The end of the policy has been realized. Strategically, we should maintain a long thinking, and lay out two counter offensive directions: hard technology and high-end manufacturing and dilemma reversal
The end of the policy has been realized, and the long thinking has been maintained strategically. The current progress of the epidemic, the crisis in Ukraine and the derived geopolitical game suppress the reversal of market fundamentals and valuation. The recent rapid rotation of the A-share market industry shows the short-term side of market returns, and also shows that investors do not want to bear the risk of further pullback and do not want to miss the potential benefits. In this regard, we believe that we should maintain a long thinking strategically, because the impact of the epidemic and the crisis in Ukraine will eventually pass, and the main contradiction in the market is the persistence of inflation. At present, inflation is more likely to be caused by the supply factors of the epidemic and the crisis in Ukraine, which is characterized by large fluctuation and short time. As the global short cycle enters recession, it is expected to see an inflection point of downward inflation in the second half of the year at the latest. We suggest paying attention to two major market counter offensive directions: first, hard technology and high-end manufacturing, including semiconductor industry chain; Lithium, photovoltaic, wind power and new energy sectors; Military industry, innovative medicine, etc. What these industries have in common is that most of them are in the upward stage of capital expenditure, positive catalysis of industrial policies, high performance growth and sustainability. The stock price correction in the early stage came from the extrusion of the valuation side, and the gap between roe and valuation widened. Once the macro constraints are relieved and the performance is high, the valuation has a stronger upward return power. Second, the dilemma reverses the direction, including midstream manufacturing, such as consumer electronics, TMT soft technology, pig cycle, etc. The common characteristics of these industries are that the performance is in the process of clearing, the organization is low, the chip structure is good, and the valuation is in the historical depth value range. Once the price of upstream raw materials drops and the pressure factors such as capacity clearing are relieved, the stock price will have a strong cyclical recovery power.
Under the pressure of foreign capital outflow, the layout on the left needs to pay more attention to the matching of profit and valuation. Since late February, the A-share market has fluctuated sharply under the disturbance of external factors. In the month from February 25 to now, the net outflow of funds from northbound has reached 67.930 billion yuan, the second largest in the history of net outflow in a single month, second only to the impact of China’s epidemic outbreak in March 2020. From the industry distribution of the recent reduction of northbound funds, the main direction of early foreign positions such as food and beverage, non bank and medicine has become the “hardest hit area” of capital outflow. From the perspective of the matching degree of current profits, the current valuation of these industries is obviously high. Looking back, the pressure of RMB exchange rate depreciation may still exist during the year. The conflict between Russia and Ukraine has increased inflationary pressure. At present, the Federal Reserve will take a more hawkish stance to suppress market inflation expectations. In this context, the interest rate gap between China and the United States may face narrowing pressure, global capital flows back to the United States, and the risks of exchange rate depreciation and foreign capital outflow still exist. From the perspective of the general trend, the current A-share valuation has been highly attractive. In the future, with the gradual stabilization of China’s credit environment and the cooperation of the liquidity environment, the market is expected to gradually usher in a recovery. At present, the market is still in the bottom grinding stage, which is a better opportunity for the layout on the left. In terms of the choice of rebound direction, we need to be vigilant against the direction of high proportion of foreign positions in the early stage and mismatched profit valuation. We can focus on the direction of low valuation and marginal reversal of profit expectation.
Pay attention to the pig cycle with large expected elasticity in the next year g and the consumer electronics industry. Previously, the inflection point of the supply side is expected to be from July to August this year, but the drought in South America and the conflict between Russia and Ukraine have led to a sharp rise in the price of feed at the cost side, and the losses of breeding enterprises have expanded, driving the expectation that the intensification of the pig cycle can be accelerated, and the inflection point is expected to appear in advance. Superimposed with higher inflation expectations and lower market risk appetite, the necessary consumption attribute also helps to strengthen the logic of the sector. It is expected to strengthen the market preference in the initial stage, and select the companies with more aggressive marketing volume setting targets / low pig market rate in the next year. Under the constraints of multiple factors of consumer electronics, the change cycle of consumers has been prolonged, and the operation of subdivided sectors continues to be under pressure. At present, the sector has priced the implied pessimistic expectations, and the industry’s relative all-a valuation has reached the bottom of history, falling below the most pessimistic 18q4 level. Looking ahead, smartphone shipments are expected to resume growth in the second half of the year, the current channel inventory remains low, and the cost side, economy and epidemic situation are also expected to improve in the second half of the year. The folding screen, automotive electronics and AR / VR at the starting point of the innovation cycle are about to break out. Traditional consumer electronics enterprises have the advantage of card position, which is similar to giving implicit call options to the current sector, making the current industry have better configuration and cost performance, and are expected to gradually enter the reversal range.
Focus on the plight and reversal opportunities of the agricultural sector. There are three main reasons for the recent rise of the agriculture, forestry, animal husbandry and fishery industry. First, the policy emphasizes food security, strengthens weaknesses and improves the competitiveness of the industry. Based on this, the policy direction is to ensure supply and increase production on the one hand, and improve the efficiency and energy of all links of the industrial chain on the other hand; Second, geopolitical events have affected global food stability. The situation in Russia and Ukraine has driven the general rise of Shenzhen Agricultural Products Group Co.Ltd(000061) prices through risk aversion and the linkage of crude oil prices; The third is the reversal of the pig cycle, which is also the factor that has the greatest impact on the stock prices of relevant listed companies. At present, the pig price has not reversed, the cycle is still on the left, and the head average market value valuation is below the center. Standing on the left side of the cycle, the core catalyst of the market is not profit, but the clearing of production capacity. The rise of grain prices, including the rise of feed raw materials, has an accelerator like impact on the current situation of the pig industry chain. Considering the high dependence on foreign trade of some grains in China and the vulnerability to the influence of peripheral markets, as well as the recent geopolitical background and China’s policy incentives, as well as the possible reversal of the pig cycle, the agriculture, forestry, animal husbandry and fishery industry may turn for the better, it is a difficult reversal industry with high certainty.
Risk tip: the counter cyclical policy is less than expected, and the epidemic situation is worse than expected.
