material is the cornerstone of human civilization.
From the Bronze Age to the Iron Age , from the Electrical Age to the Information Age, every profound change in human civilization is inseparable from innovation in materials and will also bring new cycles. For the capital market, new cycles mean new investment opportunities.
Steel is the most typical cyclical industry among them. When it comes to cyclical stocks, many people think of "not opening for three years, and eating for three years". Overcoming the problems brought by cyclical has become a must-have topic for analysts in every cyclical industry. In Wang Jiechao's view, "everything is a cycle". As long as you can find opportunities for growth and broaden your research field, the problems brought by the cycle will be solved easily.
With the rapid development of modern science and technology, the process of upgrading high-end manufacturing is also accompanied by the upgrading of the material system. The steel industry of CITIC Securities Research and Development Department has also been renamed the metal new materials industry. As the chief analyst of new metal materials, Wang Jiechao has his own unique understanding of this industry. After deepening his career and changing to a securities company as a sell-side analyst, he keenly discovered Yongxing Materials' investment opportunities. When talking about this story, he said modestly, "I am indeed very lucky", but behind the luck, being able to capture such opportunities is also inseparable from his solid industrial experience and R&D background.
major as an anchor, and study hard
Q: From the beginning to working in a business industry to working in a financial institution, can you briefly introduce your work experience? What are the reasons for making the decision to switch from industry to finance?
Wang Jiechao: I major in mineral processing and metallurgy related. I mainly deal with metal materials at school. After graduation, I went to MCC Jingcheng (formerly Beijing Iron and Steel Design Research Institute). I started as an engineer at that time. Later, I also came into contact with R&D and project management. and worked in the "Belt and Road" project overseas for a period of time. I studied laterite nickel ore in Sulawesi, Indonesia and worked in the design institute for nearly 8 years.
During this period, I also took some professional qualifications, including first-level construction engineer , registered consultant , etc. These exams will also allow me to learn some economic management courses such as engineering economics , project management, etc., and many of the contents of economics are actually the same. and I am also very interested in economics knowledge and will make some investments in daily life, so I am more sensitive to changes in the industry. Driven by these factors, by chance, after working in the industry for nearly 8 years, I switched to a financial institution in 2017.
In fact, I was still quite confused at the beginning of the position of analyst and didn’t know if I could do it well. But about two or three months later, I realized that the profession of an analyst was the direction I wanted, and after working for a while, I quickly gained recognition from the company and customers. I also recommended some "bullish stocks" and persisted in this way.
Q: Are there any challenges in the transformation process? How to deal with it?
Wang Jiechao: The time when came here at the beginning was relatively difficult because it was a brand new field for me, and my thinking was still immersed in the thinking of a central enterprise. My sense of independence was not that strong. It took two or three months before I gradually got used to the environment of securities companies and realized that most of the work content of analysts needs to be learned by myself. Fortunately, my learning ability is relatively strong. Through the learning of some basic tools, such as the three major financial statements and financial analysis methods, I quickly made up for my shortcomings in economic and financial aspects.
On the other hand, because I have done some metallurgical process design and research and development work, this work requires the cooperation of almost all engineering majors, so in this process, I have a clear understanding of the operating mode and principles of the entire industry. I think my work experience in the past few years has helped me a lot. No matter what company I study later, the entire process situation is actually easier to understand, and I have a relatively good understanding of industrial processes and production lines, and it is relatively easy to understand its business model.
Looking for more meanings
Q: In your opinion, what kind of job is an analyst?
Wang Jiechao: I usually think about what the significance of an analyst’s work is, or what the significance of society is. As I worked in a financial institution for a period of time, I gradually realized the significance of the work of an analyst. An excellent analyst must have a good understanding of the industry. It is very meaningful if he can have an impact on the industry within his own ability and give certain correct help to the real economy. The work of is not only about discovering the value of the enterprise, but also providing some consulting and suggestions when communicating with the enterprise. Then the enterprise may take fewer detours and less losses when making decisions, which invisibly helps the enterprise, optimizes the allocation of social resources and improves efficiency.
This is also a very important reason why I joined the Research and Development Department of CITIC Construction Investment. The company is now doing business collaboration. In fact, the collaboration between various departments is very important. Jiant Investment has done a very good job in this regard. Everyone acted together to not only improve their business level, but also helped the society and enterprises more greatly. They could also complete their own work tasks when helping others.
If you want to do this, analysts must be diligent in research and go out to see more. At the same time, we must keep up with industry trends and understand policies from top to bottom. In addition, we must communicate more with the company and discuss issues in the development process of the industry and the company.
Q: What kind of analyst do you think can be considered an excellent analyst?
Wang Jiechao: There are two types of analysts in the position of sell-side analysts, one is mainly for services, and the other is mainly for independent exploration of investment opportunities. While our team is trying its best to take into account both, we also hope to explore more investment opportunities for the market.
actually talks about what a good analyst is, and there is no unified standard. In my opinion, a good analyst must have correct values, try to do more win-win things, and reflect more social and life values. must explore investment opportunities before the market, and must conduct profound research on the industry and the company. As long as you work hard enough, study down-to-earth, be able to combine theory with practice, do a good job in logical verification, and have certain buyer thinking, it is excellent.
Q: What kind of company do you think can be called a good company?
Wang Jiechao: It is still difficult to find a good company in . This requires your own judgment criteria and tricks. To a certain extent, it also has luck. Some opportunities are very rare.
Specifically, first of all, we look at the industry and judge that the industry must be upward. For example, for Yongxing Materials, we judged that the lithium industry must be upward, so we further explored.
