boom drives stock prices. In the bull market of a few companies, consumer and technology leaders are still the main lines of long-term allocation.
Special author of this magazine Zhang Mingzhuo/Written by
Ice and fire.
On the one hand, the leading consumer and technology stocks have been hitting new highs, while on the other hand, the cyclical stocks have been falling continuously. In this bull market for a few companies in the A-share market, everything is related to the industry's prosperity.
According to statistics from Oriental Fortune Choice, as of September 22, a total of 484 listed companies in Shanghai and Shenzhen stock markets have disclosed their third-quarter report forecasts. Among them, there were 205 companies with good performance expectations (including expected increase, slightly increase, continued profit, and turnover of losses), accounting for 42%. There were 228 companies with good performance expectations (including slightly decrease, first loss, expected decrease, continued loss, increase loss, and reduce of losses), accounting for 47%, and 51 companies with uncertainty, accounting for 11%.
: According to industry, food, beverage, computer, electronic equipment and other technology-related industries continue to be prosperous in the first half of the year, and the performance of related listed companies has also shown a steady upward trend.
For example, taking Shuangta Food (002481.SZ) as an example, the company expects to achieve a net profit of 115 million to 140 million yuan from January to September 2019, an increase of 130% to 180% over the same period last year. Among them, the net profit from July to September increased by 220%-370% compared with the same period in 2018. The reason for its significant increase in performance is the improvement in the prosperity of the industry and the good sales of proteins for major products.
technology stocks are represented by Shanghai Electric Co., Ltd. (002463.SZ), and the company mainly engages in the research and development, design and production of PCBs (printed circuit boards). According to the company's estimates, due to the good operating conditions, the expected operating income and gross profit margin will both increase compared with the same period last year. The net profit from January to September 2019 will reach 800 million to 900 million yuan, a year-on-year increase of 108.76% to 134.86%. Since 2019, Shanghai Electric Co., Ltd. has performed well in the secondary market, with a cumulative increase of nearly 3 times.
Compared with industries such as technology and consumer goods, most listed companies in cyclical industries, especially real estate and real estate-related construction industries, have poor performance forecasts.
Real estate companies not only face continuous tightening of financing channels, but also need to face the downward trend of the overall real estate market. According to data from Oriental Fortune Choice, among the 12 listed companies in the real estate industry that announced their third-quarter performance forecasts, 8 have expected performance concerns, 3 have the first losses, and only 2 have expected performance positive in the construction industry.
For example, Zhongfang Co., Ltd. (600890.SH) and Dagang Co., Ltd. (002077.SZ) both expect the net profits from January to September 2019 to be a loss. The former is mainly due to the decrease in the company's main real estate business, and the latter is due to the increase in financial expenses due to the increase in financing scale and financing costs. At the same time, due to the intensification of competition in the real estate market, the company's overall gross profit of real estate sales has declined in order to accelerate the recovery of funds.
Moreover, the "National Newly Built Commercial Housing Transaction Report in 35 Cities in the First Half of September 2019" released by the E-House Real Estate Research Institute shows that in early September, the transaction area of newly built commercial housing in 35 typical cities decreased by 7% compared with early August, and a decrease of 7% from the same period last year. The "Golden September and Silver October" did not arrive as scheduled.
recently released a series of macroeconomic data is not optimistic. In August, industrial added value was 4.4%, the cumulative growth rate of fixed asset investment was 5.5%, and the total retail sales of consumer goods increased by 7.5%, both lower than the year-on-year data and market expectations in July. The export delivery value in August also fell and turned negative year-on-year, reflecting the impact of Sino-US trade frictions on exports. The economy is still in the process of continuous decline, and the bottoming of the economy still needs to be observed.
Under such a macroeconomic background, seller institutions believe that funds in the A-share market will still be laid out around the industry's prosperity, and the bull market of a small number of companies will continue, that is, consumer leaders and technology leaders are still the main lines of long-term allocation.
Economy decline is about to bottom out
September 16, according to the website of National Bureau of Statistics , in August 2019, the added value of industrial enterprises above the scale of increased by 4.4% year-on-year (the growth rate of the added value below is the actual growth rate deducting price factors), down 0.4 percentage points from July. From a month-on-month perspective, in August, the added value of industries above designated size increased by 0.32% compared with the previous month. From January to August, the added value of large-scale industries increased by 5.6% year-on-year. boom drives stock prices. In the bull market of a few companies, consumer and technology leaders are still the main lines of long-term allocation. Special author of this magazine Zhang Mingzhuo/Written by Ice and fire. On the one hand, the leading consumer and technology stocks have been hitting new highs, while on the other hand, the cyclical stocks have been falling continuously. In this bull market for a few companies in the A-share market, everything is related to the industry's prosperity. According to statistics from Oriental Fortune Choice, as of September 22, a total of 484 listed companies in Shanghai and Shenzhen stock markets have disclosed their third-quarter report forecasts. Among them, there were 205 companies with good performance expectations (including expected increase, slightly increase, continued profit, and turnover of losses), accounting for 42%. There were 228 companies with good performance expectations (including slightly decrease, first loss, expected decrease, continued loss, increase loss, and reduce of losses), accounting for 47%, and 51 companies with uncertainty, accounting for 11%. : According to industry, food, beverage, computer, electronic equipment and other technology-related industries continue to be prosperous in the first half of the year, and the performance of related listed companies has also shown a steady upward trend. For example, taking Shuangta Food (002481.SZ) as an example, the company expects to achieve a net profit of 115 million to 140 million yuan from January to September 2019, an increase of 130% to 180% over the same period last year. Among them, the net profit from July to September increased by 220%-370% compared with the same period in 2018. The reason for its significant increase in performance is the improvement in the prosperity of the industry and the good sales of proteins for major products. technology stocks are represented by Shanghai Electric Co., Ltd. (002463.SZ), and the company mainly engages in the research and development, design and production of PCBs (printed circuit boards). According to the company's estimates, due to the good operating conditions, the expected operating income and gross profit margin will both increase compared with the same period last year. The net profit from January to September 2019 will reach 800 million to 900 million yuan, a year-on-year increase of 108.76% to 134.86%. Since 2019, Shanghai Electric Co., Ltd. has performed well in the secondary market, with a cumulative increase of nearly 3 times. Compared with industries such as technology and consumer goods, most listed companies in cyclical industries, especially real estate and real estate-related construction industries, have poor performance forecasts. Real estate companies not only face continuous tightening of financing channels, but also need to face the downward trend of the overall real estate market. According to data from Oriental Fortune Choice, among the 12 listed companies in the real estate industry that announced their third-quarter performance forecasts, 8 have expected performance concerns, 3 have the first losses, and only 2 have expected performance positive in the construction industry. For example, Zhongfang Co., Ltd. (600890.SH) and Dagang Co., Ltd. (002077.SZ) both expect the net profits from January to September 2019 to be a loss. The former is mainly due to the decrease in the company's main real estate business, and the latter is due to the increase in financial expenses due to the increase in financing scale and financing costs. At the same time, due to the intensification of competition in the real estate market, the company's overall gross profit of real estate sales has declined in order to accelerate the recovery of funds. Moreover, the "National Newly Built Commercial Housing Transaction Report in 35 Cities in the First Half of September 2019" released by the E-House Real Estate Research Institute shows that in early September, the transaction area of newly built commercial housing in 35 typical cities decreased by 7% compared with early August, and a decrease of 7% from the same period last year. The "Golden September and Silver October" did not arrive as scheduled. recently released a series of macroeconomic data is not optimistic. In August, industrial added value was 4.4%, the cumulative growth rate of fixed asset investment was 5.5%, and the total retail sales of consumer goods increased by 7.5%, both lower than the year-on-year data and market expectations in July. The export delivery value in August also fell and turned negative year-on-year, reflecting the impact of Sino-US trade frictions on exports. The economy is still in the process of continuous decline, and the bottoming of the economy still needs to be observed. Under such a macroeconomic background, seller institutions believe that funds in the A-share market will still be laid out around the industry's prosperity, and the bull market of a small number of companies will continue, that is, consumer leaders and technology leaders are still the main lines of long-term allocation. Economy decline is about to bottom out September 16, according to the website of National Bureau of Statistics , in August 2019, the added value of industrial enterprises above the scale of increased by 4.4% year-on-year (the growth rate of the added value below is the actual growth rate deducting price factors), down 0.4 percentage points from July. From a month-on-month perspective, in August, the added value of industries above designated size increased by 0.32% compared with the previous month. From January to August, the added value of large-scale industries increased by 5.6% year-on-year. points to three major categories. In August, the added value of the mining industry increased by 3.7% year-on-year, a decrease of 2.9 percentage points from July; the manufacturing industry grew by 4.3%, a decrease of 0.2 percentage points; the production and supply industry of electricity, heat, gas and water increased by 5.9%, a decrease of 1.0 percentage points. : According to industry, in August, 32 of the 41 major industries maintained year-on-year growth in value. The added value of the agricultural and sideline food processing industry was the same as the same month last year, with the textile industry growing by 0.1%, the chemical raw materials and chemical products manufacturing industry growing by 1.2%, the non-metallic mineral products industry growing by 8.1%, the ferrous metal smelting and rolling processing industry growing by 10.4%, the non-ferrous metal smelting and rolling processing industry growing by 8.5%, the general equipment manufacturing industry remained the same as the same month last year, the special equipment manufacturing industry growing by 3.3%, the automobile manufacturing industry growing by 4.3%, the railway, ship, aerospace and other transportation equipment manufacturing industry growing by 