According to analysts, despite being in trouble, for the construction and materials industry, public investment will be a bright spot in 2023, partially offsetting the weakness of the residential real estate sector.
Illustration: Hoang Hieu/VNA
The downward adjustment of raw material prices will have a positive impact on some businesses in the industry. In particular, building material enterprises with their own advantages will have the opportunity to sharply increase revenue and profit thanks to key projects.
In order to offset the decline of other growth drivers, the Government is planning to boost public investment in 2023. It is expected that there will be VND 793,000 billion for public investment disbursement in 2023, an increase of 34 % compared to the public investment plan in 2022.
According to estimates of VNDIRECT Securities Joint Stock Company, public investment disbursement in 2023 will increase by 20-25% compared to the actual disbursement in 2022 thanks to the bottleneck of lack of construction stone and backfill land that has been resolved when The government grants mining licenses for new mines and the prices of construction materials such as iron and steel, cement, and construction stone are forecast to fall next year.
According to the Ministry of Transport, a series of key transport infrastructure projects will be started from the end of 2022, including: North-South Expressway phase 2 (December 2022); passenger terminal and airport runway at Long Thanh Airport (December 2022); Terminal 3 at Tan Son Nhat Airport (December 2022); Expressway Bien Hoa - Vung Tau (April 2023) and expressway Khanh Hoa - Buon Ma Thuot (June 2023). Meanwhile, 11 component projects of the North-South Expressway phase 1 will still be accelerated construction and completed in the period 2022-2024 respectively.
Notable transport infrastructure projects in the near future are the North-South East Expressway - Phase 2, Long Thanh International Airport, Ring Road 4 (Hanoi) and Ring Road 3 (Ho Chi Minh City). Chi Minh).
The appointment of contractors at the North-South Expressway phase 2 will open up opportunities for leading construction companies. In order to shorten the project implementation time, the Ministry of Transport has been authorized to appoint the North-South Expressway contractor phase 2 for the bidding packages of consultancy, construction and installation, technical infrastructure relocation, compensation and clearance. land and resettlement. The Ministry of Transport has also announced the criteria for selecting construction contractors to ensure projects are carried out in a transparent manner.
Leading companies with proven capabilities include Vietnam Construction and Import-Export Joint Stock Corporation - Vinaconex (stock code: VCG), Deo Ca Transport Infrastructure Investment JSC (stock code: VCG). : HHV), CIENCO4 Group (stock code: C4G)... has taken advantage of many advantages to win large-scale bidding packages.
For businesses producing asphalt products, it is said to be the time to accelerate the rate of profit recognition. The government is targeting 11 component projects of the North-South Expressway phase 1 to be completed on time. Thus, in 2022, 2023 and 2024 respectively, about 361km, 148km and 128km of expressways at this project will be completed.
In addition, 349km of expressways at the North-South Expressway project phase 2 will also be put into operation in the period of 2023-2025 respectively. While asphalting usually takes place in the later stages of road projects, asphalt companies are therefore expected to benefit more from the fourth quarter of 2022.
Since there are no statistics on Vietnam's asphalt industry, VNDIRECT Securities Joint Stock Company compares the growth of consumption volume of the industry based on Petrolimex Petrochemical Corporation - JSC (stock code: PLC).
It can be seen that the business results of asphalt enterprises are greatly affected by disbursement of public investment capital.
In VNDIRECT Securities, for example, PLC's asphalt revenue skyrocketed in the period 2014-15, when disbursement of public investment in transport infrastructure increased sharply.
On the other hand, low infrastructure spending in 2016-2019 is attributed to limited government budget and cooling private investment in BOT projects, leading to a decrease in PLC's asphalt revenue. approximately 50% compared to 2014-2015.
As for the way businesses produce construction stone, due to the characteristics of the construction stone industry, transportation costs often account for a large proportion of the finished product's cost. Depending on the distance and type of transportation, the price of stone delivered to the site can be twice as high as the price of stone at the quarry.
The Long Thanh airport project has just started construction, leveling and foundation, this will be the main growth driver for the demand for construction stone in the Southeast region in the coming time. Accordingly, listed companies owning quarries located near Long Thanh airport are prioritized for mobilization thanks to their advantages and product quality.
The issuance of mining licenses for construction quarries is facing difficulties in both extending the time, increasing the mining capacity and especially the licensing of new quarries due to the opposition of local people when the mining operation is not completed. Quarrying is leaving many negative consequences on the environment. At the same time, most of the old quarries (with the expiration of their exploitation period) have not yet carried out the procedures to close the mines according to the initial commitment.
Therefore, listed construction stone enterprises that own quarries with long exploitation time and large mining capacity will have many advantages over competitors and benefit from the construction demand. Vietnam's huge transport infrastructure in the period of 2022-2030.