After the industry beta is determined, the second thing to do is to look for α, that is, the company's excess returns. I think a company is good, but most people think it is not good, which creates an expectation difference, which also depends on analysts' understanding of the industry. It also requires a lot of on-site research and expert certification, which requires accumulation and judgment.
After both of the above conditions are met, you still need to grasp the company's microscope, which is actually the bottom line for finding a good company. , especially for private enterprises, we need to pay attention to the management style and understand the historical evolution of the enterprise, and ensure that the company itself has no problems.This point is actually simple and difficult. When talking about it, it may be "spoofed" by the company when communicating with the company in the first place. This requires analysts to provide indirect evidence from the industry, such as whether the company attaches importance to product quality, whether it has social responsibility, etc., are all very important factors.
Be the first to eat crab
Q: Can you share your past experience and choose the most successful stock?
Wang Jiechao: The team actually recommended many bull stocks for the first time, such as Daye Special Steel ( CITIC Special Steel ), Zhen'an Technology , Yongxing Materials, etc. Among them, Yongxing Materials' highest increase was more than 10 times. When Yongxing built its first mica lithium extraction production line in 2019, we were very optimistic about Yongxing's mica lithium extraction process and recommended it to the market as soon as possible. At that time, the market was full of doubts about mica lithium extraction, but we have been very firmly recommending it. finally gained market recognition in October 2020, and its stock price rose by about 300% in more than two months. The failure of mica lithium extraction technology before
is mainly because hydrofluoric acid will be produced during the production process, which has a relatively large impact on the environment, product quality and production equipment, so the production cost is very high. However, Yongxing Materials' mica lithium extraction technology later made a major breakthrough. The entire process no longer introduced hydrogen roots (sulfuric acid), but instead added sulfate . Hydrofluoric acid will not be produced during the chemical reaction, but instead formed calcium fluoride , which is a very stable and non-toxic mineral, and ultimately makes the production line smooth.
After a series of on-site investigations and interviews, we realized that this technology will have a great impact on the lithium salt pattern. Mica lithium extraction was previously solved with high cost and environmental problems, so we firmly introduced them to the market. At the same time, on the other hand, the price of lithium was also very low at that time. We judged from the lithium carbonate balance table that the price would definitely rise.
Later, some investors labeled us as "bullish stock excavator". Why do others comment on us like this? I also summarized . In fact, the targets we explored will only rise after a period of time. They are not following others, but being the first to try new things. Therefore, they are generally recommended on the left, and the market has a process of recognition. Take Yongxing Materials as an example. Later, the market verified our previous judgments, but this process was not temporary. Moreover, during the recommendation process, we have always followed our own judgment. Every stock we choose is carefully selected. If we think a company is not good, we will not recommend it. We must follow our own principles to recommend it for the market and try our best to maintain the reputation of our team.
Q: What are some interesting experiences in the process of studying Yongxing Materials?
Wang Jiechao: From November 2019 to October 2020, the company's stock price basically fluctuated. During this period, many familiar investors suggested that I should not recommend mica lithium extraction anymore. They believe that mica lithium extraction technology has been falsified before, so it would be meaningless to recommend it again. But I think if our judgment is correct, then the company has a lot of room for growth, which ultimately proves that our team's conclusion is correct, and the company's growth rate is more than 10 times.
So seller research should still be based on value. mining a good company is a win-win process for all parties. From the perspective of analysts, professionalism can be recognized by investors. For listed companies, its market value has also increased, and it has excess returns for investors, so everyone is happy to see it. The most interesting thing in this process is that I think it is a benign interactive process that is helpful to my career and life. We will try our best to explore more similar investment opportunities and find some undervalued good companies.
Q: The metal new materials industry is relatively cyclical. How do you overcome some obstacles that may be brought about by cyclicality in your research?
Wang Jiechao: metal industry actually has good things and bad things. It is also an objective fact that people in traditional industries think there are few opportunities.However, it cannot be denied that the industry also has good stocks, and even steel has excellent material targets. For example, Daye Special Steel, which was now called CITIC Special Steel, has risen by about 8 times before. The metal industry is actually divided into two categories. One is traditional materials, such as traditional electrolytic aluminum , copper, and steel; the other is new materials, including energy metal lithium cobalt nickel, and also the field of new metal materials that support the upgrading of the manufacturing industry. These belong to the growth field and have strong investment opportunities.
Nowadays the era of new energy, new energy is actually the era of electricity replacing oil. From the periodic table , the underlying logic is that metal elements are replacing carbon elements, that is, the cycle of batteries composed of energy metal lithium cobalt nickel replacing oil. In fact, in my opinion, everything is a cycle. No industry is not a cyclical industry. For example, semiconductor is also a cycle. Steel has also been a growth stock for 20 years. In fact, it is the same. The underlying logic is nothing more than supply and demand relationship.
There are two ways to overcome periodicity for us: on the one hand, we should explore growth opportunities from the field of steel and nonferrous materials and fight against cycles. On the other hand, it is to expand the customer base and research field. We usually communicate with investors in macro, fixed income and other fields, because the downstream of steel is connected to many industries such as automobiles, home appliances, engineering machinery, real estate, infrastructure, etc., which basically cover the most important categories of Chinese industries. If you understand these, you will basically understand half of the logic of China's macroeconomic operation. Therefore, we will also have research in these aspects and have not locked our customers in the steel non-ferrous circle. We also hope to bring support to research in the macroeconomic field from the industrial level.
Chief Wang Jiechao team of new metals attached to metals in the past year:
CICC Ace Research Metals and Metals New Materials: Selected 2022 Major Research Results
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