I. from a top-down perspective, when does the undervalued blue chip last?
1. What do you think of the “virtual” and “real” of the Fed’s interest rate hike?
Since November 21, what consensus and industry opportunities does this China US video conference contain How to lay out the “vacuum period” of the current market And other reports took the lead in suggesting that the overall hawks of the Federal Reserve will continue to exceed expectations. The current focus is whether the Fed’s interest rate hike is a real interest rate hike or just like the “oral interest rate hike” in 2016? We believe that there may be three conditions that may make the Fed ease its interest rate hike – systemic risks in US stocks, systemic risks in the US economy, or a sharp decline in US inflation. Before that, the Fed’s real interest rate hike may not be underestimated. According to the impact of the Fed’s interest rate hike cycle on A-Shares in history, the overvalued sector has been greatly impacted, and the market / low P / E ratio has a relatively obvious performance in both the first interest rate hike and the whole interest rate hike cycle.
2. What is the rhythm and intensity of China’s “steady growth”?
At present, under the “steady growth” policy, credit easing has achieved initial results. In terms of rhythm, it is expected that the economic data in the first quarter of this year will be significantly better than the pessimistic expectations of the market, the second quarter or stage will decline, and the data is expected to stabilize after the third quarter. In terms of strength, the overall steady growth this year may show a situation of “trust but not action”. From the perspective of means of stabilizing growth, the overall real estate is dominated by “passive relaxation”. The central government can make efforts, and the annual deficit rate target may not be lower than the level of 3.2% last year. However, local finance is subject to the decline of land transfer fees and implicit debt. Although it will also make efforts, there is limited space. Therefore, monetary policy will become the main body of steady growth throughout the year. It is expected that interest rate and standard cuts in small steps will run through the whole year.
3. When will the undervalued blue chip last?
According to our previous resumption of the four rounds of market with relatively dominant value blue chips since 2010, it is found that the early stage of the market is mainly catalyzed by policy easing. If the subsequent economic data can confirm the expectation, the market value style may continue. At present, it is still in the stage of wide credit, and there is still a long way to go before the economic data bottoms out and picks up. At present, there is still room for the undervalued sector to repair, and the boom advantage margin of the growth sector has decreased. At present, the undervalued blue chip market is far from over.
The current economic data in the first quarter exceeded expectations + the potential benefits of the comprehensive registration system. It is expected that the undervalued blue chip line will last at least until the first half of this year. As mentioned earlier, it is expected that the economic data in the first quarter of this year will be significantly better than the pessimistic expectations of the market, superimposed with potential benefits – the impact of the comprehensive registration system on the financial sector, steady growth and the end of the three-year pilot reform of state-owned enterprises are all concentrated on undervalued blue chips. This year, with the comprehensive registration system, including the acceleration of small ticket supply and delisting mechanism, large and small tickets may “attack and defend different trends” again.
4. What is the benefit direction of “steady growth” undervalued blue chip?
(1) from the perspective of industry, since the central government is the main body of steady growth, it focuses on 102 key industries involved in the 14th five year plan, such as railway, electric power, etc;
(2) from the perspective of the main body of enterprises, considering the weakening of the endogenous kinetic energy of private enterprises and private real estate enterprises mentioned above, central enterprises will be the key field of steady growth resources. This year is the last year of the three-year pilot of state-owned enterprise reform, and many central enterprises that have carried out equity incentive will enter the performance fulfillment evaluation period.
(3) from the perspective of valuation, the current leading dividend rate of central enterprises is higher in the global mainstream market, while the valuation is lower, which is a veritable undervalued depression. It is suggested to focus on the leaders of central enterprises that have done equity incentive or high dividend in the past two years.
(4) in terms of capital market policy, the most important policy this year and still underestimated by the market is the implementation of the comprehensive registration system. By studying the market rules before and after the implementation of major capital market reforms such as the registration system of the science and innovation board in 2019, the registration system of the gem in 2020 and the split share structure reform, it can be found that securities companies will have very obvious performance opportunities with the corresponding favorable policies of the capital market. After superimposing the inflection point changes in residents’ expectations of “house prices rising forever”, The demand for wealth management from real estate and financial management to capital market allocation broke out. This year, we are firmly optimistic about the performance opportunities of securities companies.
