1、 2021 review: emerging manufacturing has sprung up, and there are many hot spots of “+ new energy”
2021 is the most concerned year for the manufacturing industry. While the downturn in the consumer sector has brought more capital attention, the substantial improvement of the overall manufacturing industry profit has become the background of the sector market. From industrial automation to industrial machine tools, from woodworking, sewing, packaging and other special equipment, all ushered in a sharp increase in orders and the full release of performance. In the second half of the year, although the profit growth rate of industrial enterprises began to decline, the logic of “+ new energy” was highly sought after. Traditional manufacturing enterprises who cut into the new energy track received the most full attention from the market. However, we believe that the hot plate is not a clear sky. In 2022, we will still seek investment opportunities from the two dimensions of industrial trend and security.
2、 Outlook for 2022: new infrastructure will lead value remodeling and drive the economy to achieve steady growth
Power grid investment: with the convening of this year’s central economic work conference, China has set “seeking progress while maintaining stability” as the general tone of economic work for many consecutive years. This year’s central economic work conference pointed out that China’s economic development is facing triple pressures of shrinking demand, supply shock and weakening expectations. We believe that new infrastructure will be the key direction of steady growth, and new energy construction and power grid investment will be the main driving force to drive growth. During the 14th Five Year Plan period, the total investment scale of power grid is expected to achieve rapid growth, in which distribution network is still the key investment direction, and the proportion of investment in power grid intelligence and digitization is expected to be further improved. The proportion of new energy power generation continues to increase. The new power system promotes the transformation and upgrading of the power grid. With the superposition of the important underpinning significance of the new infrastructure to the economy under the background of steady growth, we expect that the scale of power grid investment will usher in rapid growth during the 14th Five Year Plan period, in which capital construction investment is the foundation, short board and automation upgrading at the distribution side, and the overall promotion of power grid intelligence, It will be a more important direction for power grid investment. It is recommended to pay attention to investment opportunities in distribution network and smart grid.
Urban pipe network: we believe that the growth rate of urban pipe network investment in the 14th five year plan is expected to increase, focusing on pipeline renewal, environmental pollution discharge, comprehensive pipe gallery and so on. The central economic work conference proposes to carry out infrastructure investment moderately in advance, and requires to accelerate the aging, renewal and transformation of urban pipelines, which is most conducive to the improvement of investment demand for gas pipeline renewal. During the 14th Five Year Plan period, the performance growth of gas pipeline related targets is expected to accelerate. Environmental pollution discharge has always been the focus of making up the shortcomings of urban pipe network, and urban sewage management has become stricter. During the 14th Five Year Plan period, the relevant targets of drainage pipelines will fully benefit from the increased demand for drainage pipelines. The construction of underground comprehensive pipe gallery will continue to move forward during the 14th Five Year Plan period. Especially under the background of steady growth, the initial investment of underground pipe gallery is large, which will bring a strong economic pull. Key projects such as the great protection of the Yangtze River, the diversion of rain and sewage, and the continuous promotion of high-standard farmland construction will also drive the improvement of pipeline demand.
3、 2022 Outlook: high end manufacturing is heating up again, and the long-term trend is still good
Industrial automation: breakthroughs have been made in some fields, and domestic substitution is promising. Industrial automation can improve production efficiency, increase output, improve quality, reduce labor cost and ensure safety. It is also an important basis for modern high-end manufacturing. Developed countries such as Europe and the United States have a long history of industrialization development and have a first mover advantage and leading position in various subdivided fields of industrial automation, especially in the fields of PLC, industrial Siasun Robot&Automation Co.Ltd(300024) , servo system and so on. After years of accumulation, Chinese enterprises have made breakthroughs in some fields. A number of competitive enterprises have emerged in Small PLC, medium and low-end servo system, frequency converter, industrial Siasun Robot&Automation Co.Ltd(300024) and other fields. Generally speaking, the main market of China’s industrial automation is still in the hands of foreign-funded enterprises. Foreign capital in PLC industry accounts for more than 80%, frequency converter industry accounts for more than 60%, servo motor industry accounts for more than 70%, and industrial Siasun Robot&Automation Co.Ltd(300024) industry accounts for about 70%. Chinese enterprises still have huge replacement space.
