summary
May Strategy: Tactically focus on switching rather than offense. With the catalysis of short marginal factors, the orderly opening and resumption of work in Shanghai, and the landing of interest rate hikes by the Federal Reserve, A shares are expected to usher in a certain rebound in the first half of May. However, due to the fact that the earnings outlook and credit easing path are still vague, we believe that the stock market has not yet reached the time to reverse, and after the rebound, it is still dominated by weak index consolidation and structural opportunities. In the rebound, we believe that the tactical focus is not on the offense, but on the style switch, from growth to value, growth rebound to switch. The correction of supply capacity in the supply chain is not the core contradiction of the current market, the core of the market lies in the need for demand recovery and the trend of inflation. The growth style will still face downward revisions in earnings expectations and crowded trading structures in the future. The focus of investment is on low-risk characteristics of stocks, layout and steady growth associated with cycles and consumption.
The Politburo meeting focused on risks and clarified the "bottom line thinking". The focus of the April 26 Meeting of the Central Financial and Economic Commission and the Politburo on April 29 was to clarify the "bottom line thinking" and A shares returned to 3,000 points. The Politburo put forward the idea of "preventing the epidemic, stabilizing the economy, and ensuring development", and "striving to achieve the expected goals of economic and social development for the whole year" and "preventing the occurrence of various 'black swans' and 'gray rhinoceros' events", and the positive statement will help alleviate the current nervousness of investors to a certain extent. At the same time, the Politburo stated that "optimizing the supervision of pre-sale funds for commercial housing" and "introducing specific measures to support the healthy development of platform economic norms" will also help alleviate the cash flow risk of the real estate industry and the risk of platform economic supervision, and the risk expectation can be reduced in stages.
The complexity of the current macro environment and the lack of momentum for credit expansion should be recognized. The Politburo meeting clarified the optimization of the supervision of real estate pre-sale funds, but this measure will only help alleviate the risk of cash flow repayment of real estate companies, and there is still uncertainty about the willingness of real estate companies to expand their balance sheets and start new construction under the constraints of "housing and not speculation" and the lack of financing channels with high-risk preferences (such as shadow banks in the past). Coupled with the downward pressure on export growth and the weak willingness of residents and enterprises to spend capital, the current momentum of economic growth and credit expansion lacks effective support. Therefore, investors should not underestimate the complexity of the macro today.
Monarch Strategy May 2022 Gold Stock Portfolio: 1, Building Materials: Oriental Yuhong; 2, Construction: China Railway; 3, Coal: Jingyuan Coal Power; 4, Real Estate: Financial Street; 5, Steel: Fangda Special Steel; 6, Food and Beverage: Fuling Squeezed Vegetables; 7, Agriculture: Makihara Shares; 8, Trade and Retail: Chongqing Department Store; 9, Finance: Bank of Chengdu; 10, Dianxin: Meichang Shares.
directory
01 Monarch Strategy May 2022 Gold Stock Portfolio
02 Summary of views
2.1. Strategic perspective: Tactical emphasis is placed on switching rather than offense
Researchers: Fang Yi, Xia Shilin, Huang Weichi
The Politburo meeting focused on risks and clarified the "bottom line thinking". For nearly two weeks, investors have sold off equity assets and expressed concerns about the stalled growth prospects at valuations below the bottom of the 2018 and Q1 limits in 2020. The focus of the April 26 Meeting of the Central Financial and Economic Commission and the Politburo on April 29 was to clarify the "bottom line thinking" and A shares returned to 3,000 points. The Politburo put forward the idea of "preventing the epidemic, stabilizing the economy, and ensuring development", and "striving to achieve the expected goals of economic and social development for the whole year" and "preventing the occurrence of various 'black swans' and 'gray rhinoceros' events", and the positive statement will help alleviate the current nervousness of investors to a certain extent. At the same time, the Politburo stated that "optimizing the supervision of pre-sale funds for commercial housing" and "introducing specific measures to support the healthy development of platform economic norms" will also help alleviate the cash flow risk of the real estate industry and the risk of platform economic supervision, and the risk expectation can be reduced in stages.
The idea of camera regulation ensures the counter-cyclical action ability of policies when necessary. The Politburo meeting did not continue the "prudent" and "moderate" formulation of monetary policy in the past, but was adjusted to "seize the opportunity to plan incremental policy tools and increase the intensity of camera regulation and control". At the same time, the Politburo meeting stressed the need to "make every effort to expand domestic demand and play a key role in effective investment" and "comprehensively strengthen infrastructure construction". The above changes may mean that when necessary, especially in the context of risk shocks, policy tools can be more aggressive or even aggressive, with the ability to act counter-cyclically.
However, we should still recognize the complexity of the current macro environment and the lack of credit expansion momentum. Although the Politburo meeting highlighted the steady growth of infrastructure investment and the optimization of the supervision of real estate pre-sale funds, this measure only helps to alleviate the risk of cash flow repayment of real estate companies, and there is still uncertainty about the willingness of real estate companies to expand their balance sheets and start new construction under the constraints of "housing and not speculation" and financing channels that lack high-risk preferences (such as shadow banks in the past). Superimposed "epidemic prevention" is placed in the first place, export growth is facing downward pressure and the willingness of residents and enterprises to spend capital is weak, and the current momentum of economic growth and credit expansion still lacks effective support. Therefore, investors should not underestimate the complexity of the macro today.
Tactical emphasis is placed on switching, not offense. With the catalysis of short marginal factors, Shanghai's orderly opening up and resumption of work, the Fed's interest rate hike landing, looking forward to the first half of May A shares are expected to usher in a certain rebound. However, as the earnings outlook and credit easing path are still blurred, we believe that the stock market has not yet reached the time to reverse, and the rebound is still dominated by weak index consolidation and structural opportunities. In the rebound, we believe that the tactical focus is not on the offense, but on the style switch, from growth to value, growth rebound to switch. The correction of supply capacity in the supply chain is not the core contradiction of the current market, the core of the market lies in the need for demand recovery and the trend of inflation. The growth style will still face downward revisions in earnings expectations and crowded trading structures in the future. The focus of investment is on low-risk characteristics of stocks, layout and steady growth associated with cycles and consumption.
Investment opportunities in stocks with low-risk characteristics: low valuation, performance, performance determination. Industry recommendation: 1) the direction of holding physical assets and having stable cash flow: coal, chemical resources, second-tier central state-owned enterprise real estate, banks; 2) the direction of public investment led by government expenditure: construction, power grid, wind and photovoltaics; 3) dilemma reversal, the core focus on supply-side in-depth optimization: pigs, liquor and consumer services, Q2 focus on the emergence of consumer building materials, steel investment opportunities.
See the report for details:
"Tactical emphasis on switching, not offense - April 29 A share quick review" 2022-04-29
2.2. Macro Perspective: The First Step to Regaining Confidence
Researchers: Dong Qi, Chen Liqing, Huang Runan, Han Zhaohui
The meeting was very cautious about setting the tone for the current economic environment, and concerns about subsequent uncertainties increased. The growth challenges, employment pressures and inflation risks facing The country have been clearly pointed, and it has stated that "we will strive to achieve the expected target of social development for the whole year and keep the economy operating in a reasonable range" This is the background for promoting policy heating.
In the epidemic prevention situation, "adhere to the dynamic clearance and unshakable" and "minimize the impact of the epidemic on economic and social development" to balance. However, under the characteristics of this round of epidemic, dynamic zero clearance is still the first principle, which is the fundamental guarantee for the victory of the 20th National Congress of the Party, and further local optimization and overall consideration are the flexible space that accompanies the changes in the epidemic situation. Without a repair premise, there is no room for resiliency. In the face of the impact of epidemic prevention, ensuring logistics and ensuring the industrial chain supply chain is the primary task derived.
The three axes of steady growth are reflected in the infrastructure, real estate and platform economy.
The general direction of stable growth is still investment, especially in the field of infrastructure. The all-out and comprehensive statements in the press release are all concentrated in the field of infrastructure investment. Coupled with the recent 11th meeting of the Central Financial and Economic Commission, the significance of infrastructure investment has been significantly improved in the long and short term. The first axe of steady growth - the space and sustainability of infrastructure investment are facing improvement;
For real estate, the cash flow pressure and debt risk of follow-up housing enterprises have been significantly reduced, and the loosening of policies from the perspective of urban policies will enter a new acceleration period. We have a positive attitude towards real estate policies, but we still need to observe the fundamental operation, and the second axe of steady growth - real estate in 2022 is more of a state to be held back;
For the platform economy, the conference clarified the positioning from the general direction, and the follow-up will do the correction and support work in some areas in the context of supervision. The third axe of stable growth will have a certain improvement in business environment expectations and employment pressure.
