Investment-based methodology| Founder Fubon Fund Wu Hao: The medium- and long-term growth of the new energy industry is more certain

#Touji Methodology #157, originally published in Xinhua Finance

On September 24th, Wu Hao, general manager and fund manager of founder Fubon Fund Index Investment Department, was a guest of today's headline financial channel and Xinhua Finance's online interview column "Investment Methodology" to share stock investment strategies. #Dialogue Wu Hao #@Founder Fubang Wu Hao

Profile: Wu Hao, Master of Computer Science, Beijing University of Posts and Telecommunications, served as Vice President of Huaxia Fund Quantity Investment Department from September 2014 to April 2018, and currently served as General Manager and Fund Manager of Founder Fubon Fund Index Investment Department.

Q: Welcome To Mr. Wu Hao, General Manager of the Index Investment Department of Founder Fubon Fund, as a guest of today's headline financial channel and Xinhua Finance's online interview column "Investment Methodology", why has the new energy index soared all the way since last year, and is there room for growth in the future?

Wu Hao: Looking back at the changes in the economic cycle over the past 30 years, technological innovation is an important engine driving economic growth. Looking ahead, I believe that the energy revolution and the technological revolution will be the main drivers of a new cycle and where investment opportunities lie. With "carbon neutrality" becoming a global consensus, the global energy consumption structure dominated by fossil energy needs to be transformed urgently, the energy pattern reshaping trend has been determined, and clean energy will replace fossil energy as the main body of global energy consumption in the future. New energy is the most beneficial link in carbon neutrality, and it is the integrator of the energy revolution and the scientific and technological revolution. Specific to new energy, photovoltaics, wind power and new energy vehicles have changed the energy structure from both ends of power generation and electricity consumption, and the next few years will usher in a golden period of development. China's new energy industry chain not only has the advantages of the domestic market of China's manufacturing industry, good supply chain support, engineer dividends, etc., but also has incubated high-quality leading enterprises and industrial clusters with global competitiveness, and the medium- and long-term growth of the new energy industry is relatively certain.

The fundamentals of the new energy industry in the first half of the year were good, and the sector performed well, significantly outperforming the Shanghai Composite Index and the ChiNext Board. New energy automobile industry to maintain a high state of prosperity, domestic, European and American sales data have year-on-year growth, plate key companies half-year performance is expected to be better, according to the caliber data of the China Automobile Association, August new energy vehicle production and sales of 309,000 units and 321,000 units, new energy vehicle production and sales accelerated again, penetration rate accelerated; wind power, photovoltaics, the past 10 years of global photovoltaic / onshore wind power / offshore wind power electricity costs fell by 82% / 39% / 29%, respectively, With the domestic wind power to accelerate the large-scale upgrading of wind turbines and the improvement of the industrial chain, the decline in the cost of electricity is expected to accelerate, the scale of domestic wind power bidding in 2021H1 is expected to exceed expectations, and it is expected to reach 50GW throughout the year, and the industry's high prosperity is expected to continue, and the growth is prominent; the silicon end game in the photovoltaic industry is nearing the end, the upward trend is marginally slowing, and the industry installed capacity in the fourth quarter and next year is still maintaining positive and optimistic expectations.

From a longer perspective, in the next five years, the compound growth rate of global new energy vehicle sales and new photovoltaic installed capacity is expected to reach 40% and 20%. We continue to be optimistic about companies with strong moats in all aspects of the new energy industry chain and share the growth value of excellent enterprises.

Q: This year's sub-track with high market attention is the new energy vehicle sector, how do you think about the space and future market of new energy vehicles?

Wu Hao: At present, new energy vehicles are similar to smart phones ten years ago, technological breakthroughs and the advent of large single products have opened a boom cycle, the industrial chain is long enough and the market scale is large enough, so we review the industrial evolution and market evolution of Apple's industrial chain:

First, the industrial development analogy:

Industrial development follows the "S-shaped curve", the industrial evolution extends from hardware equipment to software and applications mainly through three stages: 1) the introduction period before 2010, technology and infrastructure have not yet been perfected, the penetration rate is less than 15%, an annual increase of 1-3%, 2) 2010 ~ 2015, with the 2009 3G commercialization, base station equipment and other infrastructure rapid construction, while the iPhone as the representative of the smart phone technology breakthrough, in 2010 smart phone penetration rate exceeded 15%; accelerated development From 2009 to 2015, the compound annual growth rate reached 42.2%;

3) The maturity period began in 2015, and the penetration rate of China and the world exceeded 70% in 2013 and 2015 respectively, respectively, and since then, the sales volume and penetration rate have slowed down.