7.8%, the electrical machinery and equipment manufacturing industry growing by 10.0%, the computer, communications and other electronic equipment manufacturing industry growing by 4.7%, and the electricity, heat production and supply industry growing by 5.1%. Anxin Securities stated that the year-on-year growth rate of industrial added value in August was only 4.4%, which is a new low in the year-on-year growth rate of industrial added value since 2009 for two consecutive months after July. This is significantly lower than market expectations by 5.4%, increasing market concerns about future economic trends. Why did the year-on-year growth rate of industrial added value suddenly weaken from July to August? Due to Sino-US trade frictions, weak exports are widely regarded by the market as the main reason for the decline in industrial growth. The sharp decline in export delivery value in August was more obvious evidence. According to data released by the National Bureau of Statistics, in August 2019, industrial enterprises above designated size achieved an export delivery value of 1046.4 billion yuan, a year-on-year decrease of 4.3%. Regarding the reasons for the decline in industrial export delivery value in August, Fu Linghui, spokesperson of the National Bureau of Statistics, said that the decline in industrial export delivery value this month is related to changes in the international situation. He said that because the world's economic and trade growth has generally slowed down since 2019, the WTO global goods trade barometer index has been below 100 for several consecutive quarters. The influence of factors such as trade protectionism objectively has caused a reduction in world trade, which has had an impact on changes in industrial production and export delivery value, import and export, and especially exports. In August, China's exports grew by 2.6%, compared with 10.3% last month, so this is in line with the general situation of economic operation. Anxin Securities said that from the data, it does not deny the negative impact of weak exports on industrial growth, but the other two factors may be more important and are ignored by the market and deserve attention. These two factors are the destocking under the pessimistic expectations of enterprises and the supply-side reform of industry's industrial growth rate may show an turning point and decline. Judging from the data of the industry by industry, the industry with a higher proportion of exports is indeed weaker in July-August than in January-June, but this is mainly reflected in two industries: computer, communications and other electronic equipment manufacturing and metal products, machinery and equipment repair industries. If these two industries are eliminated, the negative correlation between the two is not very obvious. In addition, judging from the relationship between the difference in industrial growth rate between May and August and January and April of each industry, the negative correlation is not obvious. There are two possible explanations for this: First, the downward exports have little impact on the year-on-year growth rate of industrial added value; second, the impact of Sino-US trade frictions on industries with high export proportions and low export proportions may be similar. Anxin Securities research report stated that in May 2019, Sino-US trade frictions suddenly escalated. The industrial growth rate in many industries has shown a significant decline since May. This suggests that the first explanation may be weak. The expected sub-item of PMI's business activities reflects the company's predictions for future business operations. This indicator showed a relatively obvious and rapid decline after May 2019. This may indicate that the escalation of Sino-US trade frictions in May has affected companies' expectations for future economic activities to a certain extent, thus affecting their production behavior. In this case, one of the measures for the company is to remove inventory. Anxin Securities research report shows that the inventory growth rate of listed companies in non-supply-side reform industries has been declining since the fourth quarter of 2018. Even though the economy rebounded slightly in the first quarter of 2019, the inventory growth rate was still declining and accelerated slightly.This may be related to the pessimistic expectations of enterprises caused by trade frictions. Under this pessimistic expectation, enterprises generally lowered their inventory levels, whether it is industries with high export proportion or low export proportion. Industry with high export share have significantly oversold, which may be because the market believes that the escalation of trade frictions will have a wide impact on the economy, not limited to the export industry. Anxin Securities believes that another more important factor is that the industrial growth rate of the supply-side reform industry may have a large turning point, and the distortion of supply-side reform production in the supply-side reform industry may come to an end for the time being. Supply-side reform has suppressed the production of the supply-side reform industry and concealed the actual economic growth. Before 2016, the industrial growth rates of the supply-side reform industry and the non-supply-side reform industry were basically the same, but after the supply-side reform, the two showed a clear divergence. From the beginning of 2016 to the third quarter of 2017, the year-on-year growth rate of industrial added value in the non-supply-side reform industry has been rising all the way, while the year-on-year growth rate of industrial added value in the supply-side reform industry has been falling all the way; from the third quarter of 2017 to the second quarter of 2019, the year-on-year growth rate of industrial added value in the non-supply-side reform industry has been falling all the way, while the year-on-year growth rate of industrial added value in the supply-side reform industry has been rising all the way. From the perspective of time span, the production restoration of the supply-side reform industry may come to an end temporarily; from July to August, the industrial growth rate of the supply-side reform industry declined significantly, and there was a change in the same direction as the non-supply reform industry, which may be a confirmation signal. This will have a significant impact on the overall industrial growth rate. Since the first quarter of 2018, although the non-supply-side reform industry has been declining all the way, the supply-side reform industry has largely hedged the downward trend of the non-supply-side reform industry, so the overall industrial growth rate has not declined significantly. However, if the repair of the supply-side reform industry is completed and the turning point appears, then the supply-side reform industry and the non-supply-side reform industry will decline simultaneously, which will lead to a significant decline in industrial growth. Anxin Securities believes that this may be the main reason for the significant decline in industrial growth from July to August. Behind this change in is the change in the supply-side reform industry's net profit margin. During the supply-side reform period, the supply of the supply-side reform industry has decreased significantly, which has significantly improved the net profit margin of the supply-side reform industry and stimulated the investment and production of the supply-side reform industry after the end of the supply-side reform. However, the net profit margin of the supply-side reform industry began to decline significantly and rapidly after reaching its high in the third quarter of 2018, and will continue for a period of time. Combined with the above analysis, Anxin Securities judged that the direction divergence between the supply-side reform industry and the non-supply-side reform industry may have ended and will gradually converge in the future. Therefore, the industrial growth rate of the supply-side reform industry may continue to decline, which will put pressure on the overall industrial added value growth rate. So, which industries are dragging down industrial production? New Era Securities believes that from the perspective of the three major industries, the growth rate of mining production has increased, and the growth rate of manufacturing and electricity, gas and water production and supply industries has declined. Considering that manufacturing accounts for the highest proportion of industrial added value (87.7% in 2018), manufacturing has dragged down the industrial production the most. In the manufacturing industry, the automobile manufacturing industry, culture, education, arts, sports and entertainment products manufacturing industry have declined more frequently. The main reason for the decline in the manufacturing production growth rate is the following points. One is the downward trend of external demand. It can be found that the proportion of export delivery value to operating income in several industries with a large decline in production growth is basically relatively high. Among them, the proportion of computer communications and other electronic equipment manufacturing industries has reached about 50%, and the correlation coefficient between the export delivery value and the growth rate of industrial added value is as high as 85.5%. Factors such as slowing global economic growth and trade frictions have caused pressure on the "export-manufacturing" chain, restricting manufacturing production. The second is the pressure to destock. Taking the automobile manufacturing industry as an example, its export delivery value accounts for only about 5% of its operating income. However, due to the huge pressure of destocking, the production growth rate dropped from 4.9% in 2018 to -1% in January-August 2019, ranking first in the manufacturing industry. Third, the financing dilemma.The decline in the production growth rate of culture, education, industry, art, sports and entertainment products manufacturing industries is second only to that of automobile manufacturing, and its export delivery value ranks second in proportion to operating income, but the growth rate of export delivery value has improved compared with 2018, and the growth rate of related consumption has also improved compared with 2018. Enterprises may have actively contracted production due to financing issues. Since 2019, the credit spread of medium and low ratings has fallen at a high level, while the credit spread of leisure services industry is still on an upward trend. Some manufacturing industries may be subject to financing difficulties. The meeting of the Political Bureau of the CPC Central Committee held on July 31 also mentioned that it is necessary to "promote financial supply-side structural reform and guide financial institutions to increase medium- and long-term financing for manufacturing and private enterprises." The decline in manufacturing industry prosperity has also affected manufacturing investment, which has dragged down fixed asset investment. Data released by the National Bureau of Statistics on September 16 showed that from January to August 2019, national fixed asset investment (excluding farmers) increased by 5.5% year-on-year, down 0.2 percentage points from January to July. Among them, manufacturing investment increased by 2.6%, and the growth rate fell by 0.7 percentage points. Judging from the seasonally adjusted month-on-month data that better reflects the trend, fixed asset investment in August increased by 0.4%, down from 0.01 percentage points in July. In terms of real estate investment, from January to August, the national real estate development investment was 8458.9 billion yuan, an increase of 10.5% year-on-year, and the growth rate fell by 0.1 percentage point from January to July. Among them, residential investment was 6218.7 billion yuan, an increase of 14.9%, and the growth rate fell by 0.2 percentage points. In addition to real estate, the automobile industry, another important economic pillar industry, is not optimistic. Data released by the National Bureau of Statistics showed that the total retail sales of consumer goods increased by 7.5% year-on-year in August, but automobile sales fell by 8.1%. According to Zhang Min, statistician of the Trade and Foreign Economic Department of the National Bureau of Statistics, judging from the monthly growth rate, the consumer goods market is greatly affected by factors such as the increase in the sales of automobile products. In August, the retail sales of