Event:
Up to now, the 2021 annual report and the 2022 quarterly report have all been disclosed. Our comments are as follows.
Comments:
\u3000\u30001. The profits of A-Shares have been repaired, and the profits of upstream, middle and downstream have been differentiated
The net profit attributable to the parent company of wandequan a in Q1 this year has changed from – 9.4% in Q4 in 2021 to 3.39% year-on-year. The overall profit of the market has been repaired to a certain extent. The roe of wandequan a also increased from 1.48% of Q4 in 2021 to 2.56%.
In terms of sectors, in Q1 2022, due to the conflict between Russia and Ukraine, the price of bulk commodities increased, the profit of upstream resource products increased faster, and the profit of middle and downstream manufacturing industry was under pressure. Among CITIC’s primary industries, the growth rate of parent net profit of upstream industries related to energy and materials is generally high. For example, the parent net profit of non-ferrous metals, coal, basic chemical industry and petrochemical industry is 123.9%, 82.3%, 39.6% and 25.4% respectively year-on-year. The profits of middle and downstream manufacturing industry are squeezed due to the rise of upstream raw material prices. Only the performance growth of power equipment, new energy and communication industry in medium and high-end manufacturing field is positive, The net profit attributable to the parent company was 26% and 13.9% respectively year-on-year. The performance of the transportation industry also ranks in the forefront, with a year-on-year rate of 45.6%.
Under the influence of the epidemic, the pharmaceutical and food and beverage industries representing mandatory consumption showed some resilience, and the growth rate of net profit attributable to the parent was 28% and 16.7% respectively. In contrast, affected by the covid-19 epidemic prevention and control in China, the agriculture, forestry, animal husbandry and fishery industry bottomed out twice in the pig cycle, and the growth rate of net profit attributable to mothers was – 194.5% year-on-year. In addition, the growth rate of parent net profit in non bank financial and real estate industries also declined, with – 40.5% and – 42.5% respectively. However, the banking industry has achieved a slight positive growth, with the growth rate of net profit attributable to the parent company being 8.6%.
In terms of return on net assets, under the background of covid-19 epidemic, the roe of food and beverage sector remained the highest in the whole industry, reaching 6.8%. The roe of pharmaceutical biology also ranked high, with 4.3%. In addition, upstream resource products industries such as coal, non-ferrous metals, basic chemical industry and petrochemical industry generally have high roe, which are 5.6%, 4.7%, 4.6% and 3% respectively. According to the upstream, middle and downstream indexes, the roe of CSI upstream, middle and downstream indexes are 4%, 2.6% and 3% respectively. We believe that with the support of demand, the process of profit distribution to the upstream has not ended, and the profits of the upstream resource products industry still have a certain toughness. The profits of the middle and lower reaches of the manufacturing industry may still be under pressure under the influence of high costs.
\u3000\u30002. In the field of manufacturing growth, industries such as defense and military industry, power equipment and semiconductor have a high prosperity
According to the industry classification of Wande CITIC, in the subdivided fields related to manufacturing upgrading, the net profit of defense and military industry, power equipment, semiconductor and other industries increased rapidly in the first quarter of 22 years. Among them, the national defense and military industry benefited from the continuous expansion of demand and strong profitability. After achieving a good start in the 14th five year plan, the gross profit margin increased significantly in the first quarter of 22 years; Relevant enterprises have sufficient confidence in future development, and the growth rate of capital expenditure is relatively high. In the field of aerospace, the downstream demand of aircraft main engine plants and airborne subsystems is strong, orders are increasing, and contract liabilities are growing rapidly year-on-year. The gross profit margin of the semiconductor industry has increased steadily. Although roe has decreased slightly, the overall trend is relatively stable. Driven by the demand of high boom tracks such as new energy vehicles, the prospect is optimistic. The roe of power equipment rebounded in the first quarter of 22 years, and its profitability was stable. On April 15, the national development and Reform Commission said that it would promote the construction of energy infrastructure in accordance with the requirements of moderately advanced infrastructure investment. It is believed that the field of power equipment is expected to continue to grow with the support of the new policy.
\u3000\u30003. In the field of consumption, alcohol and household appliances have greater recovery elasticity
Compared with the manufacturing industry, the pricing power of some areas of consumer goods is relatively strong, which can transfer the upstream cost pressure to a certain extent. From the first quarterly report, the net profit of alcohol and household appliances increased year-on-year, and their overall gross profit margin and roe rebounded significantly, with enhanced profitability.
In terms of alcohol, in the long run, the logic of profit growth remains unchanged and the momentum remains unchanged. Taking Baijiu as an example, its profit growth space mainly comes from the price upgrading of existing products and the nationwide expansion of the market, which are in the ascendant. Since Q2 of 21 years, the overall gross profit margin of alcohol has not been disturbed by the epidemic, showing a continuous upward trend, rising from 69.26% to 74.12%, an increase of 7%. In the future, with the improvement of the epidemic situation, the overall consumption of alcohol is expected to be replenished. Alcohol consumption scenes are divided into banquet, business, gift giving, self drinking, etc. After the epidemic situation improves, banquet scenes will be supplemented, and business and gift giving scenes will also increase with the continuous improvement of economic activity, driving the rise of overall alcohol consumption.
The early repressive factors in the field of household appliances are gradually alleviating, and the profit inflection point may have appeared. Household appliances have three attributes: manufacturing, real estate and consumption. In the early stage, the home appliance industry was mainly suppressed by factors such as the high price of bulk commodity raw materials, the downturn of real estate, the suppression of epidemic situation, online logistics and offline sales. According to the data released by China Electronic Information Industry Development Research Institute, the overall retail sales of China’s home appliance market in 22q1 decreased by 11.1% year-on-year. Recently, the repressive factors began to improve marginally. Since May, the prices of relevant raw materials have fallen as a whole. With the support of policies, the real estate is expected to recover, the epidemic situation has improved, and the logistics has gradually recovered. Therefore, looking back, the home appliance industry is about to usher in the dawn. In terms of breakdown, the profits of household appliance enterprises with installation attributes such as white electricity (refrigerators, air conditioners, washing machines, etc.) in the first quarter were mainly affected by the epidemic control, but the year-on-year growth rate of 22q1 contract liabilities was stable, which showed that the orders of enterprises were relatively full and there was still room for repair in the future.
\u3000\u30004. Investment advice
Affected by the strong interest rate hike attitude of the Federal Reserve, the continuation of geopolitical events in Russia and Ukraine and the rebound of the epidemic in China, the market’s earlier profit expectation of A-share listed companies has been revised down. With the disclosure of the first quarterly report, the performance of some leading companies is lower than expected, which also gives market investors reasons to sell. At present, the epidemic in China has been gradually controlled, the market’s expectation of the Fed’s interest rate increase is close to the peak, and the impact of Russia and Ukraine on the capital market is also passivating. With the sustained development of the steady growth policy, investors’ confidence in the repair of economic fundamentals has been boosted, and the market has rebounded recently. Based on the fact that the asset prices of most industries have fully taken into account the adverse factors outside China and the valuation is at the bottom of history, we believe that there is little downward space for A-Shares in the later stage. However, the restoration of economic order will not be achieved overnight. Therefore, in the short term, the value will continue to dominate until the steady growth policy is fulfilled. In the direction, it is suggested to pay attention to investment opportunities in stable growth fields such as infrastructure and real estate, as well as the main line of epidemic recovery and resumption of work and production. In addition, in the context of rising global inflation, the profits of the upstream sector are still expected to remain high.
Risk warning: the epidemic situation exceeded expectations; China’s policy implementation was less than expected.