In the statement of fiscal and monetary policy, the core of the meeting reflects the meaning of the main body. Tax rebates and tax reductions, structural monetary policy jointly bailed out small and medium-sized enterprises. In addition, the meeting proposed that "we must pay close attention to planning incremental policy tools, increase the intensity of camera regulation, and grasp the amount of advance and redundancy of policies under the goal orientation." "The follow-up stimulus policy for the demand side, we think there will be further increases in fiscal and monetary perspectives."
The special content of the meeting mentioned the preparation of the National Talent Development Plan for the 14th Five-Year Plan Period, which is of long-term significance for China's economic growth in the medium and long term, especially in the context of the dual cycle perspective and the clear positioning of regional functions, for the quality of Chinese and regional development.
Overall, this meeting set a clear tone for the current situation, fully released the signal of stability, and further clarified the policy direction, strength and implementation of the three angles. The follow-up policies are reflected in the order of magnitude of strength as follows: epidemic prevention, logistics protection, infrastructure promotion, loosening real estate, and promoting consumption. The policy signal has released enough space, the first step to regain confidence has been taken, and the follow-up needs to pay attention to the speed of policy response and the landing effect.
See the report for details:
"The First Step to Regain Confidence - Comments on the April 2022 Politburo Meeting", 2022-04-30
2.3. Industry and Company Perspective:
2.3.1. Building materials: The epidemic has accelerated its clearance, making the bottom area more certain
At the end of 2021, the market's judgment on the "bottom" of building materials, especially consumer building materials with a large risk exposure in the real estate chain, was generally believed to be in the 2-3 quarters, but the impact of the epidemic that began to spread in the first quarter and the impact was seriously exceeded expectations created a relatively certain bottom of fundamentals: including the impact on the delivery of enterprises themselves, the policy increase that brought about subsequent stable growth and the increase in real estate relaxation policies, and accelerated the supply of small enterprises in the industry.
The market for consumer building materials enterprises in the first quarter performance is actually relatively fully expected, whether it is cost pressure, demand impact after the confirmation of a quarterly report, cost pressure, leading advantages, demand resilience, expectations of other participants, these factors will usher in confirmation, but also to the stage where you can participate with confidence.
We believe that the difficulty of resuming work on the construction site is far lower than that of precision manufacturing and consumption, and the high-frequency situation seems to verify this; on the cost side, industries such as midstream refining and chemical industry have borne certain cost pressures for the consumer building materials industry, and the current business model of the industry is not inferior in the current market environment.
The first quarterly report is a stress test of the growth model and will point out the direction of real growth in the next 3 years. For consumer building materials, the growth of the business model has undergone a huge directional change, punishing high leverage, the beginning of growth differentiation, the high leverage model of the past binding H and other real estate blindfolds has ended, the past logic has lost its consistent logic, so the elasticity is not on the worse balance sheet, the best verification of the growth differentiation in 2022 is that we look at the adversity in the first quarter (in fact, from Q4 2021) still get ahead of the industry's performance growth, profit growth, cash flow, This will point to the real growth direction for the next 3 years starting in 2022.
Long-term value, 2021-2022 demand side and cost side to the industry large enterprises to bring pressure is observable, and the industry small enterprises out of the clear is self-evident, the long-term investment value of consumer building materials lies in the concentration of huge potential to enhance the growth of the potential, and this potential is magnified in the current adversity; to the second half of the year and 2023, the endogenous improvement of demand and the stabilization of the middle and upstream costs will also bring about the continuous environmental advantage of gradual improvement of enterprise performance. Even the low base of 2021H2 will contribute to the mid-term advantage.
The fundamentals turned better with the unblocking of the epidemic betting point as a signal. At present, the high-frequency data we have shown that the demand in South China, which has a greater impact in the early stage, has begun to recover sharply, and the logistics environment in East China has improved recently. At the end of the first quarter of 2020, we shouted out that "the resumption of work is the leader of the dry cycle" The first key signal to clarify the fundamentals to the right is to resume work and production, especially in the East China market with the strongest endogenous demand, at present, a variety of evidence such as logistics/automobile/electronic industry chain policy expectations to resume work and production has become the marginal focus of policy attention, so the appropriate layout in advance is a better opportunity.
There are not many varieties that can be bought at present, and it is recommended to concentrate on companies with positive growth in the quarter or good elasticity of subsequent expectations. We judge the overall consumption of building materials to lead, of which functional building materials lead the way, decorative building materials side response, glass fiber has a better offensive and defensive characteristics, glass plate storage in the second half of the year, cement plate is still partial to the game, civilian carbon fiber plate continued high growth.
See the report for details:
"Cement production fell in the first quarter, waiting for steady growth - Building Materials Industry Weekly Report" 2022-04-25
2.3.1.1. Oriental Rain Rainbow (002271): Show the true colors of the king in adversity and verify the logic of differentiation
Researchers: Bao Yanxin, Huang Tao
Maintain an "overweight" rating. In Q1 of 22, the revenue was 6.308 billion, an increase of 17.31% year-on-year, the net profit attributable to the mother was 317 million, an increase of 7.07% year-on-year, and the net profit growth rate affected by excluding equity incentive expenses reached 20.83%, exceeding market expectations. We maintained our 22-24 EPS forecast of $2.14, $2.68, $3.35 and maintained our target price of $75.25.
The gap between business differentiation and widening, adversity shows the true color of the king. We believe that the fundamentals of Q1 real estate continue to decline, and under the repeated impact of the epidemic since March, the downward pressure on the overall building materials sector has increased, while the revenue of Oriental Yuhong still maintains a growth of 17%, which is valuable. We believe that in the context of "steady growth", the cumulative demand elasticity of infrastructure will be released after the impact of the epidemic has receded, and the company's excellent ability to take orders in key engineering fields is expected to bring obvious revenue elasticity, while in Q2, where fundamentals continue to decline, Yuhong is also expected to continue to show the true color of adversity.
Gross margin is expected to enter the upward channel in Q2. Q1 gross margin of 28.28%, down 4.59pct year-on-year, with asphalt as the representative of raw materials up at least 20% of the background, the company's gross profit margin relatively controllable decline has reflected the advantages of multiple rounds of price increases from 2021 to the present. Considering Yuhong's low-priced asphalt inventory and mid-March price increases, gross margin is expected to rise quarter-by-quarter.
Cash flow in the first quarter was primarily due to an increase in inventory expenses and repayment receivables. The company's Q1 operating net cash flow was -4.784 billion, an increase of 2.4 billion yuan year-on-year, mainly due to the increase in raw material procurement and accounts payable. The cash-to-cash ratio of 22Q1 is 1.09, which has continued to improve since 2018, and in 2022, we believe that the company's cash flow profit matching degree and sales-to-cash ratio indicators are expected to further improve, and it is expected that the two can be matched in 2022, which is expected to drive the reshaping of Yuhong's valuation system.
Risk warning: macroeconomic downturn, rising raw material costs.
See the report for details:
"Show the true colors of the king in adversity, verify the logic of differentiation - 2022 first quarter report review" 2022-4-28
2.3.2. Construction: Accelerated revaluation of central state-owned enterprises under steady growth
The investment style has the advantage of certainty in low-risk characteristic stocks, the performance of the construction sector has increased quarter by quarter, and the risk expectation tends to converge with stable growth, and the allocation value is highlighted under low valuation. The current uncertainty of economic growth and credit path has brought about a blurred profit expectation and a decline in risk appetite, and the investment style should focus on low-risk characteristic stocks with performance, performance determination and low valuation. In the context of economic transformation + downward growth, growth dependence on traditional sectors has increased, the hedging of infrastructure investment is expected to increase marginally, and the performance of state-owned enterprises in the construction of central governments will accelerate quarter by quarter. And with the development of policies, the sector has a more certain advantage under the convergence of risk expectations. The leading central enterprises in valuation have hit a new ten-year low and are cost-effective.
