Key investment points:
Industry market review: since February (2022.2.1-2022.3.24), the electronics (Shenwan) sector index has fallen by 10.04%, underperforming the Shanghai and Shenzhen 300 index (- 6.85%) in the same period, ranking second from bottom among 31 Shenwan level industries. In terms of sub sectors, since February (2022.2.1-2022.3.24), discrete devices, electronic chemicals and analog chip design sectors have increased significantly, up 12.52%, 4.19% and 3.95% respectively; Printed circuit boards, consumer electronics components and assemblies, and brand consumer electronics fell significantly, down 12.64%, 16.46% and 19.62% respectively.
The output of integrated circuits increased negatively, and the prosperity of China’s mobile phone market decreased: according to the data of the National Bureau of statistics, the output of integrated circuits in China from January to February 2022 was 57.33 billion, a year-on-year decrease of 1.2%, showing a negative growth for the first time since 2020. In February 2022, the growth rate of China’s IC trade deficit slowed down. According to the data of the General Administration of customs, in February 2022, the import volume of China’s integrated circuit industry was US $29.95 billion, a year-on-year increase of 13.4%; The export volume was US $11 billion, a year-on-year increase of 24.1%, and the trade deficit was US $18.95 billion, an increase of about 7.9% over the same period in 2021, with a decrease in growth rate. In February 2022, China shipped 14.864 million mobile phones, a year-on-year decrease of 31.7%. From January to February 2022, the total shipments of mobile phones in the Chinese market totaled 47.886 million, a year-on-year decrease of 22.6%.
Panel prices continued to decline, and the import and export volume of printed circuit boards fell significantly month on month: in March 2022, large-size panels decreased slightly compared with February 2022, but the overall change was little. The price of 6.22-inch / 7-inch small and medium-sized panels fell significantly. The price in March was $11 / 15.5/piece, down 8.3% and 6.1% respectively compared with February 2022. In terms of panel import and export, in February 2022, China’s printed circuit import volume was US $790 million, with a year-on-year increase of 6.3% and a month on month decrease of 30.1%; The import volume was 2.9 billion pieces, down 16.7% year-on-year and 23.7% month on month. In February 2022, China’s printed circuit exports amounted to US $1.295 billion, an increase of 11.9% year-on-year and a decrease of 36.7% month on month; The number of exports was 2.8 billion, down 9.7% year-on-year and 51.7% month on month.
Maintain the industry’s “synchronous market” investment rating: as of March 24, 2022, the PE of SW electronics sector (excluding negative values) was 29.4 times, significantly lower than the gem index valuation (44.4x) and the science and Innovation Board valuation (42x). From the valuation trend in recent three years, the current valuation is lower than the average level (43.2x). At present, under the background of rapid rotation of industry hotspots in the secondary market, the performance of sub sectors in the electronics industry is also relatively differentiated. There are many theme hotspots in the industry, such as “folding screen”, “Automotive intelligence”, “continuous penetration of VR” and “domestic substitution of Semiconductors”. However, at the same time, the external environment also includes risk factors such as US science and technology sanctions, Russia Ukraine conflict and the expectation of interest rate increase by the Federal Reserve, This tightening of risk appetite is expected to have a negative impact on the technology industry in particular. From a long-term perspective, the demand for 5g + alot, automotive electrification and intelligence, VR / AR, smart home and other application fields will continue to grow. In addition, due to the complex changes in the current international economic and political situation, there is an urgent demand for domestic substitutes in the upstream of chips, electronic components and raw materials. Maintain the investment rating of the electronics industry to “synchronous market”.
Investment suggestion: focus on the three main lines of semiconductor, consumer electronics (VR, folding screen) and automotive electronics. Recommended targets: (1) semiconductors: Semiconductor Manufacturing International Corporation(688981) ( Semiconductor Manufacturing International Corporation(688981) . SH), Advanced Micro-Fabrication Equipment Inc.China(688012) ( Advanced Micro-Fabrication Equipment Inc.China(688012) . SH), National Silicon Industry Group Co.Ltd(688126) ( National Silicon Industry Group Co.Ltd(688126) . SH), China Resources Microelectronics Limited(688396) ( China Resources Microelectronics Limited(688396) . SH), Yangzhou Yangjie Electronic Technology Co.Ltd(300373) ( Yangzhou Yangjie Electronic Technology Co.Ltd(300373) . SZ), Ninestar Corporation(002180) ( Ninestar Corporation(002180) . SZ); (2) Consumer electronics: Shenzhen H&T Intelligent Control Co.Ltd(002402) ( Shenzhen H&T Intelligent Control Co.Ltd(002402) . SZ), Goertek Inc(002241) ( Goertek Inc(002241) . SZ); (3) Automotive electronics: Will Semiconductor Co.Ltd.Shanghai(603501) ( Will Semiconductor Co.Ltd.Shanghai(603501) . SH), Sunwoda Electronic Co.Ltd(300207) ( Sunwoda Electronic Co.Ltd(300207) . SZ).
Risk warning: the game uncertainty in the field of science and technology between China and the United States; The cost of upstream raw materials remains high; The development of advanced technology of Chinese manufacturers may not be as expected.
