Q1 GDP grew 5.3% year-on-year and 1.6% quarter-on-quarter from the fourth quarter of last year, in line with our March 26 report for 5.0-5.5% growth in the first quarter ("Q1 Growth Forecast Raised"). The five-year compound growth rate for the same period in 2019 was 5.0%, which is the highest GDP compound growth rate since the second quarter of 2022. Looking ahead, what is the macroeconomic and policy trend, and what is the impact on various types of assets?
macro
The improvement in external demand is relatively more clear
Q1 GDP grew 5.3% year-on-year, in line with our earlier forecast of 5-5.5% (Q1 Growth Forecast Raised). From a marginal point of view, the year-on-year growth rate of industrial added value, total social zero and exports in March all fell significantly, mainly due to the fading of phased boosting factors from January to February (such as leap years, concentrated holidays, Spring Festival dislocation, etc.) and the impact of the base increase in the same period last year. If we look at the compound growth rate in 2019, the compound growth rate of these economic indicators has improved compared with December last year. In March, the growth of fixed asset investment accelerated, of which manufacturing investment was strong. To put it simply, the improvement of external demand is relatively clear, and the issuance of local bonds and new projects are accelerating, as well as the implementation of policies such as equipment renewal, which may provide support for domestic demand.
The quarter-on-quarter growth rate of the economy improved in the first quarter. GDP in the first quarter of 2024 was +5.3% year-on-year (+5.2% in the fourth quarter of 2023), and the quarter-on-quarter growth rate also increased to 1.6% from 1.2% in the fourth quarter of 2023. In terms of industries, the year-on-year growth rates of the primary, secondary and tertiary industries were 3.3%, 6.0% and 5.0% respectively (4.2%, 5.5% and 5.3% respectively in the fourth quarter of 2023). However, the overall lack of demand is still reflected, first, the GDP deflator in the first quarter is -1.1% year-on-year (-1.0% in the fourth quarter of 2023), which has been negative for four consecutive quarters, and second, the industrial capacity utilization rate is 73.6%, which is higher than the 72.9% in the first quarter of 2016, but lower than the average of 74.5% in the first quarter of 2013-2023.
Under the high base, the year-on-year growth rate of the production end fell in March. Under a high base, the industrial added value and service production index in March were 4.5% and 5.0% year-on-year respectively (7.0% and 5.8% in January-February 2024). Exports remained the main supporting factor for the industry, with export deliveries +1.4% y/y in March (+0.4% in January-February), in line with the previous month-on-month export data. The value added of high-tech manufacturing was +7.6% year-on-year (7.5% in January-February), which was better than other industries, or partly reflected the export drive. The industrial production and sales rate fell 1.0ppt year-on-year in March, which may indicate a further replenishment of inventories.
The compound growth rate of total social zero was flat, and the growth of commodity consumption accelerated. In March, the total amount of social zero increased by 3.1% year-on-year, which was lower than that in January and February (5.5%), mainly due to the impact of the base. If we look at the five-year compound growth rate of the same period in 2019, it is the same as that in January-February, it is 4.4%. Considering the "blessing" brought by the release of Spring Festival consumption from January to February, the compound growth rate of social zero in March remained unchanged, reflecting that consumption growth was relatively stable. In terms of items, as the impact of the Spring Festival holiday subsided, the growth rate of catering consumption, which was greatly boosted from January to February, fell back, while the compound growth rate of retail sales of sports and entertainment goods, cultural and office supplies and other goods further improved. Since late March, some places have successively introduced policies to promote the trade-in of consumer goods, which may support commodity retail.
Manufacturing investment is the main support item for fixed asset investment. Fixed asset investment in January-March was +4.5% year-on-year (4.2% in January-February), of which manufacturing investment was +9.9% year-on-year (9.4% in January-February). The reason for the improvement in manufacturing investment is still driven by the improvement of exports and industrial enterprise profits in the early stage, of which high-tech manufacturing investment was +10.8% year-on-year (10.0% in January-February), but the investment growth rate of some industries in March has declined, for example, the investment in electrical machinery and equipment manufacturing in January-March was +13.9% year-on-year, down further from 24.1% in January-February. Looking ahead, we expect that manufacturing investment may remain at a high growth rate, driven by fundamental factors such as exports and profits, as well as the support of large-scale equipment modernization and transformation policies.