automobile products units above the limit fell by 8.1% year-on-year, an increase of 5.5 percentage points from July. Affected by this, the total retail sales of consumer goods in August increased by 7.5% year-on-year. Excluding automobile products, the total retail sales of consumer goods in August increased by 9.3% year-on-year, 0.5 percentage points faster than the same caliber growth rate in July. At present, economic data, fiscal and monetary policy, and external environment have all returned to a rare state of dullness. The profits of industrial enterprises and the growth rates of listed companies are both kept near zero, and differentiation has become the keywords. How to find industries with relatively high prosperity and listed companies has become an important problem faced by investors in the A-share market. Looking for improvement in prosperity Interim report is a clue to finding the improvement in prosperity in the industry. GF Securities Research Report shows that from the perspective of industry comparison, in 2019, although the overall prosperity trend of the A-share interim report is still bottoming out, there are many structural highlights. According to GF Securities' summary, the highlight of the interim report is that some traditional countercyclical and weak-cyclical industries such as consumption and service industries are still stable. Against the backdrop of deteriorating trade expectations and weakening of the macro economy in the second quarter, sectors with countercyclical or weak cycle attributes still have relatively stable performance, such as large consumption and some growth industries. The consumer industry has less demand elasticity, branded premium and good competition landscape. The demand side of some industries is stable, and the steady growth of profits is achieved through product terminal price increase, cost control and fee reduction. Among them, consumer industries with the interim report maintaining the advantageous range include: agriculture, forestry, animal husbandry and fishery (the pig cycle brings back the prosperity of the livestock and poultry breeding and feed industries), food and beverage (terminal price increase and profit margin increase), home appliances (the performance of white goods leaders exceeds expectations, black electricity revenue accelerates and negative profit growth converges), furniture (negative growth converges in revenue and profit), leisure services (the duty-free maintains high prosperity, turnover rate drives improvement in ROE), airports and logistics (tax-free, express delivery, stable profit rise in revenue), general retail (even income but gross profit margin and net profit margin rise). Highlights are industries that have ushered in a turning point in their own economic cycle, including semiconductors, 5G, photovoltaics, wind power, oil service, etc. Some industries have bottomed out in their own economic cycle and ushered in upward improvement, mostly focusing on growth sectors, while the trends of leaders and the overall industry have further diverged and differentiated.Semiconductors (domestic substitutions realize their performance, the industry's growth rate declines, and the leader has significantly dominated), 5G chain PCB/communication equipment (growth rate has improved significantly after excluding individual stock disturbances), Cultural Media and Games (prosperity has improved, and the corresponding base this year has been lowered after the impairment of goodwill was cleared last year), photovoltaics and wind power (high prosperity in the interim report, and installation expectations have been further improved after intensive approval in July), oil and gas services (advanced medium and long-term oil price cycle, profit growth rate has risen at a high level). Highlight third is that the middle and downstream manufacturing industries benefit from tax cuts, including transportation equipment, communication equipment, and motors. The value-added tax rate reduction plan for the 2019 "Two Sessions" was implemented and officially implemented on April 1. According to GF Securities' estimates, this value-added tax rate reduction will significantly benefit the mid- and downstream manufacturing industries. Without considering the transmission of tax cuts to downstream consumers, the net profit growth rate of the mid- and downstream manufacturing industries such as transportation equipment, communication equipment, metal and non-metal mining and product selection, electrical machinery, etc. in 2019 ranges from 10% to 20%. In the interim report, the gross profit margin and net profit index of the relevant industries rose to different levels, or the net profit increase without a significant increase in revenue (reflected as a decline in costs). Highlights are the improvement of the industry structure brings the resilience of leading companies, such as real estate, cement, engineering machinery, etc. supply-side reform has accelerated the integration pattern of various industries and the pace of competition optimization. The concentration is rapidly concentrated in industries with a higher level, and can rely on the guidance of leading companies to achieve a better industry pattern. Some industries with leading interim reports have improved gross profit margin (money-making ability) and turnover rate (supply and demand efficiency) from the two paths of income and asset side. Representative industries include real estate, cement, and engineering machinery. On the one hand, the bargaining power over the upstream and downstream industrial chains has increased, achieving high control over prices without significant stimulation on the demand side and maintaining stable growth in revenue; on the other hand, the overall capacity expansion of the industry is concentrated under the business decisions of a few leaders, and the supply expansion is more rational and orderly, reducing the impact on the rapid production capacity release. In addition, GF Securities also recommends gradually paying attention to "stable growth" that is expected to lead the upward turning point in the early-cycle industries such as infrastructure chains and automobiles. GF Securities research shows that in history, during a period of negative profit growth, policy efforts will promote traditional early-cycle industries to take the lead in getting out of the turning point of upward profits, such as electrical equipment and infrastructure that benefited from infrastructure in 2005 and 2012, and automobiles that benefited from consumption in 2011. However, this round of A-share earnings fell to negative growth, while the performance of traditional early-cycle industries did not make significant efforts.
GF Securities believes that the policy hedging will be carried out in parallel with the two ideas of infrastructure chain and promoting consumption, which will help the relevant early-cycle industry prosperity usher in an upward turning point: electrical equipment, infrastructure, and automobiles. On the one hand, under the economic combination of "export pressure, manufacturing investment declines, and real estate investment declines", fiscal policies including loose infrastructure are often implemented, which are expected to include measures such as relaxing project capital and accelerating the use of remaining local special bond quotas in previous years. In terms of the use of local debt in 2019, transportation and municipal construction account for about 20%-30%, and electrical equipment, infrastructure and other industries are directly benefiting industries; on the other hand, judging from the "Opinions on Accelerating the Development of Circulation and Promoting Commercial Consumption" of the State Council on August 27, policies to encourage automobile consumption are expected to be further implemented. As automobiles accelerate destocking, stock prices are expected to be ahead of profit performance.
Guosheng Securities also studied the prosperity of various industries in the interim report, started from the interim report performance of various industries, and judged the subsequent prosperity of the industry, and screened out industries whose future performance will continue to improve in the future.
Among them, in the upstream resource field, rising oil prices will drive the performance of coal and petrochemical industries to rise. Guosheng Securities said that since 2019, the trend of global oil prices and coal prices has been basically the same. In the first half of the year, with the rebound of the prices of the two, it directly led to the improvement of performance growth.Judging from the situation in the third quarter, from July to August, with the softening of the US sanctions on Iran, oil prices and coal prices fell back to the level at the beginning of the year again. However, in mid-September, the Saudi Arabia oil fields were attacked, oil supply shrank, oil prices may rise, and the performance of coal and petrochemicals rose.
In addition, the attacks in Saudi oil fields may stimulate long-distance crude oil transportation, coupled with the arrival of the peak season of fuel transportation (judging from the fluctuations in the crude oil transportation index BDTI, it shows an unusually regular cyclical nature, September to January of the following year is a period of rapid increase in freight prices), oil transportation prices in the fourth quarter may rise beyond expectations and drive continuous improvement in performance. The shipping sector is worth paying attention to.
In the field of midstream materials, Guosheng Securities believes that with the improvement of real estate completion data, glass prices have rebounded recently, and the performance in the third quarter is likely to continue to improve; especially photovoltaic glass will benefit from the high prosperity of the photovoltaic industry, which is worth paying attention to.
In the midstream manufacturing field, Guosheng Securities recommends focusing on wind power and photovoltaics. On the one hand, wind power equipment, fans parts manufacturers fully benefit from the industry's rush to install, and their performance has grown rapidly; some low-priced orders are still squeezed in their hands, and the release of low-priced orders affects the gross profit margin, but with the acceleration of subsequent fan order release, it is expected to usher in a turning point. On the other hand, photovoltaic equipment, with overseas demand rising in the first half of the year, and the prices of the industrial chain stabilized, driving the improvement of industry profits. Generally, the fourth quarter is the peak season for the photovoltaic industry, and it is also the peak season for overseas installations. Subsequent demand will continue to be released. Domestic projects will be launched one after another starting from September. The demand for domestic bidding projects is expected to reach 5GW per month, which has increased significantly compared with the domestic monthly installation demand of about 2GW per month in the first half of the year. Recently, the prices of battery cells and polysilicon materials have begun to rise, and we continue to be optimistic about the performance of the photovoltaic industry.
In addition, the military expenditure growth rate has been inflection point since 2018, and the military expenditure execution rate has increased. 2018-2020 is the second half of the 13th Five-Year Plan. Military investment and procurement have entered its peak period. According to the characteristics of the military industry chain, assembly enterprises and core supporting enterprises will take the lead in benefiting the improvement of the industry's prosperity. It is expected that the economic rise in 2019 will further spread to the entire industrial chain.
In the downstream optional consumer home appliance field, only white household appliances have improved to a certain extent in the interim performance. Guosheng Securities said that on the one hand, the leader in the white goods industry has carried out promotional policies to drive revenue; on the other hand, the decline in cost-end raw material prices and the depreciation of the RMB have driven further growth in gross profit margins, and the performance growth rate exceeded market expectations. It is also worth noting that with the cooling of real estate, the growth of the home appliance industry is still under pressure, but the leaders still have advantages. With Gree acquiring Jinghong, Midea's merger with Little Swan, etc., the concentration of the white goods industry has further increased.
