上市捷报丨沙利文助力中深建业控股有限公司成功赴港上市(2503.HK)

Zhongshenzhen Jianye Holdings Limited (Stock Code:2503.HK) on2024year1month9The company successfully logged onto the Hong Kong Capital Market Main Board today. It is a private general contracting construction enterprise in China's development stage, having been awarded five first-class construction contracting qualifications, including first-class general contracting for construction projects; first-class general contracting for municipal public works; first-class professional contracting for foundation engineering; first-class professional contracting for building mechanical and electrical installation; and first-class professional contracting for building decoration and finishing.

Zhongshen Jianye Holdings Limited has also obtained six second-level and third-level construction contracting qualifications, covering different professional fields such as petrochemical engineering construction, steel structure construction, and environmental protection construction. The company has successively undertaken2020year,2021year,2022year2023Selected as 'Shenzhen500"Strong companies" ” Frost & SullivanFrost & Sullivan,Frost & Sullivan, referred to below as the 'Frost & Sullivan Group', provides exclusive industry advisory services for the listing of China Resources Construction Holdings Limited. We hereby extend our warmest congratulations on its successful listing.

Zhongshenzhen Jianye Holdings Limited (hereinafter referred to as 'Zhongshenzhen Jianye') was incorporated on2024year1month9The company was successfully listed and issued shares1.287100 million shares, including publicly offered shares1,287.210,000 shares, allocated shares1.15828100 million shares, issue price per share1.00HK$, with the net amount of raised funds being approximately1.29HK$10 billion.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), helping the issuer communicate with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

Investment highlights

The company has obtained a series of first-class qualifications and licenses in the construction contracting industry, capable of undertaking various construction projects;

By interacting and communicating with municipal public utility projects over various periods, the company has a thorough understanding of the needs and requirements of government departments;

The company is led by a dynamic and dedicated management team, as well as a senior project management team;

The company adopts a comprehensive and strict occupational safety and quality control system.

According to a report by Frost & Sullivan, in2022year,

The construction industry in Guangdong Province accounts for about8.1%(revenue-based);

Among all private construction enterprises in Guangdong Province, the top five private construction enterprises rank as approximately15.0%market share;

The company ranks among the top private construction enterprises with over 10,000 employees in Guangdong Province50Bit (calculated by revenue), market share is about0.23%.

Overview of Construction Industry in China and Guangdong Province

The construction industry has long been one of China's pillar industries, occupying a pivotal position in the development of the national economy. In particular, central and local governments have intensively introduced incentive policies that not only enhance the green development of urban and rural areas and infrastructure levels but also contribute to the construction of an ideal development model based on high-quality green buildings and green lifestyles.

Construction Industry Classification

According to the 'National Economic Industry Classification' released by the National Bureau of Statistics of China, China's construction industry can be divided into four major categories, including(i)housing construction industry;(ii)Civil engineering construction industry;(iii)Construction and installation industry; and(iv)Building decoration, renovation, and other construction industries can be further subdivided as shown below:

Source: Frost & Sullivan report

Total output value of construction industry

The total output value of the construction industry refers to the quantitative measurement of the production scale, development efficiency, and total output value of the construction industry, including(i)Construction project output value refers to on-site construction projects, equipment installation, and building maintenance;(ii)Auxiliary building products and industrial output value;(iii)Output value of outsourced construction services and machinery leasing services;(iv)Output value of planning, design and supervision services; and(v)Other construction-related work, products, and service output value.

Source: Frost & Sullivan report

According to a Frost & Sullivan report, except for projects with special requirements, project owners usually prefer to entrust general contractors with managing the entire construction project rather than multiple specialized contractors. Therefore, calculated by output value, projects built by general contractors account for the majority of the market share in the construction industry in Guangdong Province.2018In [year], the general contractors in Guangdong Province accounted for79.3%, and this market share is in2022Year-on-year further increase to83.0%.

With the continuous development of large-scale construction projects in China, calculated based on construction output value, the construction market in Guangdong Province is dominated by general contractors, with construction output value from2018About RMB10,993Yuan billion at a compound annual growth rate of about14.7%Grew to2022Renminbi in [year]19,043Yuan billion, expected2022Year-end2027The compound annual growth rate for the year is about8.7%, and in2027Reach approximately RMB before the Spring Festival28,9471000 million yuan in construction output value.

According to the State Council2021year5The 'Notice on Further Stimulating the Development Vitality of Market Entities through Deepening the Reform of 'Separation of Licensing from Construction Contracts'" issued in [month] has abolished the third-level qualification for construction enterprises and adjusted the second-level qualification accordingly. Moreover, there will no longer be a classification of third-level qualifications for specialized contractors. Therefore, it is expected that in the future, efforts will be made to vigorously promote the reduction and simplification of construction permit approvals for general contracting and specialized contractors. It is hoped that the qualification standards for the construction industry in China can gradually be optimized.