Compared with smart phones, the consumption frequency of new energy vehicles is lower, and the equipment replacement cycle is longer, so the penetration rate increase rate is relatively slow. The global smartphone penetration rate from 15% to 70% lasted 6 years, and new energy vehicles may take longer, so the important investment window period for new energy vehicles may be longer.

Second, the market evolution analogy:

Review of the market of Apple's industrial chain in 2010-2015: the evolution of the industry began from electronic devices, gradually transmitted to software content and spread to scene applications; (1) 2010-2012: Apple industry chain led to the emergence of hardware devices; (2) 2013: smartphone users exceeded 100 million, 3G technology matured to promote the rapid development of the media industry, driving the vigorous development of the game, video and other content industries; (3) 2014: traditional industries and the Internet deep integration, Internet + Becoming the main theme of investment, Internet finance and Internet medical treatment, the computer industry benefits from this trend. In general, the market value growth of Apple's industrial chain is consistent with the fundamentals, and the annualized growth rate of apple index attributable net profit from 2010 to 2015 is 29.4%, the annualized increase of market value is 35.0%, and the PE valuation center is about 49 times.

The current round of new energy vehicles began in early 2020 and began to accelerate in the second half of 2020, and the valuation of the new energy vehicle sector is currently at a historical high. Under the support of the high prosperity of the industry, the market performance of new energy vehicle-related companies is expected to rise as a whole, but there will be twists and turns in the process. New energy vehicles are currently in the growth period of accelerated penetration, at present, lithium battery prosperity is the highest, looking forward to the future, with reference to the smart phone chain, the prosperity of new energy vehicles is expected to spread downstream, and the business of new energy terminal car companies is gradually expanding to software and services. Under the support of the high prosperity of the industry, the new energy vehicle sector is expected to achieve better market performance in the next few years.

Third, it should be emphasized that nearly 60% of the profits of iPhones are obtained by Apple. The new energy vehicle industry is expected to change this situation, whether it is the middle and upstream parts manufacturing or downstream terminal car companies, China has incubated a globally competitive high-quality leading enterprises and industrial clusters, is expected to occupy a dominant position.

Q: What is the reason for the sudden collapse of the lithium battery plate recently? Are industry fundamentals changing?

Wu Hao: On September 16, the lithium battery plate suddenly fell sharply. Among them, the lithium ore index fell sharply by 8.58%, the salt lake lithium index fell sharply by 6.78%, and many lithium ore stocks with a market value of 100 billion yuan fell to a halt. The photovoltaic and energy storage sectors have also collapsed, and the sector index has fallen by more than 6%. There are mainly two bearish messages:

First: Xin Guobin, vice minister of the Ministry of Industry and Information Technology, said that at present, the cost of new energy vehicles in China is still high, and the power battery, the key component of electric vehicles, is facing the pressure of mineral resources such as lithium, cobalt and nickel and rising prices, and the Ministry of Industry and Information Technology will work with relevant departments to accelerate overall planning and improve the ability to guarantee. —— The market interprets it as the "collection and mining" of lithium ore, which will lead to a decline in prices;

Second, Yapal, the world's largest lithium producer, has recently reached an employment contract agreement with the union at the Salt Lake Salar plant in Atacama, Chile, ending a month-long strike. (The Atacama Salt Flats are the world's highest lithium-containing, largest and most ripely mined lithium salt lakes, and the region supplies nearly a quarter of the world's lithium.) ）

Of course, lithium battery stocks have risen too much before, which is also one of the factors that triggered the adjustment.

1, from the situation of the leading lithium mine, the price of the main product rose from 30,000 yuan / ton in June last year to 150,000 yuan / ton, the price rose by 5 times, still in a state of short supply, the fundamentals have not changed significantly.

2. On September 14, Pilbara, the main lithium mining company in Australia, completed the second lithium concentrate auction, and the auction price reached 2240 US dollars / ton, a new record high, and nearly doubled the first auction price 1 month ago. This reflects the tight supply of global lithium resources; at the same time, coupled with production costs, sea freight, manufacturers of 25-30% gross margin space, lithium carbonate prices are expected to exceed 200,000 yuan / ton, or even higher.