The growth rate of infrastructure investment remained high throughout the year, and the growth rate of the performance of central construction enterprises increased quarter by quarter. The market believes that the growth of this round of infrastructure investment is in the low single digits, but we believe that infrastructure investment will maintain a high growth rate under the high increase in general budget expenditure and the high density of the use of huge special bonds, and is expected to be above 8.4% in 22 years and reach a high growth rate of 15% in June-August. In the context of market expansion, the performance growth of leading central state-owned enterprises with competitive advantages will accelerate quarter by quarter, due to the following reasons: 1) sufficient orders in hand and further increase in newly signed orders of central enterprises; 2) the downward PPI gross profit margin of construction leaders has accelerated; 3) the low performance base caused by 21Q4 real estate factors and receivables impairment; 4) the three-year reform of state-owned enterprises has ended, and the performance under equity incentives has been released.
Construction in the economic downturn has excess returns, and the return to growth, asset quality optimization and the establishment of the second growth curve have helped to improve valuations. The construction industry boom has counter-cyclical characteristics, and its performance elasticity is smaller than that of the cyclical industry corresponding to bulk products during the economic acceleration period, but it has excess stock price returns during the economic downturn. In the past, the valuation adjustment of the construction industry was mainly due to the decline in the growth of the industry, the avoidance of the high-leverage and low-dividend business model of foreign capital and the continuity of the performance of construction enterprises under the DCF valuation system. However, these negative effects have improved significantly at present: the PE-G perspective market is expanding rapidly, the performance of construction central enterprises is accelerating quarter by quarter, and growth is returning. From the perspective of PB, the company's asset quality is optimized, the receivables impairment is sufficient and the cash flow of Party A is improving, which improves the quality of new receivables. DCF perspective Construction central enterprises are actively creating a second growth curve in the emerging infrastructure field, and the sustainable growth ability of performance is enhanced.
See the report for details:
"Strategic Dialogue Architecture: Accelerated Revaluation of Central State-owned Enterprises under Stable Growth- Macro Strategies Deep Talk industry 1-hour series IV", 2022-04-26
2.3.2.1 China Railway (601390): Q1 new signings increased by 84% more than expected, and equity incentives released strong performance momentum
Researchers: Han Qicheng, Man Jingya, Guo Haoran maintained their holdings. Maintain forecasts for 2022-24 EPS growth rate of 1.30/1.45/1.62 yuan 16/11/12%. Maintain the target price of 9.25 yuan, corresponding to 7 times PE in 2022. Q1 new signings increased by 84%, of which the infrastructure increase of 94% exceeded expectations, and one of the world's largest construction groups fully benefited from infrastructure development. 1) The unfinished contract amount is 4,545.3 billion (+22%) and the guarantee multiple is about 4. 2) 605.7 billion yuan (+84%) was newly signed in Q1 of 22 years, CAGR +34% in two years, and CAGR +25% in three years. Among them, infrastructure construction is 543.4 billion yuan (+94%), survey and design is 11.9 billion yuan (+158%), real estate development is 7.2 billion yuan (-28%), and other businesses are 28.3 billion yuan (+39%). 3) The total planned investment of newly started projects in the first two months increased by 62.8%, and the number of newly started projects increased by 1.1 times. The company accounts for 60% of the domestic urban rail transit turnout market / 60% of the steel bridge / 50% market share of urban rail transit power supply products. The steady growth of copper and infrastructure real estate provides performance flexibility, and equity incentives provide performance certainty. 1) One of the world's largest multi-functional integrated construction groups. 2) The mine holds resources/reserves of about 8.3 million tons of copper/ about 600,000 tons of cobalt / molybdenum about 650,000 tons of industry-leading, 21 years of net equity profit of 3 billion (about 11%). 3) There are 36 infrastructure operation projects in the table, with an operating period of between 8-40 years. 4) Equity incentives require 22-24 years of deduction of non-net profit CAGR≥ 12%, ROE ≥ 10.5%; major shareholders intend to increase their holdings by 150-300 million yuan. 5) 21 years of real estate sales revenue accounted for 5% / gross profit accounted for 10%, benefiting from the marginal recovery of real estate policies. The downward pressure on the economy is still stable and the growth policy will continue to increase, and the acceleration of infrastructure investment in the peak season will drive pe and performance. (1) The comprehensive PMI output index in March was 48.8% lower than that of the previous month by 2.4 percentage points, indicating that the production and operation prosperity level of mainland enterprises has declined. (2) The National Standing Committee stressed that the annual development goals will not be relaxed, and the policy of stabilizing the economy will come out early and quickly, and there will be no measures that are not conducive to stabilizing market expectations. The CbRC said that it will encourage institutions to carry out M&A loans in a sound and orderly manner, focusing on supporting high-quality housing enterprises to merge and acquire high-quality projects of difficult housing enterprises. (3) The National Standing Committee pointed out that it is necessary to flexibly use monetary tools in a timely manner and increase support for the real economy. Strengthen the implementation of prudent monetary policy and maintain reasonable and sufficient liquidity. Risk warning: macroeconomic policies exceed expectations of tightening, international business risks, etc. For details, see the report: "Q1 New Signings Increased by 84% Beyond Expectations, Equity Incentives Release Strong Performance Momentum - Stable Growth Central Enterprise Series 12"2022-04-072.3.3. Coal: Demand is expected to rebound, with global energy shortages supporting prices
The sector adjustment is mainly due to weaker macroeconomic expectations, which will rebound in the future. 1) Affected by the epidemic, the market for macroeconomic expectations weakened, in March 2022, the secondary and tertiary industry electricity consumption growth rate of only 2.3%, 4.0%, January to March cumulative year-on-year 3.0%, 6.2%, compared with 1-2 months of 3.4%, 7.2% has declined, and combined with the continuous repetition of the national epidemic after April, it is expected that the April data will continue to decline, the coal sector as the most upstream energy products, resource products, there are concerns about weakening demand under the downward pressure of the economy. 2) With the increase of economic pressure, it is expected that the counter-cyclical adjustment policy will be further strengthened, after the Politburo meeting at the end of April and the success of follow-up epidemic control, the country may usher in a large-scale resumption of work and production, driving a significant increase in industrial electricity consumption and a rapid increase in steel production, and after June, the residential electricity market will gradually begin to enter the peak season, further driving coal demand.
The growth rate of raw coal production accelerated in March, and the actual effective increase was limited. In March, the country produced 396 million tons of raw coal, an increase of 14.8% year-on-year, and the growth rate was 4.5 percentage points faster than that in January-February, with an average daily output of 12.77 million tons, an increase of 1.13 million tons from 11.64 million tons in January to February. From a structural point of view, the output of state-owned key mines in March was 169 million tons, an increase of only 1.65% year-on-year, and the average daily output was 5.47 million tons, which was the same as that of January and February, and it can be found that the increase in supply is mainly from small and medium-sized coal mines, and the calorific value of coal is relatively poor, and subject to factors such as safety supervision, the sustainability of small and medium-sized coal mine output needs to be further observed.
Global energy shortages and price inversions continue to affect imports. The War between Ukraine and Russia affected the global energy pattern, the increase in Alternative Demand for Coal in Europe will continue to push up global coal prices, after the sharp increase in the benchmark price of Thermal Coal in Indonesia in April, it is estimated that the corresponding domestic arrival price is 1925 yuan / ton, and the high price difference will further inhibit the enthusiasm for imports and support domestic coal prices.
See the report for details:
"Demand is expected to rebound, global energy shortages support prices--- Coal Industry Weekly Report 2022-04-23
2.3.3.1 Jingyuan Coal Power (000552): Enjoy preferential tax rates, 22Q1 performance exceeded expectations
Researchers: Zhai Kun, Xue Yang, Deng Chengqi
Maintain earnings forecasts and price targets and overweight ratings. The company released the first quarterly report of 2022, achieving revenue of 1.38 billion (+16.3%), net profit attributable to the mother of 450 million (+178.7%), the performance exceeded expectations, the growth rate of net profit attributable to the mother far exceeded the main reasons for revenue: 1) the cost end of the company's coal price rise was relatively fixed, and the profit growth rate of the coal business exceeded the revenue; 2) the income tax rate was reduced from 25% to 15%. Maintain the company's EPS of 0.71, 0.91 and 1.07 yuan from 22 to 24 years, maintain the target price of 6.72 yuan and the overweight rating.