Although the performance growth rate of the automobile industry has declined for two consecutive quarters, judging from the situation of the sub-industry, internalization is relatively large, and passenger cars, commercial vehicles, automobile sales and services have stabilized and rebounded from the bottom. From the perspective of the automobile's own cycle, the industry's inventory cycle has been at the historical bottom. Starting from July, terminal prices have continued to recover, basically returning to the price level before the National V promotion. At the same time, with the recovery of wholesale sales, the industry turning point has gradually been established, and the profit statement will continue to improve in the future.
In the field of essential consumption, the performance growth rate of agriculture, forestry, animal husbandry and fishery in the second quarter of 2019 was 46.1% (-53.6% in the first quarter of 2019), which was a significant improvement; since the end of 2018, African swine fever and pig cycle, pork prices have continued to rise. At the end of June 2019, the average pork price in 22 provinces and cities has reached 25 yuan per kilogram. As of the end of August 2019, the price has exceeded 36 yuan per kilogram, and pork prices still have room for upward in the future. According to the "China Agricultural Outlook Report (2019-2028)", pig prices are expected to rise rapidly in stages from the second half of 2019 and will reach a cyclical high in 2020.
Food and beverages, in the second quarter of 2019, the retail sales of grain, oil and food remained stable, with a small downward trend; at the same time, the CPI has risen rapidly recently, which also has certain support for performance in terms of prices. In the sub-industry, the overall performance of liquor has declined slightly, but the leading high-end liquor has performed well, while beer has shown a turning point.
In the TMT field, Guosheng Securities believes that the prosperity of semiconductors, security controllable and cloud computing, as well as the communications sub-industry are improving, which is worth paying attention to.
According to Guosheng Securities' research report, the performance growth rate of electronic components has improved for two consecutive quarters, and we will continue to be optimistic about the semiconductor industry in the future. At present, the turning point of global semiconductor medium-term supply and demand is clear, industrial demand continues to recover, and the fermentation of the Japanese and Korean incidents further changes the medium-term supply; at the same time, Huawei leads a comprehensive breakthrough in domestic semiconductors, and the industry is reversing in a V-shaped manner. The performance in the third quarter will be expected to continue to grow high for more than four quarters year-on-year. At the same time, semiconductors are at the top of the entire electronic information industry chain. China will face more fierce competition and blockade in the future. Domestic substitution will be an important development direction for all links of the semiconductor industry chain.
Computer segmentation recommended to focus on security and controllable and cloud computing sectors. For safety and control, the alternative path of domestic operating systems + domestic CPUs is clear, and there is huge room for growth of integrated circuit design and software companies under the trend of safe and controllable industry. The safety and control sector has seen a turning point in revenue growth for two consecutive quarters, with net profit excluding non-operating items increasing significantly, and R&D continued to increase investment, which indirectly verified that the industrialization of safe and control can be fully implemented. For cloud computing, compared with the development trajectory of public cloud in China and the United States, 2019 is the year when Chinese public cloud corresponds to public cloud in the United States. It is expected that the domestic public cloud industry chain will still have an average growth rate of 50% in the next 3-5 years, and the adjustment of short-term capital expenditure will not change the long-term trend. At the same time, government agencies and industrial enterprises have set off a wave of cloud access, and the industrial Internet is expected to usher in a golden period of development in the next ten years.
With the acceleration of domestic 5G construction, the performance of the communications industry rebounded sharply in the first half of the year. The current domestic spectrum allocation plan has been implemented, 5G licenses have also been issued, and operator capital expenditures have entered an upward cycle. In 2019, the total capital expenditures of the three major operators exceeded 300 billion yuan. As the early 5G cycle industry, antenna radio frequency, optical modules, and network specifications are the first to reflect the industry's recovery signal, while PCBs are both offensive and defensive. As 5G gradually enters the trial commercial stage, the focus will gradually extend to back-end applications in the future, and high-definition video, cloud video, cloud AR/VR, etc. are expected to be the first to be implemented.
That is, according to the seller's summary of the prosperity of various industries in the interim report, most of the sub-sectors of the big consumption and big technology sectors are in the upward period of prosperity, and the driving force of the stock price is the prosperous cycle. With the surging 5G wave, the recovery of the technology stock market will accelerate. It is still a good choice to stick to technology and not relaxing.
The prosperity of technology stocks is accelerating
Compared with the long bull trend of consumer stocks such as liquor, technology stocks have stronger short-term explosive power.
China Merchants Securities Research Report stated that in mid-June, the market was immersed in the panic of Huawei being included in the entity list, and some people believe that China's technology sector is facing huge challenges. However, Huawei not only stood firm, but also turned around and brought huge opportunities to the industrial chain.
As more and more feedback from the industrial chain comes, the market gradually begins to choose to believe. China's semiconductor production in July and August showed a small "V" shape, and this signal was quickly grasped by the market, and "semiconductors entered an upward cycle" began to be widely circulated. In July, global semiconductors improved month-on-month. During this period, the performance of relevant electronics industries and companies in Taiwan and PCB listed companies in the A-share market gave strong confidence to the market.
Huawei was included in the entity list, which has accelerated domestic substitution significantly, and the software industry has ushered in new expectations. ZTE and Huawei's orders in the 5G field have frequently been reported, rekindling the expectations of 5G construction that had previously fallen into a sluggish situation. Driven by 5G expectations, media analysts began to regain their confidence in VR/AR.
According to statistics from China Merchants Securities, since June 13, the electronics sector has risen by 27%, the technology leader has risen by 26%, and there are 62 stocks with a rise of more than 50% in the TMT field.
China Merchants Securities believes that after experiencing the expected repair, the technology sector currently needs to wait for new catalysis, and the third quarter report that may exceed expectations will inject new impetus into the technology sector. Huawei and Apple's latest flagship phones have been released one after another. The mobile phone sales that may exceed expectations in the fourth quarter will make the market re-examine the credibility and amplitude of the "mobile replacement cycle".
Currently, there is a view that "tech stocks are already very expensive", while China Merchants Securities believes that valuation is always the result, and what drives the stock price is the prosperity cycle.In 2020, with the peak of 5G construction and the 5G replacement cycle and other applications based on 5G implementation, the recovery of technology stocks will accelerate in 2020, and the acceleration of performance will still bring about a continued improvement in valuation level. Short-term fluctuations are not enough to constitute a reason to give up the technology sector. It is still a good choice to insist that technology will not relax.
Zhongtai Securities also stated that hard technology has a strong investment logic.
First, the Sino-US trade friction has had a far-reaching impact on the fundamentals of China and global economies. According to a simple estimate by China Securities, the 25% tariff of US$200 billion has an impact on China's economy of about 1%. The recent downward trend in macroeconomic data has gradually reflected the impact of overseas events. Domestic macroeconomic policies focus on how to countercyclical hedge the impact of trade frictions on economic downturn, including the recent special bond policies, comprehensive reserve requirement ratio cuts and targeted reserve requirement ratio cuts, but their role in the macro economy is more to support the bottom rather than pull up. This shows that the economic downturn rate will not be as large as expected, but the downward trend is clear and domestic demand will gradually weaken. Industry and listed companies with EPS from 2019 to 2020 as the main investment logic do not have investment value.
Second, the global economy is weakening under the influence of overseas frictions, global monetary policies are tending to be loose, and China is no exception. The next few years will be a process of global liquidity from tightening to gradually flooding, and treasury bond yields still have room for downward in this context. In addition, after the economy declines, various investment products with risk-free returns will continue to experience default risks, which will gradually reduce the risk-free returns recognized by investors. The two major logics together constitute a downward trend in the global risk-free interest rate, which is conducive to improving the valuation level of equity assets.
The third is the launch of the Science and Technology Innovation Board, which shows China's determination to catch up with the world in the field of scientific and technological innovation, and senior management should accelerate the pace of scientific and technological innovation. The market's risk preference for technological innovation is gradually increasing, and it will increase beyond expectations. The investment in hard technology is not based on EPS from 2019 to 2020. Investors who believe that technology stocks have high valuations do not fully understand the core investment points of technology stocks. Technology stocks need to pay attention to the company's track, barriers, core technologies, team capabilities, etc., which can become a great company in the next 5-10 years, and they need to pay attention to its EPS level in the next 5-10 years.
Driven by the industry prosperity, the stock prices of technology stocks performed strongly, and the stock prices of leading stocks such as Shanghai Electric Co., Ltd. doubled, which was in sharp contrast with the overall market trend, interpreting the bull market of a few companies.
A small number of companies have bull market
Tianfeng Securities said that consumer leaders and technology leaders will still be the main lines of long-term allocation, and the bull market of a small number of companies will continue. The leading companies in consumption and technology can have the advantage at the same time, which can start with two logics: one is the long-term logic of the macro background; the other is the medium-term logic of the micro background.
At the macro level, the long-term background that China faces in the future may be the decline of the economic growth center, the transformation of the economic structure, and the decline of the interest rate center level. In this process, a simple logic is that which sectors perform better depends on the changes in the proportion of each sector in GDP.
