Tianfeng Securities: Which construction targets benefit from "anti-involution"?

According to the Zhitong Finance APP, Tianfeng Securities released a research report stating that the logic benefiting from the anti-involution in the international engineering sector mainly focuses on two aspects: 1) From the perspective of "price elasticity": Against the backdrop of anti-involution, the expectation of rising prices for resources such as coal has increased. International engineering companies that have laid out resource business, such as NORINCO International, possess performance elasticity and stock price catalysts. NORINCO International's coking coal sales have been over 5 million tons in the past two years, contributing profits of over 600 million in 2024. If coking coal prices rebound, under neutral and optimistic expectations, NORINCO International's coking coal business is expected to contribute profits of 770 million and 950 million respectively in 2026.

1. From the perspective of downstream profit improvement and high-quality development: The anti-involution measures in the steel and cement industries propose the exit of backward production capacity, product structure upgrades, and low-carbon energy-saving transformations. If anti-involution policies can promote profit improvement in industries such as steel and cement, the demand for upgrading and transforming production lines in downstream enterprises is expected to rebound, benefiting corresponding specialized engineering companies. Key recommendations include Sinoma-int (600970.SH) and SINOSTEEL ENTEC (000928.SZ), with a suggestion to pay attention to CHALIECO (601068.SH).

The main viewpoints of Tianfeng Securities are as follows:

The anti-involution policy continues to deepen, and construction companies are shifting from "price competition" to "value competition."

Since the second half of 2024, the central government's stance on rectifying "involution-style" competition has gradually become clear. "Anti-involution" is gradually transforming from policy orientation to implementation. In July 2025, 33 construction central enterprises, state-owned enterprises, and private enterprises, including China State Construction Engineering Corporation and China Nuclear Engineering Corporation, issued an "Initiative," proposing the "Four No's" policy: no assembling scale, no blind expansion, no excessive debt, and no shell structures, collectively resisting "involution-style" competition, striving to abandon pure "price competition," and pursuing more technically sophisticated "value competition." This initiative details the three major sectors of the construction industry: central and state-owned enterprise blue chips, international engineering, and steel structures from the perspective of anti-involution.

How to grasp the anti-involution of traditional undervalued central and state-owned enterprise blue chips?

For traditional undervalued central and state-owned enterprise blue chips, the meaning of construction companies' anti-involution should be grasped from three dimensions: "dividend capability," "price elasticity," and "technological transformation": 1) Dividend capability: In Q1 2025, the market share of new signed orders from the nine major construction central enterprises further increased to 59.89%, demonstrating the strong order-taking ability of central enterprises. However, the rapid increase in market share is under pressure from continuous competition, leading to strained payment conditions and profit margins in the industry. The essence of construction "anti-involution" is value return, fundamentally optimizing profitability and cash flow through supply-demand optimization. The competitive pressure from central enterprises on local construction state-owned enterprises is also expected to marginally ease. Attention should be paid to construction central state-owned enterprise blue chips with strong dividend capabilities, with key recommendations for China State Construction and Sichuan Road and Bridge; 2) Price elasticity: The expectation of rising prices for bulk resource products has increased, and construction companies' layout of resource business also possesses performance elasticity and stock price catalysts. Companies engaged in the chemical new materials industry will also benefit from "price elasticity," with key recommendations for China National Chemical Corporation and China Railway; 3) Technological transformation: The construction industry is expected to benefit from the structural high prosperity of technology-driven infrastructure demands in the future, such as smart cities and smart construction. Technological transformation has become an important path for traditional construction enterprises to achieve their own transformation. Construction companies are expanding non-traditional construction businesses based on existing resources, such as data elements, with key recommendations for Tunnel Corporation and a suggestion to pay attention to China State Construction International How to grasp the anti-involution of the international engineering sector?

The logic of benefiting from the anti-involution of the international engineering sector mainly focuses on two aspects: 1) From the perspective of "price elasticity": Under the background of anti-involution, the price increase expectations for resources such as coal have risen. International engineering companies that are involved in resource businesses, such as NORINCO International, have performance elasticity and stock price catalysts. NORINCO International's coking coal sales have been over 5 million tons in the past two years, contributing over 600 million in profits in 2024. If coking coal prices rebound, under neutral and optimistic expectations, NORINCO International's coking coal business is expected to contribute 770 million and 950 million in profits in 2026, respectively; 2) From the perspective of downstream profit improvement and high-quality development: The steel and cement industries have proposed measures to exit backward production capacity, upgrade product structures, and implement low-carbon energy-saving transformations. If anti-involution policies can promote profit improvement in industries such as steel and cement, the demand for upgrading and transforming production lines in downstream enterprises is expected to rebound, benefiting corresponding specialized engineering companies. Key recommendations include Sinoma-int and SINOSTEEL ENTEC, with a suggestion to pay attention to CHALIECO.

How to grasp the anti-involution of the steel structure sector?

The steel structure sector can be divided into two links: manufacturing and installation. The supply-side reform of upstream steel materials is favorable for steel price increases, which is expected to bring ① short-term demand release and profit improvement for processing enterprises (such as Honglu Steel Structure); ② benefits for the profits of scrap steel sales for enterprises, while under the moving average cost accounting method, the net profit per ton is expected to marginally improve. During the steel price increase period, Honglu Steel Structure's net profit per ton reached a maximum of 347 yuan in Q3 2022, but as steel prices weakened, the net profit per ton fell to 111 yuan in 2024, indicating significant elasticity for profit improvement in manufacturing enterprises; ③ Steel price fluctuations require higher demands for inventory management and cost management for enterprises, benefiting leading companies with cost procurement advantages. Key recommendation: Honglu Steel Structure.

For steel structure installation companies (such as Jinggong Steel Structure), anti-involution is expected to accelerate industry clearing. The construction steel structure industry is gradually transforming towards intelligent construction, green construction, and prefabricated buildings. The technological, financial, and brand advantages of leading companies are expected to be further highlighted. At the same time, in the face of the previous involution environment, steel structure companies have been expanding overseas. Jinggong Steel Structure's overseas orders in the first half of 2025 increased by 94% year-on-year, and Jianghe Group's newly signed overseas orders in 2024 increased by 57% year-on-year. The increase in overseas proportion helps improve the profitability and cash flow of steel structure companies. Key recommendations: Jianghe Group and Jinggong Steel Structure.

Risk Warning: The implementation of anti-involution policies may fall short of expectations, infrastructure & real estate investment may decline beyond expectations, overseas demand may not meet expectations, and calculations may have a certain subjectivity, which may deviate from actual values, etc