Therefore, we judge that the tight balance between supply and demand continues, and the prosperity is transmitted upwards. In the case of the continuous upward trend of downstream new energy vehicles, the situation of insufficient supply of lithium ore is difficult to alleviate, and the price of lithium concentrate continues to maintain a high and rising trend. The profit margins of lithium salt manufacturers may be squeezed, so it is believed that manufacturers who lay out high-quality lithium resources and manufacturers with scale advantages in the integration of upstream lithium ore and midstream lithium salt will get excess benefits.

Q: How to build an active + quantitative investment strategy?

Wu Hao: Use quantitative methods to enhance the breadth and depth of active investment: active investment relies on the "circle of competence" of fund managers/researchers, quantitative investment can use quantitative analysis methods to systematize the fundamental investment concept, quantitatively portray the key elements and research methods in the fundamental analysis framework, quickly build a stock pool, can provide some scientific basis for active investment, and at the same time can catch "fish that slipped through the net" (especially if our research team is not a particularly large company, which is a convenient method);

2, the use of quantitative methods to improve self-risk control capabilities: quantitative investment can quantitatively decompose and prevent risks, but also has a strong discipline, once there is an abnormal timely "alarm", can always remind me to overcome my own human weaknesses, but also to overcome cognitive biases.

3. Active investment can make up for the dependence of quantitative investment on historical data. History does not simply repeat, the market is also changing rapidly, I will adjust my final investment strategy in time according to my own meso strategy judgment.

Q: Will the market style change in the fourth quarter? Mao index, Ning combination who is the main ups and downs?

Wu Hao: Judging from the calendar effect in the fourth quarter, the low valuation and ROE stable varieties are generally dominant, and the core logic behind it is: the valuation of profitable stable varieties is switched, and the policy stimulus at the end of the year is stimulated. During the epidemic period, interest rate downturn and market liquidity is good for core assets and market pursuit of certainty and other factors, the core assets represented by the Mao index have obtained obvious excess returns, since this year, the denominator has undergone adverse changes, the molecular end has not exceeded expectations, the superimposed valuation level is at a historical high point and the cost performance is low, resulting in the overall correction of the Mao index after the Spring Festival, the simple leader lying to win strategy can be said to have begun to fail, the current Mao index PE in the past 10 years is in the 95.7% quantile (as of September 17), It is still at a high level, as I said before, I don't think it has a good investment value, so I think this year may be similar to the fourth quarter of 2011 and 2018, in the year when the macro economy as a whole is downward, the internal motivation for valuation switching is weak, and the calendar effect may be invalid. Although Ning's combination of light from the price-to-earnings ratio and price-to-book ratio and other indicators, the short-term is indeed suspected of overestimation, but we consider the forecast growth rate in 2022, Ning combined subdivision track new energy vehicles - lithium batteries and components, lithium battery equipment, in addition to photovoltaic - modules, photovoltaic - materials and other tracks are obviously more dominant, 22 years of industry forecast growth rate are more than 45%.

Q: What do you think of the same high-boom track, the chip semiconductor industry and the military industry?

Wu Hao: Since August, the semiconductor sector has pulled back, mainly from the perspective of the supply chain, the prosperity of mobile phones, PCs, passive components, panels and other industries has declined somewhat month-on-month, and the market has begun to worry about whether the prosperity of semiconductors has appeared at an inflection point, and the market has begun to diverge. However, I personally think that it is still necessary to distinguish between the current mobile phones, PCs, panels and other fields, from the perspective of the chain comparison, there are indeed signs of weakening, but the semiconductor equipment, The Internet of Things AIOT field, the demand is still strong. At present, whether it is TSMC, or mainland SMIC, Yangtze River Storage and other fabs, the expansion of production capacity is very clear. At present, the domestic factory line is promoting localization, making the high prosperity of domestic equipment in the next few years very clear, so the semiconductor equipment track, I personally think, is still the most noteworthy. At the same time, the Internet of Everything is the future trend, now the demand for AIOT is also very strong, at present many companies are limited by the impact of production capacity, can not get more capacity and lead to growth rate restrictions, with the subsequent easing of production capacity, AIOT Internet of Things track is also very worth looking forward to.