The coal business made up for the volume with price, the income tax rate fell, and the performance of 22Q1 reached a new high. The company's 2022Q1 coal output is 2.2 million tons (-2.6%), sales volume is 1.86 million tons (-26.6%), the output is slightly reduced or due to the Weijia Mine (3 million tons) according to the coking coal after the sale of the need to go through the washing process, the production of washed refined coal is lower than the raw coal and offset the increase of the Red Cross Mine, the sales volume declines or due to the Q1 part of the coal accumulation. The selling price of tons of coal is expected to increase significantly year-on-year due to the increase in the benchmark of the long-term cooperation and the resale of coking coal from thermal coal to WeijiaDi Mine, contributing to the main performance increment by price supplement. In addition, the company was found to be in line with the "Western Encouraged Industries" at a 15% income tax rate, and the 22Q1 tax rate was 8.6% and decreased by -4.9 PCT, a new high.
The acquisition progress exceeded expectations, and the scale of the business will increase significantly. The company originally planned to solve the competition with the related party Kiln Street Coal Power by the end of 2023, and on April 24, it issued a preliminary plan to acquire 100% of the equity of Kiln Street Coal Power at a price of 3.63 yuan, and the progress exceeded expectations. Yaojie Coal Power has 5.7 million tons of high-quality coking coal in production, 21 years of revenue of 4.84 billion, net profit attributable to the mother of 1.24 billion, output of 6.04 million tons, equivalent to 100%, 171%, 69% of the company's 21 years, respectively, the debt ratio of 85.7%, the company's coal production capacity after the acquisition of +56.5%, and has 4.4 million tons of mines under construction.
The project was put into operation and coal clearance, and there was still an increase in 22 years. 1) Baiyanzi Mine (900,000 tons) and 350,000 tons of urea are expected to be put into operation at the end of 22 years; 2) 22Q1 coal accumulation of 330,000 tons, is expected to be sold within the year.
Risk Warning. Coal prices fell faster than expected; works under construction fell short of expectations; acquisitions fell short of expectations.
See the report for details:
"Enjoy preferential tax rates, 22Q1 performance exceeds expectations--- Jingyuan Coal Power 2022 Quarterly Report Review", 2022-04-27
2.3.4. Real Estate: Use good monetary instruments and expect a resurgence of wide currencies
The pre-sale fund supervision that the market is concerned about has been mentioned this time, and the optimization of the pre-sale fund supervision from the central level is more clear than the previous statement of the Ministry of Housing and Urban-Rural Development, which is the first highest level statement since the policy in July 2021, boosting the improvement expectations of the property market. In July 2021, we proposed in the normative industry development document that the supervision of pre-sale funds will bring great pressure to the industry's balance sheet reduction, which will bring about a systematic balance sheet reduction in the industry and a liquidity crisis for some housing enterprises. By the beginning of 2022, the expectation of easing the supervision of pre-sale funds is increasing, and the current proposal to optimize supervision from the Politburo meeting will bring more tangible improvements than the statement of the Ministry of Housing and Urban-Rural Development.
The main contradiction in the current market is no longer pre-sale funds, but the low risk appetite of financial institutions for high-risk housing enterprises, which makes the real estate enterprises that are essentially financial face continuous pressure to shrink their balance sheets, and the lack of shadow banking, the current emphasis on the use of good monetary tools, enhance the risk appetite of traditional financial institutions, can improve the current main contradictions. At present, local governments have "prisoner's dilemma" type of pre-sale fund supervision, and even if there is relaxation, the withdrawal of excess frozen pre-sale funds will be used to repay the corresponding loans of other financial institutions, and the industry is still in the stage of continuous balance sheet reduction. Even if there are central banks, local governments and other leading financial institutions to strengthen loans to housing enterprises, but based on the principle of risk appetite, it is expected that the difficulty of promotion is still large, at present, from the politburo meeting level, put forward the use of good monetary tools, more positive than the previous wording, after a clear broad monetary policy, the risk appetite of traditional financial institutions is expected to be further improved.
For the expression of housing and not speculation, after keeping no systemic risks, the scope and intensity of the policy will continue to expand. We believe that the current industry risk is still larger, subject to the positioning of housing and not speculation, financial policy in the implementation of some slower than expected, the current risk is placed before the housing is not speculated, it is expected to usher in the financial policy in the scope and strength of the continuous expansion. We continue to recommend second-tier central state-owned enterprises as a source of excess income in the sector, benefiting CCCC Real Estate and C&D shares, and at the same time, after the wide currency is cashed, structural asset shortage will also appear, recommend financial streets, benefit from Zhongxin Group, China International Trade, etc., and continue to recommend first-tier central state-owned enterprises.
Risk warning: The government has re-liberalized the former financing and re-adopted the land financial model.
See the report for details:
"Use good monetary tools, wide currency expectations rise again" 2022-04-29
2.3.4.1. Financial Street (000402): The development business improves quality and efficiency, and the value of core assets is highlighted
Researchers: Xie Haoyu, Shan Ge, Bai Shuyuan, Hao Yawen
Maintained a neutral rating and maintained a target price of $6.12. Revenue increased by 33%, but by the impact of the decline in carry-over gross margin, net profit attributable to the mother fell by 34%, lower than expected, lower than expected, lower 2022-2024 EPS to 0.55/0.70/0.87 yuan (the original 2022/2023 was 0.72/0.82 yuan), the growth rate was 0%/28%/24%, the development business to improve quality and efficiency, high-quality self-sustaining property is the best allocation direction to resist wide credit obstruction, maintaining the target price of 6.12 yuan, the current price corresponds to 11.1 times PE in 2022.
Carry-over margins declined, and development businesses began to improve quality and efficiency. The company's settled gross margin fell by 10.9 pcts to 16.6%, while accruing 740 million impairments led to a significant decline in performance. However, in the past two years, land acquisition has tended to be cautious, with sales falling by 15% to 33.9 billion yuan and soil reserves falling to 16.51 million square meters, but still maintaining a 9.4-year de-industrialization cycle. It is expected that the company will still focus on the core area to obtain land, accelerate the pace of soil storage development, and after the impairment and prudent land acquisition, the profit of the development business will be more stable.
The income from holding the property is stable, reasonablely priced, and through the cycle. 1) The company holds office buildings and commercial leasable area of 1.1 million square meters in first- and second-tier core cities, and the gross profit in the past four years is about 1.5 billion, and the impact of the epidemic is limited, reflecting the good texture; 2) By the end of 2021, the company's investment real estate is priced at 38.7 billion yuan, about 38,000 yuan / square, which is generally at a low level. The 820 million yuan generated by the change in fair value in 2021 mainly came from the conversion of completed businesses to self-sustaining operations, and the reported value is relatively solid; 3) The company has maintained positive operating cash flow in the past three years.
The asset management business has been further promoted, and the monetization channels have been enriched. In 2021, the transfer of Desheng Company (mainly part of the properties of Desheng International Center) was realized, which significantly increased the investment income to 1 billion yuan and improved cash flow. It is expected that the company will continue to optimize the holding of properties and improve the efficiency of capital use.
Risk Warning: The rapid downturn in the economy has had an impact on the company's development and holding of properties.
See the report for details:
"Development Business Improves Quality and Efficiency, and Highlights the Value of Core Assets——2021 Annual Report Review", 2022-04-01
2.3.5. Steel: Crude steel production continues to decrease throughout the year, and steel demand needs to be replenished
The short-term epidemic has affected the recovery process of steel demand. On Friday, the large-scale steel society library fell by 308,000 tons, the factory warehouse fell by 0.78 million tons, and the total inventory fell by 315,800 tons. On Friday, the apparent consumption of large varieties of steel was 1026.02 tons, up 304,100 tons. Steel demand rebounded last week, but due to the impact of the epidemic, the release of demand in the peak season is still less than expected. In the short term, the current downstream construction and logistics and transportation in many places continue to be affected by the epidemic, and the steel demand continues to be under pressure; but throughout the year, we believe that in the context of "steady growth", with the gradual improvement of the epidemic situation in various places, the demand for infrastructure steel will accelerate to make up, the demand for real estate and automotive steel will also bottom out, and at the same time, the demand for steel exports will be high, and we expect that steel demand in the later period will show a pulse-type replenishment trend.
On Friday, the weekly output of large varieties of steel was 9.9444 million tons, an increase of 57,800 tons from the previous week, down 6.31% from the same period last year. Last week, the blast furnace operating rate of 247 steel mills nationwide was 79.8%, down 0.31 percentage points from the previous week; the national electric furnace operating rate was 74.1%, up 17.96 percentage points from the previous week. According to the National Bureau of Statistics, the national crude steel output in March was 88.29 million tons, down 6.4% year-on-year; the average daily output of crude steel was 2.848 million tons, down 6.1% year-on-year and up 6.4% month-on-month. After the 3.15 production restriction was relaxed, the short-term steel supply gradually rebounded, but suppressed by the low level of profits, the enthusiasm of steel mills to increase production was less than expected, and last week's output only rose slightly. Throughout the year, the National Development and Reform Commission has made it clear that it will continue to carry out the reduction of crude steel production, and we expect that the growth space of crude steel production in the later period will be limited, and the logic of the long-term boom in the industry will not change.