High end machine tools: the development trend of domestic machine tools is good, and the core parts are gradually overcome. China’s machine tool industry has developed for a short time and entered a period of rapid development in the early stage. However, under the influence of the global economy and the operation problems of state-owned machine tool enterprises, the industry has declined. Since April 2020, the output of China’s metal cutting machine tools has started to rise rapidly and is still growing. Under the background of the steady development of China’s manufacturing industry, the machine tool industry will have a good growth period. At present, China has the strength of localization substitution for medium and low-end machine tools, and a series of competitive machine tool enterprises have emerged, such as Ningbo Haitian Precision Machinery Co.Ltd(601882) , Guangdong Create Century Intelligent Equipment Group Corporation Limited(300083) , Kede Numerical Control Co.Ltd(688305) , Nantong Guosheng Intelligence Technology Group Co.Ltd(688558) , Neway Cnc Equipment (Suzhou) Co.Ltd(688697) , Zhe Jiang Headman Machinery Co.Ltd(688577) . The field of high-end machine tools in China is still occupied by overseas machine tool enterprises. In 2018, the localization rate of high-end machine tools was 6%, which has developed in recent years, but it has not substantially reversed the situation. China still needs to import high-end machine tools of about US $3 billion every year, and there is huge room for localization. At the same time, the CNC rate of China’s machine tool industry also has great room for improvement. Under the current policy environment, the competitiveness of private enterprises can be further withdrawn to lead the overall upward development of the industry. China’s machine tool core parts are gradually breaking through. Servo systems, cutting tools and CNC systems are showing certain competitiveness. There are also Kede Numerical Control Co.Ltd(688305) , Wuhan Huazhong Numerical Control Co.Ltd(300161) and other machine tool enterprises and core parts enterprises with strong independent ability. The independent production of core parts will also enable domestic machine tools to expand to the high-end market.
4、 2022 Outlook: the double carbon trend is making waves again, focusing on energy conservation and emission reduction and hydrogen energy sector
Energy conservation and emission reduction: an important way of green manufacturing, and energy-efficient energy-saving equipment ushered in a growth opportunity. Energy conservation and emission reduction is an important direction of future industrial development. Accelerating the development, promotion and application of energy consuming equipment such as high-efficiency motors and distribution transformers, and eliminating energy consuming equipment such as low-efficiency motors, transformers, fans, pumps and compressors are the long-term trend in the future. Compressors, motors, transformers, fans, pumps and other industrial equipment have great energy-saving potential. In general manufacturing enterprises, the power consumption of compressor air system accounts for 10 ~ 20% of the total power consumption of enterprises. Motor power consumption accounts for about 75% of industrial power consumption. It is not only the main energy consuming product, but also the key to energy conservation and emission reduction in the industrial field. Transformer loss accounts for about 40% of the power loss of transmission and distribution, which has great energy-saving potential. Fan is an important industrial basic equipment. Fan belongs to high-power power consumption equipment. The power consumption of fan in China accounts for about 10% of the total power generation in China. China has made mobile breakthroughs in compressors, transformers, fans, motors and other equipment, but the high-end market has not occupied a leading position, and the competitiveness in some fields is poor. China’s pump industry has fierce market competition and low concentration. Vacuum pumps in the semiconductor field mainly rely on imports. Generally speaking, China’s compressors, transformers, fans, motors and other high-energy consuming equipment are still lack of competitiveness in high-end products, and energy-saving technology has made a breakthrough, but there is still room for improvement in some fields, and there is also a large room for localization substitution in the industry.
Hydrogen energy sector: under the goal of “double carbon”, the new energy revolution has arrived, and hydrogen energy will become an important sub battlefield. Understanding the strategic significance of developing hydrogen energy requires a higher perspective. The main factors restricting the development of hydrogen energy for a long time are the difficulty of technological breakthrough in all links of the industrial chain and the high cost, and the mainstream hydrogen production by reforming fossil energy still causes carbon emissions. However, looking ahead, the development trend of new energy will bring synergy, In the future, hydrogen energy will be completely cleaned mainly by producing hydrogen by electrolyzing water with cheap renewable primary energy, and the most promising application end of hydrogen energy demand is fuel cell. At present, the hydrogen energy industry is very similar to the eve of the outbreak of other new energy sources. Policies guide the expansion of industry scale and industrial technological progress, so as to drive all links of the industry to improve efficiency and reduce cost, and the market demand continues to expand. We believe that the policy drive is accelerated and the development of hydrogen energy industry is driving into the fast lane. Under the goal of carbon neutralization, China has put the development of hydrogen energy at the height of national strategy. Local governments actively formulate hydrogen energy support plans. The current policy strength and development determination can also be seen from the amount of industrial investment. In addition, under the double cycle pattern, the hydrogen energy industry also ushers in the opportunity of domestic substitution. At present, there is a significant gap between the required materials and equipment and foreign technologies in hydrogen preparation, transportation or fuel cell preparation, with low overall self-sufficiency rate and large import substitution space. It is suggested to pay attention to hydrogen energy equipment enterprises with leading technology advantages.
Risk factors: the prospect of manufacturing industry is less than the expected risk, the domestic substitution process is less than the expected risk, the risk of policy change, the expansion of new energy industry chain is less than the expected risk, the risk of raw material price fluctuation, the risk of repeated epidemic, etc.