II. From a bottom-up perspective, where are the segmentation opportunities for undervalued blue chips? (Sun Ying, Zhongtai building materials & new materials, Xie Honghe, Zhongtai nonferrous metals, Lu Yunting, Li Bo, Zhongtai chemical, Chen Chen, Zhongtai coal)
1. Building materials: Social Finance and special bonds have made a good start, and continue to recommend the target of stable growth chain; The marginal recovery of real estate and the opportunity of brand building materials throughout the year are worth looking forward to. The growth rate of social finance is higher than expected, the implementation of projects / special bonds is accelerated, and the capital construction is expected to grow steadily. Attention is paid to investment opportunities in industries with high proportion of capital construction such as cement, water reducer, pipe and waterproof.
2. Nonferrous metals: in the context of steady growth, we mainly focus on two dimensions (1) base metals: China’s economic work in 2022 is set to be “steady”. Social finance greatly exceeded expectations in January. It is expected that the follow-up steady growth policies will be gradually introduced to support the confidence of base metal demand. However, from a global perspective, 1) changes in the structure of overseas economic demand before, during and after the epidemic, 2) the core trend of overseas demand is not to tighten the supply structure. In terms of the supply and demand structure of the medium cycle from 2022 to 2023, under the stable growth, the policies of large infrastructure and real estate enterprises are strict, and the valuation structure of base metal electrolytic aluminum may be as difficult to break as coal. The whole industry will make considerable profits with high price + low-cost green power / coal power. (2) New energy upstream raw materials (rare earth, lithium, copper foil, aluminum foil, etc.): the short-term prosperity is still strong, and the general direction of the medium and long-term three-year prosperity upward cycle will not change. The industrial prosperity is the most clear and firmly optimistic.
3. Insurance: since the beginning of this year, the share price of insurance stocks has been driven mainly by risk avoidance, especially by overseas funds, as well as the improvement of the asset side related to real estate and the asset quality of bank stocks. The liability side is still weak. It is suggested to pay attention to the good fundamentals, and the asset side benefits from steady growth and overseas interest rate hikes, such as AIA. First, the rise of US bond interest rate has increased AIA’s reinvestment income. In terms of a shares, we are optimistic about China Life Insurance Company Limited(601628) . The bank stocks it invests in perform well. At the same time, the liability side is relatively good in Chinese insurance stocks, with a high staff increase rate and a dynamic team.
4. Chemical industry: we are optimistic about real estate related chemical products represented by MDI. In the high valuation sector, high and small market value stocks still face potential risks. For the undervalued blue chip targets of the chemical sector this year, we suggest to focus on Wanhua Chemical Group Co.Ltd(600309) and Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) .
5. Coal: at present, coal stocks have ushered in a better investment time. Coal has long been an undervalued and high dividend blue chip. After experiencing the sharp rise and fall of coal prices in 2021, the fluctuation of coal prices will be greatly reduced under policy regulation this year, and the fluctuation range is relatively clear. The profitability of coal enterprises is generally better and more stable. After the sharp correction in the early stage, the valuation is generally lower. We still emphasize the value of the stock capacity of the coal industry, which must be paid attention to. Companies with high proportion of long-term cooperative have higher certainty of performance growth, and companies with high proportion of market coal can be preferred with high risk preference. 1) Power coal: Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) , Yankuang energy, China Shenhua Energy Company Limited(601088) , Shaanxi Coal Industry Company Limited(601225) , power investment energy. 2) Metallurgical coal: Pingdingshan Tianan Coal Mining Co.Ltd(601666) , Shanxi Coking Coal Energy Group Co.Ltd(000983) , Huaibei Mining Holdings Co.Ltd(600985) , Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) . 3) Anthracite: Shanxi Lanhua Sci-Tech Venture Co.Ltd(600123) .
Risk warning: the risk of coal price falling more than expected; Safety production risk; Risk of excessive concentration of profitable business; The public data used in the research report may have the risk of information lag or untimely update; The demand is less than expected; Deterioration of cash flow; The prices of raw materials and energy rose sharply; Technological change; The information lags behind or is not updated in time; The calculation of industry scale is biased, the implementation of relevant reform policies in the field of common prosperity is less than expected, and China’s macroeconomic growth rate exceeds the expected downside risk.