Last week, the simulated production profits of threads and hot coils were 268 and -72 yuan / ton, respectively. From the cost side, last week, Australia and Pakistan iron ore shipments rebounded slightly, China's arrival volume rebounded to above the annual average, the overall iron ore supply showed a growth trend; and the requirements for continuing to carry out the national crude steel production reduction work affected the market's expectations for iron ore demand, and the overall iron ore price fell last week. In addition, affected by the epidemic, the supply of raw materials such as coke and scrap steel has been blocked, and prices have continued to run strongly. Overall, steel mill profits continued to be under pressure last week. However, throughout the year, the supply of the four major mines and non-mainstream ore iron ore is expected to increase by about 40 million tons, and the supply policy of coke and coking coal will continue, so we expect that the raw material price center of steel mills will return to a reasonable range in the later period, and the profits of steel mills will gradually rise.
Maintain an "overweight" rating. The current plate has been at the bottom of demand, cost top, supply upward elasticity is not the worst stage of fundamentals, looking forward to the future, with the emergence of the epidemic stage inflection point, the suppressed demand will make up, from the perspective of the real estate cycle, the policy bottom is bringing fundamental changes, is expected to gradually stabilize in the second half of the year, and the cost side of the high probability of high decline, the industry gross profit will usher in a re-expansion, it is recommended to pay attention to high dividends, low valuation, low configuration, low expectations under the plate opportunities.
Risk warning: The production restriction policy has been relaxed more than expected, and the industry demand has fallen back more than expected.
See the report for details:
"Crude steel annual output continues to decrease, steel demand to be replenished" 2022-04-25
2.3.5.1. Fangda Special Steel (600507): Steady and high dividends, profitability steadily improved
Researchers: Li Pengfei, Wei Yudi, Wang Hongyu maintained the "overweight" rating. In 21 years, the company achieved operating income of 21.679 billion yuan, an increase of 30.59% year-on-year; net profit attributable to the mother of 2.732 billion yuan, an increase of 27.65% year-on-year, and the company's performance was in line with expectations. We predict that the company's net profit attributable to the mother in 22-24 years will be 2.874, 28.95 and 2.929 billion yuan respectively, an increase of 5%, 1% and 1% year-on-year, respectively; maintain the company's EPS forecast for 2022-2023 at 1.33 and 1.34 yuan, add 2024 EPS forecast at 1.36 yuan, maintain the company's target price of 11.42 yuan, and maintain the "overweight" rating. In-depth benchmarking and potential, continue to reduce costs and increase efficiency. Through vertical and horizontal benchmarking, the company strengthens its own cost-effectiveness process control and insists on cost reduction and efficiency increase. In 2021, the company's cost during the steel period (excluding research and development expenses) was 123 yuan / ton, down 5.88% year-on-year, the lowest level in the past 5 years. Among them, the sales cost of tons of steel was 11.31 yuan / ton, down 58.75% year-on-year; the financial expense of tons of steel was -38.96 yuan / ton, down 16.81% year-on-year, the lowest level in the past 5 years, and the company's refined management capabilities were continuously improved. Product structure optimization, profitability improvement. The company continues to implement the strategy of flattening, improve the quality of the brand, the highest strength EF1900YT flattening in China, which has passed road verification and achieved batch supply, and the product structure has been continuously optimized. In 21 years, the company's steel industry sales volume of 4.4208 million tons, down 0.33% year-on-year; gross profit per ton of steel 980 yuan / ton, up 15% year-on-year, net profit of 618 yuan / ton of steel, up 28% year-on-year, the company in the case of a slight decline in output year-on-year, still achieved performance growth, reflecting strong profitability. The company's low valuation and high dividends are very cost-effective long-form leading. Under the background of the "steady growth" policy and the switch of the industry's off-peak season, the demand for construction steel will grow beyond expectations, and the sector is expected to meet the repair market. The company's 21-year dividend rate is 87.6%, the corresponding dividend rate is 12.9%, the company takes into account high dividends, excellent management, low cost, but the valuation is low, we believe that the company is a very cost-effective long product leading target. Risk Warning: A sharp macroeconomic downturn; unpredictable safety incidents. For details, see the report: "Steady and high dividends, steady improvement in profitability - Fangda Special Steel 2021 Annual Report Review" 2022-03-21
2.3.6. Food and Beverage: The Politburo has set the tone to boost consumer market confidence
The Politburo of the Central Committee set the tone for the current economic situation and the consumer market, and clearly proposed to give play to the traction and driving role of consumption in the economic cycle. The Political Bureau of the CPC Central Committee held a meeting on April 29 to analyze and study the current economic situation and economic work, and made important decisions and deployments for the current epidemic prevention and control policies, macro policies, real estate, platform economy, capital market, etc., releasing a series of heavy signals. The meeting clearly pointed out that it is necessary to give play to the traction and driving role of consumption on the economic cycle, stabilize market players, and implement a package of bailout and support policies for industries, small and medium-sized micro and micro enterprises and individual industrial and commercial households that have been seriously affected by the epidemic; it is necessary to implement policies such as tax rebates and tax reductions, make good use of various monetary policy tools, effectively increase the "real money and silver" in the hands of economic entities, and support enterprises to bail out, stabilize employment and people's livelihood. For the consumer industry, the decision-making and deployment of the Politburo meeting mainly involves subdivisions such as people's livelihood commodities, platform economy, e-commerce logistics, foreign trade, and agriculture. (1) People's livelihood commodities: effectively guarantee and improve people's livelihood, organize the supply of important people's livelihood commodities, and maintain price stability; (2) platform economy: promote the healthy development of the platform economy, complete special rectification of the platform economy, implement normalized supervision, and introduce specific measures to support the healthy development of platform economic norms; (3) e-commerce logistics: ensure the smooth flow of transportation and logistics, ensure the normal operation of key industrial chain supply chains, anti-epidemic supply enterprises, and key infrastructure; (4) foreign trade: expand high-level opening up, and actively respond to the needs of foreign-funded enterprises to do business in China. Stabilize the basic plan of foreign trade and foreign investment; (5) Agriculture: Do a good job in preparing for spring ploughing, and do a good job in ensuring supply and stable prices. We believe that the timely development of the political policy to promote consumption will help small and medium-sized micro and medium-sized enterprises that have been seriously affected by the epidemic tide over the difficulties, promote economic recovery, and boost consumer market confidence. In fact, before the Politburo meeting, we have seen the intensive introduction of policies to promote consumption: (1) On April 25, the General Office of the State Council issued the "Opinions on Further Releasing Consumption Potential to Promote the Sustained Recovery of Consumption", and issued a series of tax reduction and fee reductions and financial support measures for difficult industries to help small and medium-sized enterprises seriously affected by the epidemic such as catering, hotels, and tourism tide over the difficulties; (2) local governments have released consumption potential through various measures to promote the sustained recovery of consumption, such as the approaching "May Day" holiday, Hubei, Hunan, Yunnan and other places distributed cultural tourism consumption coupons or launched preferential policies for discounting scenic spot tickets to stimulate the tourism consumer market; Shenzhen has successively issued 400 million yuan shopping consumption coupons, 60 million yuan catering consumption coupons, 10 million yuan cultural and sports tourism consumption coupons, and 30 million yuan digital yuan red envelopes to shenzhen citizens through the Meituan and Jingdong platforms, stimulating the diversified consumption needs of citizens such as shopping, food and tourism, and further releasing consumption potential. We believe that the impact of the epidemic on consumption is staged, and with the effective control of the epidemic and the gradual emergence of policy effects, the normal economic order will be restored rapidly, consumption will gradually rebound, and the fundamentals of long-term consumption have not changed. Risk warning: The epidemic has repeatedly impacted economic growth and domestic consumption. For details, see the report: "The Politburo of the Central Committee Sets the Tone to Boost Consumer Market Confidence--Guotai Junan Domestic Consumer Market Observation Special Report" 2022-04-292.3.6.1. Fuling Squeezed Vegetables (002507): The performance is in line with expectations, and the expansion of new products is poised for the future