From January to March, the cumulative amount of broad infrastructure was 8.8% year-on-year (9.0% from January to February), and slowed down in March. From January to February this year, the total planned investment in new projects of fixed asset investment was -19.8% year-on-year, partly due to the late Spring Festival, which in turn formed a certain constraint on the construction in March. From the perspective of sub-items, the growth rate of investment in public utilities, transportation and water conservancy and environmental public facilities management from January to March was 29.1%, 7.9% and 0.3% respectively, of which public utilities investment continued to accelerate, while traditional infrastructure slowed down. In traditional infrastructure, the structure is still differentiated, such as railways, water conservancy and other subdivisions with strong policy support to maintain double-digit growth, while the decline in public facilities management has widened in the context of local debt pressure. We expect that the differentiation of infrastructure investment between regions and sectors may continue to exist during the year, and with the acceleration of new project starts in April, the trend of infrastructure investment will continue to decline or improve.
Real estate development investment fell to -10% year-on-year in March from -9% in January-February, in line with expectations, and the improvement in January-February may mainly come from the base reduction at the beginning of the year. In terms of sales, the volume of new homes fell at low prices, and the sales area and sales value of newly built commercial houses narrowed from -20.5% and -29.3% in January-February to -18.3% and -25.9% year-on-year, but the compound growth rate slowed down further compared with 2021, and the prices of newly built residential buildings in 70 cities further slowed down from -1.9% to -2.7% year-on-year, down 0.3% month-on-month. In March, the transaction price of second-hand housing in 52 cities fell by 1.2% month-on-month, and the year-on-year decline expanded to -15%, and the transaction volume of second-hand housing in the sample cities continued to rise, and the transaction cycle rose to 209 days. Construction and completions slowed down, with the cumulative year-on-year further falling to -11.1% and -20.7%. New construction starts rebounded from -29.7% year-on-year to -25.4% in March, but the three-year compound growth rate is still slowing. Land acquisitions continued to shrink, and the area of land transactions in 300 cities slowed sharply to -37% year-on-year in March from -7.8% in January-February. The source of funds further fell from -24.1% to -29.0% year-on-year, and loans improved slightly, but deposits and advance collections, personal mortgages, and the use of foreign capital fell more.
tactics
GDP grew by 5.3% in the first quarter, outperforming market expectations. From the demand side, exports fell by 7.5% year-on-year, and total retail sales of consumer goods increased by 3.1% year-on-year, both slightly lower than Wind's consensus expectations. The prosperity of the real estate industry continued to be weak, with the area of real estate sales and investment falling by 19.4% and 9.5% respectively, further declining compared with the previous value. The performance of fixed asset investment was relatively good, and the growth rate of manufacturing investment and infrastructure investment was 9.9% and 8.8% respectively. On the whole, the endogenous growth momentum of the economy needs to be further strengthened.
Previously, the PMI performed better in March, and the recovery trade related to the stabilization of the economy also heated up for a while, and the pro-cyclical sector rose. The market performance was relatively weak after the release of economic data for the first quarter and March. We believe that the A-share market is entering a critical window period, and some subsequent event factors are still worth paying attention to. The quarterly reports of A-share listed companies will be intensively disclosed from the middle to late of this month, which has strong indicative significance for investors to find the main line of fundamental repair in 2024. The Politburo meeting of the CPC Central Committee that may be held in the middle and late of this month will often be combined with the economic situation in the first quarter to plan the follow-up tasks.
Looking ahead, there are still some favorable conditions in the market, and the medium-term opportunities outweigh the risks. First of all, corporate earnings have initially stabilized, industrial enterprises have performed better, and inflation is expected to rebound moderately due to the low base. In terms of corporate profitability, the total profit from January to February 2024 increased by 10.2% year-on-year, compared with a year-on-year decrease of 2.3% in 2023. Second, the overall valuation of the current A-share market is not high, and the forward P/E ratio of the CSI 300 is 10.1 times, which is still significantly lower than the historical average of 12.6 times. Third, capital market reform has driven enterprises to pay more attention to medium- and long-term shareholder returns and improve the quality of listed companies.
In terms of allocation, the TMT sector is still expected to perform relatively well driven by the expectation of scientific and technological progress and catalyzed by policies related to new quality productivity; external factors and supply clearance have brought opportunities to the upstream resource industry, focusing on resource sectors such as gold, petroleum and petrochemicals, and non-ferrous metals; and high-dividend sectors are expected to increase the proportion and willingness of dividends as the performance period approaches.