Compared with China's economic level and status as a big country, China's national defense strength is relatively weak, and a strong country must have a strong army, and only when the army is strong can it be national security. In order to achieve the goal of strengthening the army, the demand for weapons and equipment will be greatly improved in the future. In the later period of the "Thirteenth Five-Year Plan", a number of new weapons and equipment represented by the "20" have completed the finalization or small batch stage, and will gradually enter the batch production period during the "Fourteenth Five-Year Plan" period. The "14th Five-Year Plan" proposes to accelerate the integrated development of mechanization, informatization, and intelligence, comprehensively strengthen military training and combat readiness, and improve the strategic ability to defend national sovereignty, security, and development interests; and for the first time, it puts forward the goal of ensuring that the centenary goal of army building will be achieved in 2027. During the "14th Five-Year Plan" period, the release of new weapons and equipment will drive the rapid growth of demand in the entire industry, and the investment opportunities of related industrial chain companies are remarkable. In the industry, a number of leading enterprises have received large advance payments from downstream customers, major changes have taken place in the payment methods of the industry, the cash flow of enterprises has improved significantly, the predictability of orders in the medium and long term has been significantly strengthened, and the performance growth has been determined.

Q: After a round of adjustment, does the innovative drug have the current configuration value? How do you see trends in the pharmaceutical industry for some time to come?

Wu Hao: China's innovative drug industry started very late, and it is generally believed that the pharmaceutical policy reform that began in 2015 is the beginning of the great development of innovative drugs in China, and it has only been six years now. Although the time is very short, but the progress is huge, now the international mainstream treatment targets domestic enterprises basically have a layout, from the quantitative point of view, the number of many targets of Chinese pharmaceutical companies layout has been globally leading, such as tumor treatment popular PD-1 domestic products have been approved for listing, next year this number may be to double digits, while some foreign pharmaceutical giants began to cooperate with domestic companies, the introduction of domestic company varieties, indicating that some of the products of domestic companies in terms of quality also have global competitiveness.

I generally divide innovative drugs into two parts, one part is the water seller in the upstream of the innovative drug industry chain, and the other part is the downstream innovative drug enterprise. The logic of the water seller is very simple, it is the definitive beneficiary of the prosperity of the domestic innovative drug industry, and China's CXO companies have engineer dividends and manufacturing dividends, and their market share in the world is steadily increasing, as long as these two logics continue to be cashed, CXO has continuous allocation value. The logic of downstream innovative drug companies will be more complicated, and CXO has a wide range of market recognition is different, the capital market is more worried about the domestic hot targets, homogenization of serious competition patterns, the medical insurance bureau as a single large buyer has a very high bargaining power, the competitive pattern of innovative drugs in the medical insurance directory negotiations the price will be very low, but some time ago cde issued the clinical trial guidance guide for oncology drugs put forward higher standards for the research and development of future innovative drugs. The situation of low-level homogenization competition may improve in the future, and in the long run, innovative drugs are the eternal direction of medicine, which is incremental logic rather than stock game, which is worthy of attention. In addition, innovative research and development is after all a high-risk activity, the probability of failure is very large, in the choice of investment targets need in-depth research and professional judgment, so I pay more attention to the bottom-up ɑ for innovative pharmaceutical companies, through the selection of individual stocks to achieve excess returns.

The pharmaceutical industry from the long-term demand side of the certainty is very high, China is about to enter a deep aging society, the medical needs of the elderly compared to the young and middle-aged is doubling, the population policy in the domestic also began to turn to encourage fertility, the demand brought by this head and tail is very certain. However, the medical insurance burden brought about by aging will inevitably lead to further regulation of national policies, and medical insurance control fees will still bring great pressure to the overall development of the pharmaceutical industry, and it is important to choose the right direction for future pharmaceutical investment. At present, several directions are optimistic: (1) the upstream boom brought about by pharmaceutical innovation and research and development and the commercialization of new products, such as R & D outsourcing services, pharmaceutical equipment and consumables, scientific research reagents and consumables, etc.; (2) consumer medical care to meet the healthier and more beautiful needs of the people, do not occupy medical insurance, and have a high long-term prosperity of products and services, such as ophthalmology, stomatology, medical beauty, class II vaccines, etc.; (3) Innovative drugs, innovative devices, innovative vaccines and other new products to bring explosive growth ;(4) High-end pharmaceutical manufacturing with global competitiveness can overcome the pressure of internal volume brought about by domestic policies, and internationalization is the long-term direction of China's pharmaceutical manufacturing.

Funds are risky and investments need to be done with caution. The above is the transcript of the guest interview questions and answers, which only represents the personal views of the interviewees, and does not represent today's headlines and xinhua finance views.