Tianfeng Securities Take the United States as an example. In the 1960s, the actual economic growth of the United States increased by 0.5% compared with the 1950s, and the US bond yields continued to move upward. Starting from the 1970s, the actual economic growth of the United States experienced continuous declines. In addition to the suppression of ultra-high inflation in the 1970s, interest rates soared. After that, U.S. bond yields entered a long process of downward movement. In this process, the US stock "Beautiful 50" represented by consumer stock leaders and technology leaders with stable performance still emerged from a long-term bull market in the 1980s and outperformed the index significantly.
Classification of the list by GICS secondary industry shows that among the 50 "Beautiful 50" targets, consumer stocks account for the vast majority, among which the pharmaceutical/biotechnology and life sciences, food/beverage and tobacco, household and personal supplies, technical hardware and equipment industry targets rank in the top three, with 9, 7, 6 and 5 targets rank in the "Beautiful 50" list respectively.
Tianfeng Securities said that the "Beautiful 50" continues to outperform the stock price, most of which comes from performance support. This actually means that in the process of the economic and interest rate centers, performance in various industries can be maintained continuously or exploded, concentrated in the consumer field and new technology industries.
. Behind the performance contribution of individual stocks to rise, Tianfeng Securities believes that it comes from the support of the industry: In the process of the gradual decline of the US economic growth center in 1970, the proportion of education, medical care and communication technology industries in GDP continued to increase, with the largest increase; the proportion of accommodation and catering, computers and electronics industries in GDP increased slightly or rose in stages; at the same time, industries representing the traditional economy, including steel, mining, nonferrous metals, machinery, automobiles, electrical equipment, etc., their added value in GDP showed a trend of downward trend.
In addition to the long-term logic of the macro background, consumption and technology are both dominant, and have their own medium-term logic and micro background support respectively.
Tianfeng Securities research shows that for the consumer sector, the probability of outperforming Wind All A in the 59 quarters since 2005, exceeding all other sectors. In the stage where the consumer sector is relatively underperforming, its common feature is: the comprehensive expansion of the credit cycle from the bottom, that is, the comprehensive stimulus of the economy. In such a stage, if profits are comprehensively improved, the financial cycle will be dominant, and if a liquidity trap is formed, the small and medium-sized markets will outperform.
Tianfeng Securities believes that the previous credit expansion was accompanied by the policy stimulus of "large opening and closing", but currently, in the context of "leverage cannot go to the sky" and housing for living, not for speculation, the policy is extremely determined, and the policy mainly based on "resistance bottoming" is pulsed, so the background of the relatively underperforming consumer sector is difficult to reproduce.
In addition, Tianfeng Securities also believes that the inflow of foreign capital has brought changes to the "pricing system" of consumer stocks. For the A-share market, foreign capital entry will usher in a process of reshaping the "pricing system". In other words, the changes in investor structure ultimately lead to the continuous increase in the valuation weight of long-term ROE stability in the "pricing system" of A-shares, and reduce the weight of explosive power of short-term performance growth.
For listed companies, it is not easy to maintain high ROE for a long time. However, the increasing dividends and repurchase (stock cancellation) can greatly enable the company's ROE level to resist greater short-term profit growth fluctuations, so the market's focus on profits may be more on a sustainable and stable ROE, while ignoring the fluctuations in the medium and short-term net profit growth.
Tianfeng Securities stated that in the end, the A-share "pricing system" will gradually complete the integration into a mature market, and more and more companies will form a pricing model similar to Coca-Cola (although the growth rate of Coca-Cola in the past five years has been -13%, 9%, -11%, -59%, and 146%, respectively, relying on dividends and repurchase, its ROE can be stable at around 28% most of the time, and the final valuation is 33 times TTMPE). This is a medium- and long-term change brought about by foreign capital after continuous entry, but in the medium and short term, for the leading companies with the most foreign capital, the migration of " discount rate " is another more important impact.
In the DDM dividend discount model or DCF cash flow discount model, the discount rate is the weighted financing cost of a company, but it can also be simplified into a risk-free interest rate plus a risk premium. Or simply put it, it is the annualized rate of return requested by investors.
For domestic investors, they face nominal GDP growth of about 9%. Therefore, the annualized return on assets that domestic investors can accept is no less than 9%. That is to say, the discount rate given by domestic investors in the valuation model must be at least about 9%. For foreign investors, they may face nominal GDP growth of about 6%, and foreign high-yield assets are also very limited. Therefore, the annualized return on assets that foreign investors can accept can be as low as 6%. That is to say, the discount rate given by foreign investors in the valuation model can also be as low as 6%.
This leads to a result. When domestic investors see the PE valuation of 50 times the relevant consumer listed companies at a discount rate of 9%, they find it very expensive because if they buy at such a price, the future annualized rate of return may not meet the needs of domestic investors. In the eyes of foreign investors, buying at such a valuation may far exceed their demand in the future, so even if the valuation of leading consumer stocks reaches 50 times, they are still attractive.
Compared with consumer stocks, Tianfeng Securities believes that behind the outperform of technology stocks is the support of the industrial cycle.
In the construction cycle of 3G and 4G and the subsequent application cycles, the growth sector has shown significant outperforms compared with WindA. The construction cycle of 5G and the subsequent application cycles should also be roughly similar. But the difference may be in the degree of outperformance, which will be smoother than the previous two times but will take longer. Logically, the most important thing about 3G and 4G is the TOC change, targeting consumers, including mobile phones, mobile games, videos, online shopping, various mobile Internet, etc. Mobile phones and VR games may be the first to rise for the TOC side, while most of the rest may be the TOB side, including industrial Internet, big data, artificial intelligence, etc. The degree of standardization in these fields is low and the penetration rate increases relatively slowly.
In addition, the support for technology stock performance is still indispensable for external mergers and acquisitions. From 2013 to 2015, external mergers and acquisitions supported the profits of the GEM very significantly, but with the contraction of policies, the profit growth rate of the external part declined sharply. Entering 2019, with the continuous relaxation of relevant mergers and acquisition policies and the gradual start of a new round of 5G industry cycle, the scale of external mergers and acquisitions of the GEM has increased significantly in the second quarter and year-on-year, which will also provide certain support for the future profits of the GEM.
Anxin Securities believes that another more important factor is that the industrial growth rate of the supply-side reform industry may have a large turning point, and the distortion of supply-side reform production in the supply-side reform industry may come to an end for the time being. Supply-side reform has suppressed the production of the supply-side reform industry and concealed the actual economic growth.
Before 2016, the industrial growth rates of the supply-side reform industry and the non-supply-side reform industry were basically the same, but after the supply-side reform, the two showed a clear divergence. From the beginning of 2016 to the third quarter of 2017, the year-on-year growth rate of industrial added value in the non-supply-side reform industry has been rising all the way, while the year-on-year growth rate of industrial added value in the supply-side reform industry has been falling all the way; from the third quarter of 2017 to the second quarter of 2019, the year-on-year growth rate of industrial added value in the non-supply-side reform industry has been falling all the way, while the year-on-year growth rate of industrial added value in the supply-side reform industry has been rising all the way. From the perspective of time span, the production restoration of the supply-side reform industry may come to an end temporarily; from July to August, the industrial growth rate of the supply-side reform industry declined significantly, and there was a change in the same direction as the non-supply reform industry, which may be a confirmation signal. This will have a significant impact on the overall industrial growth rate.
Since the first quarter of 2018, although the non-supply-side reform industry has been declining all the way, the supply-side reform industry has largely hedged the downward trend of the non-supply-side reform industry, so the overall industrial growth rate has not declined significantly. However, if the repair of the supply-side reform industry is completed and the turning point appears, then the supply-side reform industry and the non-supply-side reform industry will decline simultaneously, which will lead to a significant decline in industrial growth. Anxin Securities believes that this may be the main reason for the significant decline in industrial growth from July to August. Behind this change in
is the change in the supply-side reform industry's net profit margin. During the supply-side reform period, the supply of the supply-side reform industry has decreased significantly, which has significantly improved the net profit margin of the supply-side reform industry and stimulated the investment and production of the supply-side reform industry after the end of the supply-side reform. However, the net profit margin of the supply-side reform industry began to decline significantly and rapidly after reaching its high in the third quarter of 2018, and will continue for a period of time.
Combined with the above analysis, Anxin Securities judged that the direction divergence between the supply-side reform industry and the non-supply-side reform industry may have ended and will gradually converge in the future. Therefore, the industrial growth rate of the supply-side reform industry may continue to decline, which will put pressure on the overall industrial added value growth rate.
So, which industries are dragging down industrial production? New Era Securities believes that from the perspective of the three major industries, the growth rate of mining production has increased, and the growth rate of manufacturing and electricity, gas and water production and supply industries has declined. Considering that manufacturing accounts for the highest proportion of industrial added value (87.7% in 2018), manufacturing has dragged down the industrial production the most. In the manufacturing industry, the automobile manufacturing industry, culture, education, arts, sports and entertainment products manufacturing industry have declined more frequently. The main reason for the decline in the manufacturing production growth rate is the following points.