Researchers: Zi Meng and Xu Yang maintained their "overweight" ratings. Maintain the company's EPS for 2022-2024 to 1.14/1.51/1.79 yuan, +36%/+32%/+19% year-on-year, and maintain the target price of 46.37 yuan. Channel sinking + e-commerce power to drive revenue growth. 2022Q1 to achieve operating income / net profit of 7/ 200 million yuan, year-on-year -3% / +5%; after the reduction of freight is expected to gross margin -4.1pct, mainly due to the use of high-priced green cabbage head; net profit margin +2.44pct year-on-year, mainly due to the decline in sales expense rate and the contribution of financial income, after the restoration of freight is expected to sell expense ratio year-on-year -2.7pct, mainly due to the temporary contraction of advertising expenses, the decline in financial expense ratio is mainly due to the increase in financial income. 2022Q1-Q3 performance will improve quarter by quarter, while three-factor resonance guarantees two-year performance flexibility. From the perspective of 2022-2023, price increases + fee contraction + cost decline will ensure the flexibility of 2 years of performance; from a quarterly point of view, driven by the gradual release of the epidemic stimulus demand + base effect + cost dividend, we judge that the performance of 2022 Q1-Q3 companies will show a quarter-by-quarter improvement trend. The strategy is fully adjusted, and the expansion of categories is poised for the future. In 2022, the company's overall strategy from "focus" to "diversification", began to focus on category expansion, from the organizational structure / product / marketing / channel side to adjust, comprehensively enhance the competitiveness of new categories such as pickles, from the current situation, the sales of the second team has been basically completed, new products have been listed in late April, the marketing end began to exert significant strength in April, and the expansion of the dealer team continued to advance. Considering that the sauce and pickle industry has sufficient space and the strength of competitors is weak, based on the company's existing brand advantages in the pickle industry and the subsequent continuous efforts in the construction of product competition barriers, we are optimistic that new products such as radish will continue to squeeze competitive products to obtain an increase in market share, thereby driving long-term growth in performance. Risk Warning: The epidemic has exceeded expectations, resulting in continued weak demand; insufficient investment in new product resources, etc. see the report: "Performance meets expectations, new product expansion is poised for the future- Fuling Cai Cai (002507) 2022 First Quarter Report Review" 2022-04-272.3.7. Agriculture: Q1 pig feed production fell more than expected, and pig breeding was recommended again
Feed Industry Association released feed production data for the first quarter of 2022. In the first quarter of 2022, pig feed output was 31.37 million tons, an increase of 1.2% year-on-year, and aquatic feed output was 3.52 million tons, an increase of 37.2% year-on-year. From the perspective of pig feed structure, piglet feed decreased by 8.8% year-on-year, sow feed decreased by 22.3% year-on-year, and fattening pig feed increased by 17.9% year-on-year. Comments: Investment advice: Continue to recommend the aquaculture sector, 1) the principle of opportunity β the recommendation is unchanged; 2) looking at Q2, more attention should be paid to the background of certainty improvement. Feed data shows that the breeding capacity has been greatly reduced. Sow feed production declined for six consecutive months, piglet feed fell by 5.1% year-on-year in January 2022, fell 2.2% year-on-year in March (February due to the Spring Festival factor growth), and the total amount of pig feed began to grow negatively year-on-year in March 2022. Therefore, from the perspective of feed data, the current high cost and double epidemic have inhibited the enthusiasm of farmers to supplement the fence and accelerated the elimination of production capacity. Multiple data cross-evidence, the capacity to go beyond expectations. From the perspective of vaccine data, we mentioned in the report "Vaccine data decline in the first quarter, and the destocking of production capacity is unstoppable" that the issuance data of various immunization vaccines for fertile sows and commercial pigs has dropped sharply year-on-year; the data of the Ministry of Agriculture on fertile sows has fallen by 9.22% from the high point, the data of the Bureau of Statistics has fallen by 8.3% from the high point, the monitoring data of Yongyi Consulting has fallen by 17.68% from the high point, and the monitoring data of Zhuo Chuang Information has fallen by 15.67% from the high point. Therefore, multiple data cross-confirm that the current decline in production capacity is greater than expected, and the trend of continued decline in production capacity has not changed. Steady and powerful, capacity deindustrialization is unstoppable. Continuing to reiterate the core logic of "the return of the value of the plate driven by the generalized capacity to exceed expectations", we believe that the generalized capacity de-industrialization will exceed expectations from three aspects - has occurred, will continue in the future, generalized production capacity in addition to the number of sows and efficiency of the three aspects beyond expectations, and from the industry data can also be gradually verified, so continue to recommend the β direction of the breeding sector unchanged. Risk warning: policy risk, breeding disease risk, natural disaster risk, raw material price fluctuation risk, etc. For details, see the report: "Q1 pig feed production fell more than expected, re-recommend pig breeding - feed production data review in the first quarter of 2022" 2022-04-262.3.7.1. Makihara shares (002714): the growth of the column exceeded expectations, and slaughter is expected to become a new growth point
Researchers: Zhong Kaifeng, Li Xiaoyuan Makihara issued a briefing on the sales of the main products in March 2022, the company sold 5.986 million pigs (including 527,000 piglets), and the sales revenue was 7.432 billion yuan. Among them, a total of 706,600 pigs were sold to Makihara Meat Food Co., Ltd., a wholly-owned subsidiary, and its subsidiaries. In March 2022, the average sales price of the company's commercial pigs was 11.67 yuan / kg, down 5.74% from January to February 2022. Comment: Maintain "overweight". We maintain the company's EPS for 2021-2023 at $1.92, $2.64, $6.58, maintain a target price of $92.49, and maintain an "overweight" rating. The output increased more than expected, and the amount of self-produced slaughter grew rapidly. In March 2022, the company sold 5.986 million pigs, and the output exceeded expectations. We expect the company's sales of fattening pigs, piglets and breeding pigs to be 5.448 million, 527,000 and 11,000 respectively, an increase of 111.30% over March last year, an increase of 91.10% over February 2022, and the output volume maintained rapid growth. As of the end of March 2022, the company's breeding sow inventory is 2.752 million heads, the production capacity is sufficient, we are optimistic about the company's future growth; and the recent company can breed sows Overall elimination rotation rhythm has accelerated compared with 2019 and 2020, the company's future fat pig cost is expected to be reduced. In addition, the company slaughtered 706,600 heads in March, an increase of 80.71% compared with December 2021, and the proportion of the company's own slaughter increased, effectively extending the company's industrial chain. The expectation of cyclical reversal has strengthened, and the advantages of α ensure that the company comes out of the cycle trough. At present, the trend of fertile sows is difficult to stop, and the expectation of cycle reversal is constantly strengthening. And with the de-capacity, the price inflection point is gradually approaching. Makihara shares continue to deepen the supply-side reform of pig breeding, especially to improve future production efficiency, stand at the head of the tide in the wave of pig breeding industrialization, control the rhythm of capacity expansion, truly dilute the cycle, and become the real tide in the era of agricultural industrialization. The company pays attention to high-quality development, explicit and implicit competitive advantages are mutually explicit, using population optimization to continuously enhance low-cost expansion capabilities, while optimizing organizational structure, reducing financial risks, and promoting the company's high-quality development, in 2022, it is still expected to be more than 55 million heads, and the growth rate of the column is still high. Risk Warning: Listed companies are uncontrollable about the African swine fever epidemic, resulting in a sharp decline in the number of outputs. For details, see the report: "Out of the bar exceeded expectations, slaughter is expected to become a new growth point - Makihara shares March pig sales briefing review" 2022-04-112.3.8. Trade and retail: the membership system is accurately anchored, and the supply chain returns to its roots
