Key investment points
The semiconductor industry is booming, and the performance of Chinese equipment enterprises has the flexibility to improve
TSMC achieved a revenue of $17.6 billion in Q1 in 2022, which was higher than the upper limit of previous performance guidelines, with a year-on-year increase of 36% and a month on month increase of 11.6%; The gross profit margin was 55.6%, an increase of 2.9pct month on month, indicating that the current industry boom is continuing to rise; TSMC expects capital expenditure to be about US $40-44 billion in 2022, with a year-on-year increase of 33.3% – 46.7%, reflecting optimistic expectations for downstream demand. Electric and intelligent vehicles need considerable sensors, while automotive electronic technologies such as intelligent cockpit, intelligent driving and v2x will significantly stimulate the demand for semiconductors. Frost & Sullivan predicts that the scale of China’s integrated circuit market will reach 1.4 trillion in 2024. Semi predicts that the potential expansion capacity of 8 / 12 inch wafer factories in mainland China will be about 42 / 1.2 million pieces / month respectively, corresponding to the strong demand for semiconductor equipment. The US sanctions and squeeze events further highlight the importance of self-control. The verification of new domestic machines is expected to be actively promoted and accelerate the performance of domestic equipment enterprises. In addition, with the diversification of the product layout of China’s semiconductor equipment enterprises, it is expected to appropriately smooth the cyclical impact and make the performance more flexible. It is suggested to focus on Advanced Micro-Fabrication Equipment Inc.China(688012) , Naura Technology Group Co.Ltd(002371) , shengmei Shanghai, etc.
China’s boom in the oil service industry continues and overseas recovery is imminent
Affected by the changes in the situation in Russia and Ukraine, the Brent oil price has returned to more than $110 / barrel, and the crude oil price is higher than the comfort zone, which is expected to drive the increase of upstream capital expenditure. It is expected that the overseas oil service market will enter a recovery period in 2022. From China’s perspective, the rising dependence on crude oil and natural gas is more than 70% and 40%, so it is urgent to ensure national energy security. Driven by the “seven-year action plan”, the “three barrels of oil” have increased capital expenditure. CNOOC expects to double the workload and proved reserves by 2025, of which the proved reserves will exceed 5 billion barrels. China’s offshore oil and gas resources have great exploitation potential and sustainability. China Oilfield Services Limited(601808) , as the leader of offshore oil and gas exploitation service, the company has the advantages of technology and scale, and has strong profit elasticity in the recovery period of global oil service.
Industry rating and opinion update this week
China’s manufacturing industry is in a period of continuous transformation and upgrading, which will bring broad market space to the high-end equipment industry and maintain the industry’s “overweight” rating. It is recommended to focus on industrial automation, self controlled semiconductor equipment, carbon neutralization, accelerating new energy industry and benefiting photovoltaic equipment and lithium battery equipment, urban rail equipment benefiting from new infrastructure, and oil service industry gradually recovering under the promotion of energy security.
This week’s core recommendations
Advanced Micro-Fabrication Equipment Inc.China(688012) : the leading position of the company in the etching field of semiconductor equipment and the gradual expansion of the company’s MOCVD equipment in the field of miniled. The company is committed to building a platform company and will gradually grow into an influential semiconductor equipment company in the world.
Guangzhou Grg Metrology&Test Co.Ltd(002967) : the third-party detection track has excellent characteristics of strong growth and weak cycle, and the policy guidance is good for the leading enterprises; The performance of traditional business is relatively excellent, and cultivating business is waiting for the optimization of customer structure; The business structure and customer strategy are optimized and adjusted, the production capacity is gradually released, and the profitability is expected to be repaired.
China Oilfield Services Limited(601808) : as the leader of offshore oil and gas exploitation services, the company occupies the advantages of technology and scale, and has strong profit elasticity in the recovery period of global oil service; China has benefited from the steady increase in the certainty of “three barrels of oil” capital expenditure under the national energy security strategy, and the company is expected to enter the release period of profit flexibility.
Risk tips
The macroeconomic boom is lower than expected; China’s fixed asset investment is less than expected; The implementation of policies in key industries is less than expected; There is uncertainty in the company’s promotion of relevant matters.