One is the downward trend of external demand. It can be found that the proportion of export delivery value to operating income in several industries with a large decline in production growth is basically relatively high. Among them, the proportion of computer communications and other electronic equipment manufacturing industries has reached about 50%, and the correlation coefficient between the export delivery value and the growth rate of industrial added value is as high as 85.5%. Factors such as slowing global economic growth and trade frictions have caused pressure on the "export-manufacturing" chain, restricting manufacturing production.
The second is the pressure to destock. Taking the automobile manufacturing industry as an example, its export delivery value accounts for only about 5% of its operating income. However, due to the huge pressure of destocking, the production growth rate dropped from 4.9% in 2018 to -1% in January-August 2019, ranking first in the manufacturing industry.
Third, the financing dilemma.The decline in the production growth rate of culture, education, industry, art, sports and entertainment products manufacturing industries is second only to that of automobile manufacturing, and its export delivery value ranks second in proportion to operating income, but the growth rate of export delivery value has improved compared with 2018, and the growth rate of related consumption has also improved compared with 2018. Enterprises may have actively contracted production due to financing issues. Since 2019, the credit spread of medium and low ratings has fallen at a high level, while the credit spread of leisure services industry is still on an upward trend. Some manufacturing industries may be subject to financing difficulties. The meeting of the Political Bureau of the CPC Central Committee held on July 31 also mentioned that it is necessary to "promote financial supply-side structural reform and guide financial institutions to increase medium- and long-term financing for manufacturing and private enterprises."
The decline in manufacturing industry prosperity has also affected manufacturing investment, which has dragged down fixed asset investment. Data released by the National Bureau of Statistics on September 16 showed that from January to August 2019, national fixed asset investment (excluding farmers) increased by 5.5% year-on-year, down 0.2 percentage points from January to July. Among them, manufacturing investment increased by 2.6%, and the growth rate fell by 0.7 percentage points. Judging from the seasonally adjusted month-on-month data that better reflects the trend, fixed asset investment in August increased by 0.4%, down from 0.01 percentage points in July.
In terms of real estate investment, from January to August, the national real estate development investment was 8458.9 billion yuan, an increase of 10.5% year-on-year, and the growth rate fell by 0.1 percentage point from January to July. Among them, residential investment was 6218.7 billion yuan, an increase of 14.9%, and the growth rate fell by 0.2 percentage points.
In addition to real estate, the automobile industry, another important economic pillar industry, is not optimistic. Data released by the National Bureau of Statistics showed that the total retail sales of consumer goods increased by 7.5% year-on-year in August, but automobile sales fell by 8.1%.
According to Zhang Min, statistician of the Trade and Foreign Economic Department of the National Bureau of Statistics, judging from the monthly growth rate, the consumer goods market is greatly affected by factors such as the increase in the sales of automobile products. In August, the retail sales of automobile products units above the limit fell by 8.1% year-on-year, an increase of 5.5 percentage points from July. Affected by this, the total retail sales of consumer goods in August increased by 7.5% year-on-year. Excluding automobile products, the total retail sales of consumer goods in August increased by 9.3% year-on-year, 0.5 percentage points faster than the same caliber growth rate in July.
At present, economic data, fiscal and monetary policy, and external environment have all returned to a rare state of dullness. The profits of industrial enterprises and the growth rates of listed companies are both kept near zero, and differentiation has become the keywords. How to find industries with relatively high prosperity and listed companies has become an important problem faced by investors in the A-share market.
Looking for improvement in prosperity
Interim report is a clue to finding the improvement in prosperity in the industry. GF Securities Research Report shows that from the perspective of industry comparison, in 2019, although the overall prosperity trend of the A-share interim report is still bottoming out, there are many structural highlights.
According to GF Securities' summary, the highlight of the interim report is that some traditional countercyclical and weak-cyclical industries such as consumption and service industries are still stable.
Against the backdrop of deteriorating trade expectations and weakening of the macro economy in the second quarter, sectors with countercyclical or weak cycle attributes still have relatively stable performance, such as large consumption and some growth industries. The consumer industry has less demand elasticity, branded premium and good competition landscape. The demand side of some industries is stable, and the steady growth of profits is achieved through product terminal price increase, cost control and fee reduction. Among them, consumer industries with the interim report maintaining the advantageous range include: agriculture, forestry, animal husbandry and fishery (the pig cycle brings back the prosperity of the livestock and poultry breeding and feed industries), food and beverage (terminal price increase and profit margin increase), home appliances (the performance of white goods leaders exceeds expectations, black electricity revenue accelerates and negative profit growth converges), furniture (negative growth converges in revenue and profit), leisure services (the duty-free maintains high prosperity, turnover rate drives improvement in ROE), airports and logistics (tax-free, express delivery, stable profit rise in revenue), general retail (even income but gross profit margin and net profit margin rise).
Highlights are industries that have ushered in a turning point in their own economic cycle, including semiconductors, 5G, photovoltaics, wind power, oil service, etc.
Some industries have bottomed out in their own economic cycle and ushered in upward improvement, mostly focusing on growth sectors, while the trends of leaders and the overall industry have further diverged and differentiated.Semiconductors (domestic substitutions realize their performance, the industry's growth rate declines, and the leader has significantly dominated), 5G chain PCB/communication equipment (growth rate has improved significantly after excluding individual stock disturbances), Cultural Media and Games (prosperity has improved, and the corresponding base this year has been lowered after the impairment of goodwill was cleared last year), photovoltaics and wind power (high prosperity in the interim report, and installation expectations have been further improved after intensive approval in July), oil and gas services (advanced medium and long-term oil price cycle, profit growth rate has risen at a high level).
Highlight third is that the middle and downstream manufacturing industries benefit from tax cuts, including transportation equipment, communication equipment, and motors.
The value-added tax rate reduction plan for the 2019 "Two Sessions" was implemented and officially implemented on April 1. According to GF Securities' estimates, this value-added tax rate reduction will significantly benefit the mid- and downstream manufacturing industries. Without considering the transmission of tax cuts to downstream consumers, the net profit growth rate of the mid- and downstream manufacturing industries such as transportation equipment, communication equipment, metal and non-metal mining and product selection, electrical machinery, etc. in 2019 ranges from 10% to 20%. In the interim report, the gross profit margin and net profit index of the relevant industries rose to different levels, or the net profit increase without a significant increase in revenue (reflected as a decline in costs).
Highlights are the improvement of the industry structure brings the resilience of leading companies, such as real estate, cement, engineering machinery, etc.
supply-side reform has accelerated the integration pattern of various industries and the pace of competition optimization. The concentration is rapidly concentrated in industries with a higher level, and can rely on the guidance of leading companies to achieve a better industry pattern. Some industries with leading interim reports have improved gross profit margin (money-making ability) and turnover rate (supply and demand efficiency) from the two paths of income and asset side. Representative industries include real estate, cement, and engineering machinery.
On the one hand, the bargaining power over the upstream and downstream industrial chains has increased, achieving high control over prices without significant stimulation on the demand side and maintaining stable growth in revenue; on the other hand, the overall capacity expansion of the industry is concentrated under the business decisions of a few leaders, and the supply expansion is more rational and orderly, reducing the impact on the rapid production capacity release.
In addition, GF Securities also recommends gradually paying attention to "stable growth" that is expected to lead the upward turning point in the early-cycle industries such as infrastructure chains and automobiles.
GF Securities research shows that in history, during a period of negative profit growth, policy efforts will promote traditional early-cycle industries to take the lead in getting out of the turning point of upward profits, such as electrical equipment and infrastructure that benefited from infrastructure in 2005 and 2012, and automobiles that benefited from consumption in 2011. However, this round of A-share earnings fell to negative growth, while the performance of traditional early-cycle industries did not make significant efforts.
htmlOn August 31, the meeting of the Financial Stability and Development Committee of the State Council emphasized that countercyclical regulation will be strengthened, and the purpose of the policy of stabilizing growth will become clearer, which is in line with the meeting of the Political Bureau of the CPC Central Committee held on July 30 to set the tone of the domestic economy "increasing downward pressure" and the purpose of the policy of stabilizing growth will be clearer.GF Securities believes that the policy hedging will be carried out in parallel with the two ideas of infrastructure chain and promoting consumption, which will help the relevant early-cycle industry prosperity usher in an upward turning point: electrical equipment, infrastructure, and automobiles. On the one hand, under the economic combination of "export pressure, manufacturing investment declines, and real estate investment declines", fiscal policies including loose infrastructure are often implemented, which are expected to include measures such as relaxing project capital and accelerating the use of remaining local special bond quotas in previous years. In terms of the use of local debt in 2019, transportation and municipal construction account for about 20%-30%, and electrical equipment, infrastructure and other industries are directly benefiting industries; on the other hand, judging from the "Opinions on Accelerating the Development of Circulation and Promoting Commercial Consumption" of the State Council on August 27, policies to encourage automobile consumption are expected to be further implemented. As automobiles accelerate destocking, stock prices are expected to be ahead of profit performance.
Guosheng Securities also studied the prosperity of various industries in the interim report, started from the interim report performance of various industries, and judged the subsequent prosperity of the industry, and screened out industries whose future performance will continue to improve in the future.