Investment advice: Warehousing supermarket selection SKU and high turnover of supply chain are more conducive to supermarket enterprises to play their advantages, compared with the radical expansion of online, targeted resource accumulation is expected to help promote change and scale expansion. Focus on valuation repair opportunities in traditional retail sectors. Fertile soil is a prerequisite for model growth. (1) After World War II, the per capita disposable income of American residents increased, the family size grew steadily, and the middle class became the backbone; (2) the warehousing member store was mainly at parity, the predecessor was a large discount store, the format began in the Post-Stagflation Period in the United States, and it was also the mature period of the supermarket industry, the supermarket in the 80s became the mainstream of consumption after many rounds of iteration, and the daily sales of channels accounted for more than 75% ;(3) The membership system is the core of business growth, accurate positioning brings high premium and loyalty, and strictly selects suppliers + own brands to create differentiated product supply ;(4) Supply chain capability is the guarantee of high cost performance + stable profit margin, and the strong cost control ability has become the basis for warehousing supermarkets to maintain high net profit margins under the defect of natural low gross profit, which is more than 14% lower than the expense rate of traditional supermarkets. Overseas review: the two giants compete for hegemony, and the details determine success or failure. (1) Sam relied on Wal-Mart's global supplier resources to firmly rank first in the industry in the 1980s, and the turning point came from the merger of Costco and Price in 1993, making Costco the largest warehouse supermarket brand in the United States; (2) In the later period, Sam acted more as a strategic supplement to Wal-Mart, while Costco sacrificed profits to beat the body more aggressively, and its strong operational resilience made it the second largest retailer in the United States; (3) With the migration of young people in large cities + the aging of core members, There is a ceiling to the company's membership fee revenue, and the gap in the comprehensive ecology makes it difficult for Costco (17% share) to compete with Wal-Mart (71% share) in all categories; (4) Based on this, the company continues to develop value-added services, and the second growth curve helps to diversify revenue while also making membership fees account for profits decline. Marginal changes on the domestic demand side: the front line is still the main position, and the sinking needs to be verified urgently. (1) China's urbanization is accelerating while the growth rate of per capita car ownership is slowing down, the first-line income continues to grow under the high base, and the gap with other levels is widening, single and childless families are the mainstream, seizing the share of families with more than three people; (2) The multi-level distribution system of the domestic fresh market has always been the shackles of the traditional supermarket to copy the overseas model, and it is difficult to seek common ground while reserving differences under the premise of overall change in the short term; (3) the domestic penetration rate of warehousing supermarkets is maintained at 5%, and Sam's currently enjoys more shares through precise positioning + unique products ;(4) The warehousing model is expected to become a high-quality supplement to traditional supermarkets, but the difference in localization paths has brought about different development paths at present; (5) supermarket formats have been squeezed by e-commerce for a long time, and the blindness and adventurism of online have brought many reform failures, but warehouse supermarkets are no longer entangled in the catch-up of online operation capabilities, and truly return to the essence of supplier resources and supply chain efficiency, which is expected to become a smoother change path for the supermarket industry logic. Risk Warning: The dilemma of sinking business formats, the intensification of market internal volume, and the supervision of unfair competition are detailed in the report: "Accurate Anchoring of the Membership System, Returning to the Source of the Supply Chain - Warehousing and Supermarket Industry Report" 2022-04-282.3.8.1. Chongqing Department Store (600729): The epidemic has affected the performance of Q1, and the incentives in place will accelerate the development
Researchers: Liu Yuenan, Chen Xiao maintained their holdings. Q1 achieved revenue of 5.271 billion yuan / - 19.04%, attributable net profit of 414 million yuan / -5.03%, deducting non-net profit of 366 million yuan / -11.35% slightly lower expectations, mainly due to the decline in passenger flow caused by the epidemic control and the shortage of goods, the lack of core in the automotive industry and other factors. Maintain the forecast for 2022-24 EPS at 2.79/3.43/4.08 yuan growth rate of 16/23/19%, maintain the target price of 41.85 yuan, maintain the increase in holdings. Q1 Gross net margin increased and operating cash flow improved significantly. 1) Q1 gross margin of 27.4%/+3pct, mainly due to the increase in gross profit margin of department stores/supermarkets/auto trade in Chongqing, net profit margin of 8.1%/+1.3pct; 2) expense ratio of 18.8%/+2.7pct, of which sales expense ratio of 13.6%/+1.8pct, management 4.7%/+1pct, finance 0.49% basically flat, research and development 0.2%/+0.19pct; 3) operating net cash flow of 1.026 billion yuan / +132% 4) Investment income of 0.86 billion yuan / + 46%; 5) continue to clear some long-tail stores, Q1 new 4 stores are auto trade, closed 10 stores (department stores 1, supermarket 3, electrical appliances 2, auto trade 4), net closure of stores are mostly in Fuwai areas, continue to be optimistic about the overall efficiency improvement. The four major measures have actively responded to the impact of the epidemic. 1) Strengthen member operation capabilities, continue to increase the proportion of member sales, promote the revitalization of existing members, and improve member viscosity; 2) Enhance online operation capabilities, coordinate live sales, organize video challenge activities, enhance the frequency of online live broadcasts, make full use of multi-platform and multi-channel marketing scenarios, increase sales reach; 3) strengthen commodity management capabilities, optimize supply chains, and continuously improve the proportion of sales of strategic brands, underwriting products and key single products; 4) Reduce costs through continuous reform and accelerated comprehensive digital advancement. Keep unlocking your potential. Benefiting from the promotion fee policy in Chongqing, high dividends and low valuations highlight the value. 1) On April 8, The Chongqing Development and Reform Commission and other 8 departments issued 19 promotion fees, the company as a regional supermarket leader will significantly benefit; 2) the company has implemented high dividends for 2 consecutive years, and the 2021 annual report proposes to pay a dividend of 37.9 yuan per 10 shares, which has been recognized by shareholders, and the dividend rate calculated according to the latest closing price is as high as 14%, and only 9 times PE is fully undervalued at present; 3) it is expected that the equity incentive will be further improved and the momentum will be enhanced. Risk warning: The epidemic situation is repeated, the supply chain change is not as expected, and Ma Que has restated it. For details, see the report: "The epidemic affects the performance of Q1, and the incentives in place will accelerate the development of the first quarter of 2022", 2022-04-23
2.3.9. Banks: Significant increase in sector positions, significant increase in leading targets
Core conclusion: In the first quarter, the positions of active fund banks rose sharply by 108bp to 4.23% month-on-month, of which the positions of joint-stock banks and city commercial banks increased the most. In terms of individual stocks, the six stocks with the greatest increase in position (measured by the position of the fund) are China Merchants Bank (+22bp), Industrial Bank (+17bp), Bank of Chengdu (+10p), Bank of Ningbo (+9bp), Industrial and Commercial Bank of China (+8bp) and China Construction Bank (+8bp). The direction of the first quarter of the increase shows that on the one hand, the overall capital has increased the position of the banking sector, so the leading and weighted stocks are the first choice; on the other hand, high-quality small and medium-sized banks are still favored. Active positions increased significantly sequentially. In the first quarter of 2022, the active fund banking sector position was 4.23%, a sharp rebound from the fourth quarter, mainly due to: (1) since 2022, the market volatility is larger, the defense demand for funds has increased, and the primary consideration is to allocate the banking sector; (2) the pessimistic expectations of the economy are fully reflected, the macro policy has been significantly more positive, and the market has begun to expect a wide credit effect; (3) the real estate support policy has continued to be introduced, the industry risk is clearer, and the annual reports of many banks have disclosed the exposure of the real estate industry in detail, which partially dispels market concerns. Passive fund banking sector positions were 0.84%, down slightly by 5bp sequentially. The leading target has been significantly increased. From a structural point of view, in the first quarter of 2022, the increase in holdings of state-owned banks, joint-stock banks and urban commercial banks was almost equal, reflecting the characteristics of positions in the banking sector. From the perspective of specific stocks, in addition to Chengdu Bank, the largest increase in holdings is China Merchants Bank, Industrial Bank, Bank of Ningbo, Industrial and Commercial Bank of China and Construction Bank, all of which are the leaders of their respective sectors. On the one hand, in the context of greater market volatility, the performance certainty of leading bank stocks is high; on the other hand, the leading target is also the first choice for institutions to enhance their positions. The attention of small and medium-sized banks is still rising. If you look at the size of the fund's holdings/the total market value of individual stocks, Changshu Bank, Chengdu Bank, Sunong Bank, Bank of Jiangsu and Bank of Nanjing have the largest increase in holdings. This caliber can intuitively reflect the contribution of institutional increases to individual stock prices, and also echo the market performance of small and medium-sized banks in the first quarter. We note that institutional positions of high-quality small and medium-sized banks have increased for several consecutive quarters, which means that institutional attention has continued to increase. Investment advice: The pulsed emotional impact caused by the change of the president of CMB is basically digested, and the banking sector will return to the original investment logic. On the one hand, in the market environment with greater uncertainty at home and abroad, the comparative advantages of the low-value banking sector are prominent, and the defensive attributes are prominent, and it is expected that the defense demand of bank stocks will run through the whole year; on the other hand, with the subsequent potential policy increase and economic stabilization, buying banks is also buying economic positive options. Risk warning: The effect of wide credit landing is lower than expected; the exposure of real estate risks is accelerated. For details, see the report: "Significant increase in sector positions, significant increase in leading targets - Analysis of Fund Positions in the Banking Sector in the First Quarter of 2022" 2022-04-22