Listed companies possessing high-quality quarries with favorable locations will be the main sources of supply for Long Thanh airport, especially Tan Cang and Thien Tan mines clustered by Binh Duong Minerals and Construction JSC (Binh Duong Minerals and Construction JSC). stock ticker: KSB), Hoa An Joint Stock Company (stock code: DHA), Bien Hoa Construction and Building Materials Production Joint Stock Company (stock code: VLB) and Dong Nai Materials and Construction Investment JSC (ticker code: VLB) securities: DND).
According to VNDIRECT Securities, the key project of the North-South Expressway will be a great driving force in boosting the profits of construction stone enterprises in 2023-2024.
As for the export market of building materials is forecasted to decline due to weak global demand. VNDIRECT Securities said that the low new orders, signaling industrial production and steel demand will decrease in the near future. The weakening global economic growth outlook also led to a marked drop in steel prices in most markets, especially flat steel products such as hot rolled coil (HRC).
China's construction material demand growth has slowed amid the COVID-19 outbreak and the weakness of the real estate sector. Vietnam's steel and cement exports will still face many difficulties in the coming months, before the situation improves in the second half of 2023.
This expectation comes from accelerating infrastructure investment, social distancing orders showing signs of easing and bailout packages for the real estate sector gradually taking effect in China and industrial production worldwide. demand recovery when the energy shortage is gradually under control.
In the domestic market, the slowdown in the residential real estate market has led to a decrease in domestic steel demand. At the same time, rising interest rates have weighed on interest expenses. According to VNDIRECT Securities, all steel companies at the end of the third quarter of 2022 are in a position of net debt. As a result, interest expenses will increase in a higher interest rate environment.
Thus, it can be seen that enterprises in the construction industry and building materials are having both difficulties and advantages intertwined. However, the advantages and disadvantages of enterprises are very different. Even enterprises that are leading in the industry, or have favorable locations near the project are considered to have many opportunities to accelerate revenue and profit thanks to key projects being implemented.
On the other hand, low infrastructure spending in 2016-2019 is attributed to limited government budget and cooling private investment in BOT projects, leading to a decrease in PLC's asphalt revenue. approximately 50% compared to 2014-2015.
As for the way businesses produce construction stone, due to the characteristics of the construction stone industry, transportation costs often account for a large proportion of the finished product's cost. Depending on the distance and type of transportation, the price of stone delivered to the site can be twice as high as the price of stone at the quarry.
The Long Thanh airport project has just started construction, leveling and foundation, this will be the main growth driver for the demand for construction stone in the Southeast region in the coming time. Accordingly, listed companies owning quarries located near Long Thanh airport are prioritized for mobilization thanks to their advantages and product quality.
The issuance of mining licenses for construction quarries is facing difficulties in both extending the time, increasing the mining capacity and especially the licensing of new quarries due to the opposition of local people when the mining operation is not completed. Quarrying is leaving many negative consequences on the environment. At the same time, most of the old quarries (with the expiration of their exploitation period) have not yet carried out the procedures to close the mines according to the initial commitment.
Therefore, listed construction stone enterprises that own quarries with long exploitation time and large mining capacity will have many advantages over competitors and benefit from the construction demand. Vietnam's huge transport infrastructure in the period of 2022-2030.
Listed companies possessing high-quality quarries with favorable locations will be the main sources of supply for Long Thanh airport, especially Tan Cang and Thien Tan mines clustered by Binh Duong Minerals and Construction JSC (Binh Duong Minerals and Construction JSC). stock ticker: KSB), Hoa An Joint Stock Company (stock code: DHA), Bien Hoa Construction and Building Materials Production Joint Stock Company (stock code: VLB) and Dong Nai Materials and Construction Investment JSC (ticker code: VLB) securities: DND).
According to VNDIRECT Securities, the key project of the North-South Expressway will be a great driving force in boosting the profits of construction stone enterprises in 2023-2024.
As for the export market of building materials is forecasted to decline due to weak global demand. VNDIRECT Securities said that the low new orders, signaling industrial production and steel demand will decrease in the near future. The weakening global economic growth outlook also led to a marked drop in steel prices in most markets, especially flat steel products such as hot rolled coil (HRC).
China's construction material demand growth has slowed amid the COVID-19 outbreak and the weakness of the real estate sector. Vietnam's steel and cement exports will still face many difficulties in the coming months, before the situation improves in the second half of 2023.
This expectation comes from accelerating infrastructure investment, social distancing orders showing signs of easing and bailout packages for the real estate sector gradually taking effect in China and industrial production worldwide. demand recovery when the energy shortage is gradually under control.
In the domestic market, the slowdown in the residential real estate market has led to a decrease in domestic steel demand. At the same time, rising interest rates have weighed on interest expenses. According to VNDIRECT Securities, all steel companies at the end of the third quarter of 2022 are in a position of net debt. As a result, interest expenses will increase in a higher interest rate environment.
Thus, it can be seen that enterprises in the construction industry and building materials are having both difficulties and advantages intertwined. However, the advantages and disadvantages of enterprises are very different. Even enterprises that are leading in the industry, or have favorable locations near the project are considered to have many opportunities to accelerate revenue and profit thanks to key projects being implemented.
According to Van Giap (VNA)