Source: Frost & Sullivan report

In various sectors of the construction industry, housing construction occupies a dominant market position in Guangdong Province, accounting for2018Annual market share is about50.9%and2022Annual market share is about50.6%Civil engineering constitutes the second largest sector in Guangdong Province, accounting for2018Annual market share is about27.8%and2022Annual market share is about32.5%subsequently2016After the promulgation of "Several Opinions on Further Strengthening Urban Planning, Construction and Management Work" in [year], the civil engineering field in Guangdong Province has been2018Year to2022Year-on-year compound annual growth rate of about17.9%Rapid growth, expected2022Year-end2027The compound annual growth rate for the year is about9.5%Continuing to firmly dominate the sector with the fastest growth in Guangdong Province's construction industry.

Total revenue of construction industry

In the past few years, the total revenue of the construction market in Guangdong Province has achieved steady growth, of which Guangdong Province is2018Year-end2022In the year, double-digit growth was even achieved, with a compound annual growth rate of about11.8%Rise to2022About RMB23,315yuan, and is expected to be2027Further growth to about RMB before the Spring Festival34,393100 million yuan.

Source: Frost & Sullivan report

Competitive landscape of construction industry in China and Guangdong Province

Although China's leading construction enterprises are mainly state-owned, the construction industry in China is highly fragmented. These state-owned enterprises rely heavily on domestic infrastructure investment, which is mainly driven by government expenditure plans. Other emerging non-state-owned private construction enterprises seek opportunities in China's vast construction market by focusing on building their own strength and competitive advantages.

According to the Frost & Sullivan report, according to2022In China's construction revenue calculation, private construction enterprises account for about35.2%According to2022Calculation of construction income obtained by all private construction enterprises in a year, with the top five private construction enterprises accounting for2022The market share of all private construction enterprises in the year is about4.2%Calculated by revenue,2022The scale of the construction industry market in Guangdong Province accounted for about8.2%The construction market in Guangdong Province is highly fragmented, calculated by revenue2022In 2021, the top five private construction enterprises in Guangdong Province accounted for approximately15.0%.

Source: Frost & Sullivan report

Driving factors of China's construction industry

· Sustainable urbanization

According to data from the National Bureau of Statistics of China,2022In China, the urbanization rate reached about65.2%estimated2027It will reach about72.0%The compound annual growth rate is about2.0%Continuous urbanization will drive demand for residential, industrial and commercial construction projects, public works, and civil engineering construction, thereby stimulating the development of China's construction industry.

· Increase investment in infrastructure

The construction industry is capital-driven, and its development benefits from the continuous growth of fixed asset investment.COVID-19 pandemicDuring the spread of the epidemic, the Chinese government has promoted economic growth by increasing investment in infrastructure projects.2022The total fixed asset investment for the year increased to approximately RMB58.0trillion yuan, compared with2021Annual growth of about4.8%The Chinese government has been investing public expenditure in infrastructure construction as a means to stimulate the macroeconomy and further promote the growth of the construction industry.

· Favorable national policies

In recent years, central and local government agencies have intensively introduced incentive policies to promoteBIMWith the application of industrialization and informatization technologies, as well as the development of prefabricated buildings. "14th Five-Year Plan for National Economic and Social Development"2021–2025It is proposed to accelerate the construction of infrastructure such as transportation, water conservancy, and energy in China to further improve the level of basic public services. In addition, the Guangdong Provincial Government has also issued a five-year development plan for the construction industry, which will focus on strengthening the development of infrastructure and other construction fields.

Development Trend of China's Construction Industry

· The complexity and scale of construction projects have increased.

With the continuous rise of China's urbanization rate and the rapid development of the construction industry, the complexity and scale of construction projects have both increased. While this creates opportunities for construction enterprises, it also places stricter demands on the modeling, evaluation, and control of project management standards, aiming to achieve an overall balance among time, cost, quality, and safety. In addition, construction enterprises have been actively formulating organic growth strategies or transforming into comprehensive all-round service construction enterprises through mergers and acquisitions in recent years, striving to strengthen their advantages and occupy the growing market.

· The construction process is moving towards mechanization, robotics, and automation.

