If you've been following Taiwan's stock market, you may have noticed that the Construction Index has surged over 50% since the beginning of this year (2024). Although construction stocks haven't received as much attention as the trending AI stocks, they represent a "dark horse" in the market that's worth a closer look. Below we will be exploring the construction industry in different key sectors.
Construction Industry Upstream: Building Materials
The upstream segment of the construction industry primarily includes raw building materials, such as rebar, cement, sand, ready-mixed concrete, tiles, and glass used for walls, windows, and floors. Additionally, this sector covers foundational engineering, structural engineering, electrical engineering, and engineering design.
- Building Materials: This includes industries like cement (China General Plastics (2504)., Run Ta Materials (8463)), rebar (Mei-Ah Enterprise (2020), Ching Chan Optical Technology (8930)), and glass/tiles (Champion Building Materials (1806), HCG (1810), Taiwan Glass Industry (1802)).
- Foundational Engineering: Involves public infrastructure projects, such as pipeline installations and wastewater treatment (Ruentex Engineering & Const. (2597)).
- Structural Engineering: Covers steel structure construction and maintenance (Sanyo Industries (1472), Chun Yuan Steel Industry (2010)).
- Electrical Engineering: Includes air conditioning system design, electrical monitoring, and mechanical installation (Shihlin Electric & Engineering (1503), TECO Electric & Machinery (1504)).
- Engineering Design: Focuses on specialized equipment designs, like cleanrooms and energy management systems (Chian Chyi Enterprise (8383), Jukao Engineering Corp. (1594)).
Construction Industry Midstream: Construction & Development
The midstream sector is what we commonly refer to as "construction," which can be further divided into "contracting" and "development."
Contracting: Contractors are the project executors. Their work includes civil engineering (roads, public projects), specialized construction (land clearing, foundation work), and building construction (residential and office buildings). Many Taiwanese contractors are small to medium-sized businesses, though larger companies include Prince Housing & Development (2511), BES Engineering(2515), and Dacin Construction (2535).
Development: Developers are responsible for funding, commissioning, and managing projects from start to finish. They acquire land, design buildings, contract construction companies, and oversee the project's sale. The developers' task is to turn land into buildings and then sell them to generate revenue. Companies like Kee Tai (2538), Highwealth Construction (2542) , Huang Hsiang Construction (2545), and Yungshin Construction (5508) are key players in this space.
Construction Industry Downstream: Interior Design & Property Management
The downstream sector focuses on interior design, renovation, painting, carpentry, and electrical work. A growing industry within this segment is property management, which handles building management services such as security, cleaning, and maintenance of systems like elevators, air conditioning, and electrical systems.
Notable companies in this interior design segment include Myson Century (5314), Ruentex Engineering (2597), Ruentex Development Co., Ltd. (9945). Companies in property management include Chung-Hsin Electric & Machinery Manufacturing (1513), Tatung (2371), Sino Horizon-KY (2923).
Conclusion
As you can see, the construction industry is far more complex and finely divided than it might initially appear. If you're interested in this sector, you could consider observing a few key stocks or tracking the Construction Stock Index for potential investment opportunities!
