Construction stocks: Expectations of “public investment” have been reflected in the price while business cash flow is mostly negative

According to Mirae Asset, investors will need to pay more attention to corporate cash flow to make investment decisions.

Construction stocks are expected to benefit positively from the “traction” of public investment in 2023. In response to this factor, these are the representatives that recorded the strongest recovery momentum in the market. According to calculations by Mirae Asset Securities, from the time the VN-Index bottomed on November 16, 2022 to the end of February 22, 2023, public investment stocks had an average recovery of 48% compared to the previous session. 12% of VN-Index.

In which, stocks like Fecon (FCN), VCG, C4G and LCG had better-than-average recovery.

According to Mirae Asset, Vietnam’s economy in 2023 will still face many challenges. The decline in domestic and world demand leads to a decrease in orders of manufacturing enterprises. The US Federal Reserve (Fed) will continue to raise the operating interest rate to above 5%, putting great pressure on the exchange rate plus the context of domestic inflation showing signs of increasing. Faced with the above challenges, the State Bank has prioritized stabilizing the macro-economic situation by directing credit capital flows to be disbursed for the right purpose, concentrating capital to support the production and business sectors. And while many manufacturing sectors are still in a difficult situation due to lack of orders, the public investment sector is becoming a bright spot when the allocated capital is almost ready .

At the beginning of February 2023, the Ministry of Finance said that it has allocated over 638,613 billion VND, reaching 90.32% of the capital plan assigned by the Prime Minister. It can be seen that if successful in disbursing public investment capital, it will be an important driving force contributing to economic growth in 2023.

However, Mirae Asset cited statistics from 2017 to now that the disbursement rate for public investment has always been low, except for the years 2020 – 2021 when disbursement is accelerated to support the consequences of covid-19. This shows that the disbursement of public investment in the past period has been closely monitored. Therefore, although it is a bright spot in growth, the risk of slow disbursement of public investment still exists.

According to Mirae Asset, construction and installation capacity is a prerequisite in selecting contractors. Public investment disbursement is being closely monitored, so the selection of construction contractors for these projects will be carefully considered. From here, only enterprises with good construction capacity records and high level of completion on schedule can have the opportunity to receive large bidding packages in the next period.

Among the 25 bidding packages for expressway projects that have selected contractors, a number of listed companies also won high-value bids such as Vinaconex (VCG, 4 packages with a total value of more than 17,200 billion), Lizen (LCG). , 3 bidding packages with a total value of nearly 10,500 billion VND, Deo Ca (HHV), Cienco4 (C4G).

However, it is worth noting from the perspective of business results, that despite the good growth of after-tax profits in 2022, the business cash flow decreased sharply compared to 2021.

Therefore, Mirae Asset finds that the prices of construction stocks benefiting from public investment disbursements have reflected most of the expected factors. Investors will need to pay more attention to corporate cash flow to make investment decisions.

Phuong Linh/Market Lifestyle