With the development of China's economy and society, the construction industry is facing a growing shortage of labor, leading to continuous increases in labor costs. The national '14th Five-Year Plan' vigorously promotes the production of parts and components robots, while exploring application scenarios for operation and maintenance robots, and plans to2025Before the Spring Festival, construction robots were deployed in the construction industry to achieve large-scale applications. Therefore, as the construction process advances towards mechanization, robotization, and automation, labor demand will decrease and efficiency is expected to improve in the future.

· Adopt green building technologies

As a starting point to help reach carbon dioxide emission peaks and achieve carbon neutrality, green buildings are becoming increasingly important in the national construction industry's transformation and upgrading strategy. Under the '14th Five-Year Plan', the Chinese government attaches great importance to the development of green industries, with provincial governments formulating incentive policies to provide subsidies or tax preferences for real estate developers engaged in green building development. It is believed that the future development of green buildings will effectively drive the construction industry forward, including sub-industries such as new building materials, new energy, and related services.

Access barriers to the construction industry in China

· Barriers to qualifications and past performance records

General contractors must obtain qualifications approved by the Ministry of Housing and Urban-Rural Development and local government departments before they can execute construction projects in China. Construction general contracting qualifications are divided into different levels and granted based on various factors, including but not limited to registered capital, past performance records, business scale, equipment and machinery capabilities, technological innovation, minimum number of technical and management personnel, etc. General contracting contracts with entry-level qualifications are limited to small and medium-sized construction projects. Due to developers' and governments' preference for cooperating with construction companies with many years of experience in the construction industry and good past performance records and reputation, new forces lacking excellent past records are at a disadvantage in bidding for projects and contracts.

· Capital and cash flow barriers

Entering the construction industry requires a large amount of capital and robust cash flow management to support the huge upfront expenditures needed for purchasing raw materials, hiring personnel, and buying or leasing equipment and machinery for construction projects. If there is any cash flow mismatch between the time when clients pay and the time when suppliers are paid, construction companies may even need to reserve funds, which could include quality bonds held by clients during the project period until the end of the agreed defect liability period. In addition, large construction projects generally impose relatively strict capital registration requirements on construction companies undertaking the projects. Therefore, new forces lacking sufficient capital and cash flow find it difficult to undertake large construction projects.

· Environmental compliance barriers

As all sectors pay increasing attention to environmental sustainability, it is expected that construction enterprises will face stricter environmental protection laws and regulations in areas such as noise control, air pollution control, and waste management. New entrants need to invest a significant amount of time and effort to comply with various regulations, which can constitute a potential barrier.

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Frost & Sullivan has extensive research experience in the construction industry and has assisted well-known enterprises in successfully listing on the capital market. Successful listings include: Shanxi Installation (2520.HK), Yijun Group2442.HK), Zhongtian Hunan Group2433.HK),GC Construction（1489.HK), Fengcheng Holdings2295.HK), Yinghui Holdings2195.HK), Zhi Xin Group2187.HK), Guanglian Engineering1413.HK), Dehe Group0368.HK),Raffles Interior（1376.HK), Xinwei Engineering8676.HK), Yinglan Group1162.HK), Jianzhong Construction0589.HK), Shengxing Holdings1472.HK), Wenyegroup1802.HK), Deyi Holdings9900.HK), Telink Construction6193.HK), Fengcheng Holdings8216.HK),WMCH Global（8208.HK), Huaji Global2296.HK), Wanya Holdings8173.HK), China Tianbao1427.HK),Beng Soon（1987.HK), Yuanda Housing (2163.HK), Anle Engineering1977.HK), Kun Group924.HK), Pujing International2060.HK), Lejias Holdings1867.HK), Weihong Group Holdings8522.HK), Pipeline Engineering1865.HK),Hon Corp（8259.HK), Hengyi Holdings1894.HK), Bao Yan Holdings8601.HK), Aobang Architecture1615.HK), People and Technology8140.HK), Wanshun Group1746.HK), Leung Chi Tin2262.HK), Tangji (8305.HK), Rongfeng Group Asia8526.HK), Deyi Holdings8522.HK), Aoneng Construction1183.HK), Yingde Holdings8535.HK), Hengyu Group2448.HK),WTGroup8422.HK), Jianpeng Holdings1722.HK), Hebei Construction1727.HK), Shouyi Holdings2227.HK), Yinglan Group8470.HK), Yikangtai8445.HK), Wantong Garden8199.HK), Haobo International8431.HK), and advanced development1667.HK), and development （8423.HK),ECI Technology（8013.HK), Shanle International1660.HK), Li's Enterprise Holdings2266.HK), Aishuo Holdings8341.HK), AEW Construction6189.HK), Kwong Man Keat8023.HK), Fengsheng Electromechanical0331.HK), Koenovode1206.HK), Red Star · Meikailong1528.HK).