2.3.9.1. Bank of Chengdu (601838): dominant and full of color
Researchers: Zhang Yu and Guo Changhao Investment Proposal: Considering the strong regional economic demand and the acceleration of the asset quality of Chengdu Bank into an accelerated improvement cycle, raise the net profit growth forecast of Chengdu Bank in 2022-2024 to 29.77% (+8.28pc)/23.62% (+1.14pc)/23.24% (new), EPS2.81 (+0.33)/3.48 (+0.45)/4.29 yuan, the current price corresponds to 1.02/ 2024 0.87/0.74 times PB, maintaining the target price of 22.49 yuan, corresponding to 1.44 times PB in 2022, maintaining the overweight rating. Revenue and net profit achieved rapid growth. The revenue growth rate of 2021Q1 was 17.7%, which is still very strong in the context of weak overall economic performance, and the growth rate of Q1 interest net income of Chengdu Bank reached 19.4%, which is higher than the overall revenue growth rate, and the quality of revenue structure is very high, indicating that regional credit demand is strong and there is sufficient room for subsequent expansion. Driven by strong revenue performance and downward credit costs, Q1 net profit growth reached 28.8%, significantly exceeding market expectations. Credit was delivered positively and net interest margins performed soundly. Q1 total assets increased by 17.4% year-on-year, and loans increased by 33.4% year-on-year, both of which were significantly higher than comparable peers. At the same time as the rapid expansion of the balance sheet, the Q1 net interest margin fell by only 2bp year-on-year, and the stability of pricing was significantly better than that of the industry. Asset quality is generally improving. (1) Under the premise of significantly tightening the identification policy, the non-performing ratio and the provision coverage ratio still improved significantly quarter by quarter, showing that the asset quality is very solid; (2) the non-performing generation rate remains at a very low level, and indicators such as overdue rate and attention rate are further improving. This means that in 2022, Chengdu Bank will be lightly loaded, and asset quality will continue to be in an accelerated improvement cycle. Risk Warning: The economic downturn exceeds expectations, and regional credit risks are exposed. For details, see the report: "Dominant, Full of Color - Bank of Chengdu 2021 Annual Report and 2022 First Quarter Report Review" 2022-04-28
2.3.10. Dianxin: Sales resumed as scheduled in March, and the epidemic may affect the industrial chain
Investment advice: We believe that the short-term impact of the epidemic has formed a certain impact on the production, sales and transportation of new energy vehicles and lithium battery industry chain, but the demand has only been delayed and has not disappeared, and the follow-up with the easing of the epidemic, the decline in lithium prices, and the gradual digestion of model prices, new energy vehicles are still expected to pick up rapidly, and the new energy sector ushers in long-term layout opportunities. In March, domestic sales of new energy vehicles recovered as scheduled, and the U.S. and European markets achieved steady growth. In March 2022, the production and sales of new energy vehicles in Mainland China were 465,000/484,000 units, up 25.4%/43.9% sequentially, and production and sales in the first quarter were 1.293 million/1.257 million units, up 142.0%/138.6% year-on-year. In terms of penetration, mainland new energy vehicles/passenger cars reached 21.7%/24.7% in a single month in March, and reached 19.2%/21.7% in the first quarter, a significant increase from 7.9%/9.7% in the same period last year. Overseas, New Energy Sales in Europe in March increased month-on-month, Germany led Europe in single-month new energy sales of 61,762 vehicles, and Norway ranked first with a penetration rate of 92%. In March, U.S. new energy passenger car sales reached 83,589 units, with a penetration rate of 6.7%, and sales in the first quarter reached 216083 units, an increase of 71.8% year-on-year, with a penetration rate of 6.5%, an increase of 3.4 percentage points year-on-year. The installed capacity of global power batteries continued to increase at a high rate, and the installed capacity of iron and lithium in the domestic power market exceeded 50%. SNE data shows that the global power battery installed capacity in February was 25.9GWh, an increase of 123.3% year-on-year. The installed capacity in January and February was 53.5GWh, an increase of 106.9% year-on-year; of which the top ten Chinese enterprises accounted for more than half, and the cumulative installed capacity of 18.4GWh in the Cataline Era continued to lead. Domestically, the installed capacity of continental power batteries in March was 21.4GWh, an increase of 56.6% month-on-month and an increase of 138.0% year-on-year. Lithium iron phosphate accounted for 61.6%; the installed capacity in the first quarter was 29.8GWh, and lithium iron phosphate accounted for 58.2%, a significant increase of 17.8 pct year-on-year. In terms of the installed capacity of domestic enterprises, the installed capacity of the Ningde era reached 10.81GWh in March, and the market share in the single month and the first quarter reached 50.5%/49.8% respectively; the market share of BYD and China Innovation Airlines in the first quarter was 10.41GWh and 4.19GWh, accounting for 20.3% and 8.2%, ranking second and third. Domestic sales are still expected to reach 5.5 million units in 2022 and 10 million units worldwide. Cost pressures such as the impact of the epidemic in 2022, subsidy decline and rising resource prices will inevitably have a certain impact on the new energy vehicle market, but we believe that: 1) the demand price of new energy vehicles is relatively rigid; 2) the cost performance of electric vehicles under high oil prices is improved; 3) The successive launch of heavy models by traditional car companies and new forces will strongly stimulate demand, and it is still expected that the sales of new energy vehicles in mainland China are expected to reach 5.5 million in 2022, continuing to maintain more than 50% growth year-on-year. Risk Warning: Subsidy decline affects sales, economic recovery is less than expected See the report: "March sales resumed as scheduled, the epidemic or affected the industrial chain - new energy vehicles in March 2022 global sales review" 2022-04-17
2.3.10.1. Meichang Shares (300861): The high performance is in line with expectations, and the diamond wire leader is growing high
Researchers: Pang Junwen, Zhou Miaoshun, Shi Yan maintained the "overweight" rating. The company announced its 2021 annual report, and the high performance increase was in line with expectations. Maintain the 2022-2023 EPS forecast of 3.02 and 3.78 yuan, and increase the 2024 EPS forecast of 4.83 yuan. Maintain the target price of $105.70. Shipments have increased significantly, and thin lines have led the industry to maintain ultra-high profitability. By the end of 2021, the company's annualized production capacity of diamond lines reached 70 million kilometers, and 10% of the safety elastic production capacity was reserved, achieving sales of 45.4082 million kilometers, +82.80% year-on-year, and the average sales price was 40.17 yuan / km, -15.68% year-on-year. Benefiting from the company's industrial chain advantages and technological innovation capabilities, the company continued to maintain high profitability, with a gross profit margin of 57.21% for the whole year, a slight decrease of 1.59pct year-on-year. The company has iteratively increased the diameter of diamond wire from 45 μm to 38 μm, and combined with the innovative "flexible cutting" and "structural wire cutting" technology application, continues to lead the development of fine wire in the industry. In addition, the company went deep into the upstream of the industrial chain to cut silk wire substrate and diamond powder to carry out R & D layout, synchronous research and development to support the development of finer diamond wire, further reduce raw material costs, enhance the company's profitability and competitive advantage. The single-machine twelve-line technology breakthrough, the competitive advantage is further consolidated. In 2021, the company benefited from the efficiency improvement and transformation of the production line, and the production efficiency of a single production line increased by 50%, so that direct labor, depreciation, energy and power expenditures were diluted, and the proportion of operating costs decreased significantly compared with 2020. Recently, the company has successfully completed the "single machine twelve lines" technology upgrade, the production efficiency is 33% higher than the original "single machine nine lines", and plans to complete the technical transformation of the production line by the end of June 2022, corresponding to the annual production capacity of more than 23 million kilometers, the cost and technical advantages are expected to be further strengthened. catalyst. The price of diamond wire continues to be maintained, and the cost of diamond wire continues to decrease. Risk Warning. Trade protection affects the demand for photovoltaics, and the risk of quality problems in new technologies. For details, see the report: "High performance in line with expectations, diamond wire leader high growth - Meichang shares 2021 annual report review and series report 7" 2022-04-25
This article originated from the financial world