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China's urbanisation rate is set to improve from 60% now to 75% by 2035. This brings large market opportunities for urban rail transit, housing construction, and urban comprehensive development. Market size for urban comprehensive devlopment alone is projected to be a whopping CNY700-900b per year.
Gain exposure to the China infrastructure sector which is now trading at an attractive valuation. The market has overlooked the new growth drivers. Municipal works, housing construction, and urban rail transit will take up more in new contract value. In addition, the structural change will improve cash flow as companies turn to highway projects with long return cycles, as opposed to urban development ones with much shorter cash collection periods.
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Leading company in the sector
Our top pick is China Rail Construction, for its strong new contract growth, lower net gearing, and exposure in the high-potential housing construction market.
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