Among them, in the upstream resource field, rising oil prices will drive the performance of coal and petrochemical industries to rise. Guosheng Securities said that since 2019, the trend of global oil prices and coal prices has been basically the same. In the first half of the year, with the rebound of the prices of the two, it directly led to the improvement of performance growth.Judging from the situation in the third quarter, from July to August, with the softening of the US sanctions on Iran, oil prices and coal prices fell back to the level at the beginning of the year again. However, in mid-September, the Saudi Arabia oil fields were attacked, oil supply shrank, oil prices may rise, and the performance of coal and petrochemicals rose.
In addition, the attacks in Saudi oil fields may stimulate long-distance crude oil transportation, coupled with the arrival of the peak season of fuel transportation (judging from the fluctuations in the crude oil transportation index BDTI, it shows an unusually regular cyclical nature, September to January of the following year is a period of rapid increase in freight prices), oil transportation prices in the fourth quarter may rise beyond expectations and drive continuous improvement in performance. The shipping sector is worth paying attention to.
In the field of midstream materials, Guosheng Securities believes that with the improvement of real estate completion data, glass prices have rebounded recently, and the performance in the third quarter is likely to continue to improve; especially photovoltaic glass will benefit from the high prosperity of the photovoltaic industry, which is worth paying attention to.
In the midstream manufacturing field, Guosheng Securities recommends focusing on wind power and photovoltaics. On the one hand, wind power equipment, fans parts manufacturers fully benefit from the industry's rush to install, and their performance has grown rapidly; some low-priced orders are still squeezed in their hands, and the release of low-priced orders affects the gross profit margin, but with the acceleration of subsequent fan order release, it is expected to usher in a turning point. On the other hand, photovoltaic equipment, with overseas demand rising in the first half of the year, and the prices of the industrial chain stabilized, driving the improvement of industry profits. Generally, the fourth quarter is the peak season for the photovoltaic industry, and it is also the peak season for overseas installations. Subsequent demand will continue to be released. Domestic projects will be launched one after another starting from September. The demand for domestic bidding projects is expected to reach 5GW per month, which has increased significantly compared with the domestic monthly installation demand of about 2GW per month in the first half of the year. Recently, the prices of battery cells and polysilicon materials have begun to rise, and we continue to be optimistic about the performance of the photovoltaic industry.
In addition, the military expenditure growth rate has been inflection point since 2018, and the military expenditure execution rate has increased. 2018-2020 is the second half of the 13th Five-Year Plan. Military investment and procurement have entered its peak period. According to the characteristics of the military industry chain, assembly enterprises and core supporting enterprises will take the lead in benefiting the improvement of the industry's prosperity. It is expected that the economic rise in 2019 will further spread to the entire industrial chain.
In the downstream optional consumer home appliance field, only white household appliances have improved to a certain extent in the interim performance. Guosheng Securities said that on the one hand, the leader in the white goods industry has carried out promotional policies to drive revenue; on the other hand, the decline in cost-end raw material prices and the depreciation of the RMB have driven further growth in gross profit margins, and the performance growth rate exceeded market expectations. It is also worth noting that with the cooling of real estate, the growth of the home appliance industry is still under pressure, but the leaders still have advantages. With Gree acquiring Jinghong, Midea's merger with Little Swan, etc., the concentration of the white goods industry has further increased.
Although the performance growth rate of the automobile industry has declined for two consecutive quarters, judging from the situation of the sub-industry, internalization is relatively large, and passenger cars, commercial vehicles, automobile sales and services have stabilized and rebounded from the bottom. From the perspective of the automobile's own cycle, the industry's inventory cycle has been at the historical bottom. Starting from July, terminal prices have continued to recover, basically returning to the price level before the National V promotion. At the same time, with the recovery of wholesale sales, the industry turning point has gradually been established, and the profit statement will continue to improve in the future.
In the field of essential consumption, the performance growth rate of agriculture, forestry, animal husbandry and fishery in the second quarter of 2019 was 46.1% (-53.6% in the first quarter of 2019), which was a significant improvement; since the end of 2018, African swine fever and pig cycle, pork prices have continued to rise. At the end of June 2019, the average pork price in 22 provinces and cities has reached 25 yuan per kilogram. As of the end of August 2019, the price has exceeded 36 yuan per kilogram, and pork prices still have room for upward in the future. According to the "China Agricultural Outlook Report (2019-2028)", pig prices are expected to rise rapidly in stages from the second half of 2019 and will reach a cyclical high in 2020.
Food and beverages, in the second quarter of 2019, the retail sales of grain, oil and food remained stable, with a small downward trend; at the same time, the CPI has risen rapidly recently, which also has certain support for performance in terms of prices. In the sub-industry, the overall performance of liquor has declined slightly, but the leading high-end liquor has performed well, while beer has shown a turning point.
In the TMT field, Guosheng Securities believes that the prosperity of semiconductors, security controllable and cloud computing, as well as the communications sub-industry are improving, which is worth paying attention to.
According to Guosheng Securities' research report, the performance growth rate of electronic components has improved for two consecutive quarters, and we will continue to be optimistic about the semiconductor industry in the future. At present, the turning point of global semiconductor medium-term supply and demand is clear, industrial demand continues to recover, and the fermentation of the Japanese and Korean incidents further changes the medium-term supply; at the same time, Huawei leads a comprehensive breakthrough in domestic semiconductors, and the industry is reversing in a V-shaped manner. The performance in the third quarter will be expected to continue to grow high for more than four quarters year-on-year. At the same time, semiconductors are at the top of the entire electronic information industry chain. China will face more fierce competition and blockade in the future. Domestic substitution will be an important development direction for all links of the semiconductor industry chain.
Computer segmentation recommended to focus on security and controllable and cloud computing sectors. For safety and control, the alternative path of domestic operating systems + domestic CPUs is clear, and there is huge room for growth of integrated circuit design and software companies under the trend of safe and controllable industry. The safety and control sector has seen a turning point in revenue growth for two consecutive quarters, with net profit excluding non-operating items increasing significantly, and R&D continued to increase investment, which indirectly verified that the industrialization of safe and control can be fully implemented. For cloud computing, compared with the development trajectory of public cloud in China and the United States, 2019 is the year when Chinese public cloud corresponds to public cloud in the United States. It is expected that the domestic public cloud industry chain will still have an average growth rate of 50% in the next 3-5 years, and the adjustment of short-term capital expenditure will not change the long-term trend. At the same time, government agencies and industrial enterprises have set off a wave of cloud access, and the industrial Internet is expected to usher in a golden period of development in the next ten years.
With the acceleration of domestic 5G construction, the performance of the communications industry rebounded sharply in the first half of the year. The current domestic spectrum allocation plan has been implemented, 5G licenses have also been issued, and operator capital expenditures have entered an upward cycle. In 2019, the total capital expenditures of the three major operators exceeded 300 billion yuan. As the early 5G cycle industry, antenna radio frequency, optical modules, and network specifications are the first to reflect the industry's recovery signal, while PCBs are both offensive and defensive. As 5G gradually enters the trial commercial stage, the focus will gradually extend to back-end applications in the future, and high-definition video, cloud video, cloud AR/VR, etc. are expected to be the first to be implemented.
That is, according to the seller's summary of the prosperity of various industries in the interim report, most of the sub-sectors of the big consumption and big technology sectors are in the upward period of prosperity, and the driving force of the stock price is the prosperous cycle. With the surging 5G wave, the recovery of the technology stock market will accelerate. It is still a good choice to stick to technology and not relaxing.
The prosperity of technology stocks is accelerating
Compared with the long bull trend of consumer stocks such as liquor, technology stocks have stronger short-term explosive power.
China Merchants Securities Research Report stated that in mid-June, the market was immersed in the panic of Huawei being included in the entity list, and some people believe that China's technology sector is facing huge challenges. However, Huawei not only stood firm, but also turned around and brought huge opportunities to the industrial chain.
As more and more feedback from the industrial chain comes, the market gradually begins to choose to believe. China's semiconductor production in July and August showed a small "V" shape, and this signal was quickly grasped by the market, and "semiconductors entered an upward cycle" began to be widely circulated. In July, global semiconductors improved month-on-month. During this period, the performance of relevant electronics industries and companies in Taiwan and PCB listed companies in the A-share market gave strong confidence to the market.
Huawei was included in the entity list, which has accelerated domestic substitution significantly, and the software industry has ushered in new expectations. ZTE and Huawei's orders in the 5G field have frequently been reported, rekindling the expectations of 5G construction that had previously fallen into a sluggish situation. Driven by 5G expectations, media analysts began to regain their confidence in VR/AR.
According to statistics from China Merchants Securities, since June 13, the electronics sector has risen by 27%, the technology leader has risen by 26%, and there are 62 stocks with a rise of more than 50% in the TMT field.
China Merchants Securities believes that after experiencing the expected repair, the technology sector currently needs to wait for new catalysis, and the third quarter report that may exceed expectations will inject new impetus into the technology sector. Huawei and Apple's latest flagship phones have been released one after another. The mobile phone sales that may exceed expectations in the fourth quarter will make the market re-examine the credibility and amplitude of the "mobile replacement cycle".
