction business, infrastructure construction investment business, operation management business, and steel structure assembly business. It has the ability to manage the whole life cycle of projects from design planning, investment and construction, operation and maintenance.

The construction business is the basis for the stable development of the company since its establishment. After years of development, it has formed a business structure with civil construction as the core, building decoration, steel structure, curtain wall, water conservancy and other subdivisions as the auxiliary, and industrial linkage development. Since 2016, the company has entered the field of steel structure assembly, developed the S-SYSTEM product system, and the integrity of the whole system integration is in the leading position in China.

In the field of steel structure, Longyuan Mingzhu is the core subsidiary of Longyuan Construction, which is a well-known steel structure production and manufacturing base at home and abroad. The company integrates international design, procurement, production, installation, trade and service. It is also a designated manufacturer of China Metal Structure Association.

It is reported that Longyuan Mingzhu has passed the international ISO quality, environment and occupational health management system certification, AISC certification of the American Association of Steel Structures, CE certification of the European Union and physical and chemical testing capability certification. In addition, Longyuan Mingzhu is also the only steel structure enterprise designated by the National Steel Structure Mobilization Center. What is more noteworthy is that Longyuanmingzhu has Class A qualification for steel structure design, can independently complete the design and deepening design work, has complete professional equipment, advanced equipment, and has advanced design software at home and abroad.

At present, the projects of Longyuan Mingzhu include high-rise steel structure buildings, prefabricated buildings, industrial facilities buildings, large venues and public buildings, overseas projects, airport high-speed railway stations, bridges, etc.

According to public data, China's annual new building area exceeds 2 billion square meters, equivalent to 40% of the world's cement and steel consumption; The proportion of urban garbage related to buildings accounts for nearly 40%, and the energy consumption level of new buildings is six times that of Western Europe. According to the research paper of Ping An Securities, the proportion of carbon emissions in construction related industries is as high as 51%, which is far higher than that in other industries. Its emission reduction is of great significance to the overall goal of dual carbon. Building prefabricated buildings is the most important way to achieve green environmental protection in the construction field.

In this regard, Everbright Securities Research News predicted that during the "Fourteenth Five Year Plan" period, only affordable rental housing will bring more than 12%, 24% and 190% of the incremental market space (area caliber) for prefabricated PC, steel structure and prefabricated decoration respectively. If the improvement of assembly rate is considered, the increase of industrial output value scale is more obvious. In addition, with the expansion of the industry scale, the assembly cost may gradually reduce under the scale benefit, and the acceptance of the owners will also increase, and the assembly industry will enter a benign development stage for a long time.

From the demand side, under the background of substantial growth in the demand for prefabricated buildings, Longyuan's construction business continues to improve. At the end of December 2021, Longyuan Construction announced that Longyuan Mingzhu had recently signed a steel structure subcontract with Shanghai Construction Engineering Group Co., Ltd. According to the contract, Long Yuanmingzhu is the subcontractor of the steel structure subcontract of the Jinqiao Guopei Land R&D project (except the pile foundation project), with the contract amount up to 387 million yuan.

It is worth noting that the company's assembly business covers the whole industry chain link of design, manufacturing and procurement, construction and installation, and technical consultation, with strong overall bargaining power.

PV building integration or a new growth point

It is worth mentioning that in recent years, Longyuan Construction has made frequent efforts in the field of distributed photovoltaic. At the end of December 2021, Longyuan Construction released news that the company held a meeting with CNNC Huineng and CNNC Kunhua, wholly-owned subsidiaries of CNNC, to discuss new infrastructure business with photovoltaic new energy as the core. The two sides established a collaborative working group to promote the development of photovoltaic new energy projects in a planned way.

Previously, Longyuan Construction had conducted in-depth discussion on the business cooperation mode with Longyuan Sunshine New Energy, a subsidiary of National Energy Group, and signed a strategic cooperation framework agreement. In November 2021, Longyuan Construction also signed strategic cooperation agreements with Trina Solar on the investment and development of photovoltaic new energy in the whole district with the government of Xiejiaji District, Huainan City, Anhui Province, and the government of Huazhou District, Weinan City, Shaanxi Province, respectively, to invest in the development of distributed photovoltaic energy projects. The total investment is expected to be 2 billion yuan.

Meng Xuming, vice president of Longyuan Construction Group, said publicly that the combination of traditional buildings and new infrastructure is the necessary trend of the company's development, and the intersection of photovoltaic and buildings, green buildings and zero carbon buildings are the direction of building a green low-carbon circular development economic system; The company will adhere to pioneering and innovation, achieve integrated development, accelerate project implementation, and open a new future of PV building integration.

According to the Industrial Securities Research Paper, the dual carbon main line is the most important market main line force in the construction industry in 2022. The potential roof distributed photovoltaic market of China's incremental buildings corresponds to a scale of 100 billion, while the market scale of stock transformation exceeds 200 billion.

Under the background of dual carbon goals, prefabricated buildings and photovoltaic integrated buildings will undoubtedly become the mainstream development direction in the future. At present, Longyuan Construction is actively enhancing its competitiveness in these business areas and conducting strong combination, laying a solid foundation for its rapid growth in the future.

From the policy perspective, the executive meeting of the State Council of China in January 2022 deployed to accelerate the promotion of major projects identified in the Outline of the Fourteenth Five Year Plan and special plans, and expand effective investment. All kinds of signals indicate that infrastructure construction will be the top priority for stable growth in the future. The centralized commencement of major projects in several regions has injected a shot in the arm for infrastructure development.

According to research papers of many securities companies, the proportion of non housing construction income of the company has increased, which has led to the improvement of profitability and payment collection. The company makes full use of the group's construction contracting capacity, cooperates with the assembly business, drives the rapid development of the assembly business, and the company's steel structure business is expected to grow rapidly. In addition, PV building integration business is expected to become a new performance growth point of the company.

From the perspective of the Company's operations in the fourth quarter of 2021, the Company's new business volume reached 5.026 billion yuan. As of the end of December 2021, the Company has undertaken 169 new projects in 2021, all of which come from the single construction contract mode.