Currently, there is a view that "tech stocks are already very expensive", while China Merchants Securities believes that valuation is always the result, and what drives the stock price is the prosperity cycle.In 2020, with the peak of 5G construction and the 5G replacement cycle and other applications based on 5G implementation, the recovery of technology stocks will accelerate in 2020, and the acceleration of performance will still bring about a continued improvement in valuation level. Short-term fluctuations are not enough to constitute a reason to give up the technology sector. It is still a good choice to insist that technology will not relax.
Zhongtai Securities also stated that hard technology has a strong investment logic.
First, the Sino-US trade friction has had a far-reaching impact on the fundamentals of China and global economies. According to a simple estimate by China Securities, the 25% tariff of US$200 billion has an impact on China's economy of about 1%. The recent downward trend in macroeconomic data has gradually reflected the impact of overseas events. Domestic macroeconomic policies focus on how to countercyclical hedge the impact of trade frictions on economic downturn, including the recent special bond policies, comprehensive reserve requirement ratio cuts and targeted reserve requirement ratio cuts, but their role in the macro economy is more to support the bottom rather than pull up. This shows that the economic downturn rate will not be as large as expected, but the downward trend is clear and domestic demand will gradually weaken. Industry and listed companies with EPS from 2019 to 2020 as the main investment logic do not have investment value.
Second, the global economy is weakening under the influence of overseas frictions, global monetary policies are tending to be loose, and China is no exception. The next few years will be a process of global liquidity from tightening to gradually flooding, and treasury bond yields still have room for downward in this context. In addition, after the economy declines, various investment products with risk-free returns will continue to experience default risks, which will gradually reduce the risk-free returns recognized by investors. The two major logics together constitute a downward trend in the global risk-free interest rate, which is conducive to improving the valuation level of equity assets.
The third is the launch of the Science and Technology Innovation Board, which shows China's determination to catch up with the world in the field of scientific and technological innovation, and senior management should accelerate the pace of scientific and technological innovation. The market's risk preference for technological innovation is gradually increasing, and it will increase beyond expectations. The investment in hard technology is not based on EPS from 2019 to 2020. Investors who believe that technology stocks have high valuations do not fully understand the core investment points of technology stocks. Technology stocks need to pay attention to the company's track, barriers, core technologies, team capabilities, etc., which can become a great company in the next 5-10 years, and they need to pay attention to its EPS level in the next 5-10 years.
Driven by the industry prosperity, the stock prices of technology stocks performed strongly, and the stock prices of leading stocks such as Shanghai Electric Co., Ltd. doubled, which was in sharp contrast with the overall market trend, interpreting the bull market of a few companies.
A small number of companies have bull market
Tianfeng Securities said that consumer leaders and technology leaders will still be the main lines of long-term allocation, and the bull market of a small number of companies will continue. The leading companies in consumption and technology can have the advantage at the same time, which can start with two logics: one is the long-term logic of the macro background; the other is the medium-term logic of the micro background.
At the macro level, the long-term background that China faces in the future may be the decline of the economic growth center, the transformation of the economic structure, and the decline of the interest rate center level. In this process, a simple logic is that which sectors perform better depends on the changes in the proportion of each sector in GDP.
Tianfeng Securities Take the United States as an example. In the 1960s, the actual economic growth of the United States increased by 0.5% compared with the 1950s, and the US bond yields continued to move upward. Starting from the 1970s, the actual economic growth of the United States experienced continuous declines. In addition to the suppression of ultra-high inflation in the 1970s, interest rates soared. After that, U.S. bond yields entered a long process of downward movement. In this process, the US stock "Beautiful 50" represented by consumer stock leaders and technology leaders with stable performance still emerged from a long-term bull market in the 1980s and outperformed the index significantly.
Classification of the list by GICS secondary industry shows that among the 50 "Beautiful 50" targets, consumer stocks account for the vast majority, among which the pharmaceutical/biotechnology and life sciences, food/beverage and tobacco, household and personal supplies, technical hardware and equipment industry targets rank in the top three, with 9, 7, 6 and 5 targets rank in the "Beautiful 50" list respectively.
Tianfeng Securities said that the "Beautiful 50" continues to outperform the stock price, most of which comes from performance support. This actually means that in the process of the economic and interest rate centers, performance in various industries can be maintained continuously or exploded, concentrated in the consumer field and new technology industries.
. Behind the performance contribution of individual stocks to rise, Tianfeng Securities believes that it comes from the support of the industry: In the process of the gradual decline of the US economic growth center in 1970, the proportion of education, medical care and communication technology industries in GDP continued to increase, with the largest increase; the proportion of accommodation and catering, computers and electronics industries in GDP increased slightly or rose in stages; at the same time, industries representing the traditional economy, including steel, mining, nonferrous metals, machinery, automobiles, electrical equipment, etc., their added value in GDP showed a trend of downward trend.
In addition to the long-term logic of the macro background, consumption and technology are both dominant, and have their own medium-term logic and micro background support respectively.
Tianfeng Securities research shows that for the consumer sector, the probability of outperforming Wind All A in the 59 quarters since 2005, exceeding all other sectors. In the stage where the consumer sector is relatively underperforming, its common feature is: the comprehensive expansion of the credit cycle from the bottom, that is, the comprehensive stimulus of the economy. In such a stage, if profits are comprehensively improved, the financial cycle will be dominant, and if a liquidity trap is formed, the small and medium-sized markets will outperform.
Tianfeng Securities believes that the previous credit expansion was accompanied by the policy stimulus of "large opening and closing", but currently, in the context of "leverage cannot go to the sky" and housing for living, not for speculation, the policy is extremely determined, and the policy mainly based on "resistance bottoming" is pulsed, so the background of the relatively underperforming consumer sector is difficult to reproduce.
In addition, Tianfeng Securities also believes that the inflow of foreign capital has brought changes to the "pricing system" of consumer stocks. For the A-share market, foreign capital entry will usher in a process of reshaping the "pricing system". In other words, the changes in investor structure ultimately lead to the continuous increase in the valuation weight of long-term ROE stability in the "pricing system" of A-shares, and reduce the weight of explosive power of short-term performance growth.
For listed companies, it is not easy to maintain high ROE for a long time. However, the increasing dividends and repurchase (stock cancellation) can greatly enable the company's ROE level to resist greater short-term profit growth fluctuations, so the market's focus on profits may be more on a sustainable and stable ROE, while ignoring the fluctuations in the medium and short-term net profit growth.
Tianfeng Securities stated that in the end, the A-share "pricing system" will gradually complete the integration into a mature market, and more and more companies will form a pricing model similar to Coca-Cola (although the growth rate of Coca-Cola in the past five years has been -13%, 9%, -11%, -59%, and 146%, respectively, relying on dividends and repurchase, its ROE can be stable at around 28% most of the time, and the final valuation is 33 times TTMPE). This is a medium- and long-term change brought about by foreign capital after continuous entry, but in the medium and short term, for the leading companies with the most foreign capital, the migration of " discount rate " is another more important impact.
In the DDM dividend discount model or DCF cash flow discount model, the discount rate is the weighted financing cost of a company, but it can also be simplified into a risk-free interest rate plus a risk premium. Or simply put it, it is the annualized rate of return requested by investors.
For domestic investors, they face nominal GDP growth of about 9%. Therefore, the annualized return on assets that domestic investors can accept is no less than 9%. That is to say, the discount rate given by domestic investors in the valuation model must be at least about 9%. For foreign investors, they may face nominal GDP growth of about 6%, and foreign high-yield assets are also very limited. Therefore, the annualized return on assets that foreign investors can accept can be as low as 6%. That is to say, the discount rate given by foreign investors in the valuation model can also be as low as 6%.
This leads to a result. When domestic investors see the PE valuation of 50 times the relevant consumer listed companies at a discount rate of 9%, they find it very expensive because if they buy at such a price, the future annualized rate of return may not meet the needs of domestic investors. In the eyes of foreign investors, buying at such a valuation may far exceed their demand in the future, so even if the valuation of leading consumer stocks reaches 50 times, they are still attractive.
Compared with consumer stocks, Tianfeng Securities believes that behind the outperform of technology stocks is the support of the industrial cycle.
In the construction cycle of 3G and 4G and the subsequent application cycles, the growth sector has shown significant outperforms compared with WindA. The construction cycle of 5G and the subsequent application cycles should also be roughly similar. But the difference may be in the degree of outperformance, which will be smoother than the previous two times but will take longer. Logically, the most important thing about 3G and 4G is the TOC change, targeting consumers, including mobile phones, mobile games, videos, online shopping, various mobile Internet, etc. Mobile phones and VR games may be the first to rise for the TOC side, while most of the rest may be the TOB side, including industrial Internet, big data, artificial intelligence, etc. The degree of standardization in these fields is low and the penetration rate increases relatively slowly.
In addition, the support for technology stock performance is still indispensable for external mergers and acquisitions. From 2013 to 2015, external mergers and acquisitions supported the profits of the GEM very significantly, but with the contraction of policies, the profit growth rate of the external part declined sharply. Entering 2019, with the continuous relaxation of relevant mergers and acquisition policies and the gradual start of a new round of 5G industry cycle, the scale of external mergers and acquisitions of the GEM has increased significantly in the second quarter and year-on-year, which will also provide certain support for the future profits of the GEM.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-