Fixed income
The economic data in March were differentiated, with real GDP in the first quarter being better than expected, of which consumption fell short of market expectations, real estate-related data was weak, and the economic vitality still needs to be strengthened. In March, the domestic macro policy was relatively stable, and there was no significant change in market expectations, and the domestic economy continued to run smoothly on the whole, but the differentiation of different industries increased; the recovery of the real estate market was still slow, dragging down the performance of the relevant middle and upstream industries, and affecting residents' consumer confidence to a certain extent; manufacturing investment was relatively strong, on the one hand, it was part of the downstream demand growth, and on the other hand, it was also driven by policies. Real GDP rose to 5.3% y/y in the first quarter, significantly exceeding market expectations, mainly due to the contribution of industry, which was relatively flat year-on-year in the first quarter due to relatively low inflation. From the perspective of demand, on the consumption side, the consumption of durable goods slowed down significantly in March, the consumption of real estate-related consumption was still low, and the overall retail sales of consumer goods needed to be further recovered; in terms of investment, the manufacturing investment was strong in March, the infrastructure investment declined, and the real estate investment continued to fall; in terms of external demand, we believe that the overseas economic trend may still be downward, and the recovery of exports in March will slow down. From the perspective of output, the added value of the service industry in the first quarter fell year-on-year, and the added value of the secondary industry rebounded year-on-year, and the manufacturing industry formed an important support for the economy in the first quarter.
The important characteristics of the domestic economy in the first quarter are the differentiation of industries, the relatively slow recovery of real estate, and the relative preference of manufacturing operations. On the one hand, residents' ability and confidence in buying houses are relatively insufficient, commercial housing sales continue to be weak, and real estate investment is declining, which leads to the weakness of some middle and upstream industries, especially the relatively insufficient demand for building materials, and drags down real estate-related consumption. On the other hand, due to the industrial upgrading of some industries, coupled with the policy support of equipment renewal, as well as the phased improvement of external demand, exports rebounded slightly in the first quarter, and some downstream production and investment activities were stronger. We have noticed a phenomenon: industrial production in the first quarter was strong, while the social inventory of industrial products was relatively high, and the destocking of social inventory was significantly lower than that of the same period in previous years, which means that the sustained economic recovery still depends on the release of demand. After the second quarter of last year, domestic economic activities gradually normalized, which means that the support of the low base for the year-on-year growth rate of economic data is weakened, and we believe that economic growth in the second quarter of this year still needs further policy support, and we expect monetary policy to continue to remain accommodative. At present, the demand for physical financing is weak, and the demand for bond allocation of financial institutions is strong, and we continue to be optimistic about the domestic bond market. Recently, the bond market has continued to fluctuate at a low level, partly because the central bank's policy easing is relatively slow, and then with the weakening of domestic constraints on overseas factors, domestic monetary easing may be significantly increased, and further downside in bond yields may be significantly opened.
Bank
Credit data: Smooth volatility with stamina. New loans in March were 3.1 trillion yuan, a year-on-year decrease of 800 billion yuan, which was basically in line with our expectations. The year-on-year decrease in the total volume is mainly due to the high base of the same period last year, and the pace of investment this year is more balanced under the guidance of the policy of "smoothing credit fluctuations", and the increase is basically the same as that in March 2022, and the absolute volume is not low, but the recovery of credit demand is still not obvious. From a structural point of view, in addition to the bill discount, all loans increased slightly year-on-year, and the bills increased by 218.7 billion yuan year-on-year, which corroborated with the low interest rate of bills in March, reflecting a certain impulse characteristic, and credit demand may still need to be recovered. Resident loans increased by 304.1 billion yuan, of which short-term loans to residents increased by 118.6 billion yuan, mainly due to the weak growth of consumer credit, and medium and long-term loans to residents increased by 183.2 billion yuan year-on-year, mainly due to the sluggish real estate transactions. Corporate loans increased by 360 billion yuan year-on-year, of which short-term loans to public increased by 101.5 billion yuan, which may be due to the decline in inventory growth and capital turnover demand, and the increase in medium and long-term loans to public by 470 billion yuan, which may be due to the moderate postponement of some project reserves and the downward trend of local debt growth in the context of debt. Looking ahead, credit in February-March has shown the effect of smoothing credit volatility to a certain extent, reserving some stamina for credit supply in the second quarter, and we expect new loans in the second quarter to increase slightly year-on-year from a low base amid a weak recovery in credit demand.
Social finance data: government financing is expected to accelerate in the second quarter. In March, the new social finance was 4.9 trillion yuan, a year-on-year decrease of 514.2 billion yuan, and the growth rate of social finance stock was 8.7%, down 0.3ppt month-on-month, slightly better than our expectations. In addition to the impact of loans, the year-on-year decrease in social finance was also due to the year-on-year decrease of 137.3 billion yuan in government bonds. This is mainly due to the low demand for local government funds after the issuance of special treasury bonds last year, and the slowdown in the issuance of local special bonds in the context of chemical bonds. The increase of 176 billion yuan in off-balance sheet bills was due to the increase in the demand for invoices in the discounted low interest rate environment, and the increase in corporate bonds by 125.1 billion yuan year-on-year was mainly due to the increase in the supply of long-term bonds in the low interest rate environment. Looking ahead, we expect government bond issuance to accelerate in the second quarter, coupled with a slight year-on-year recovery in credit, which will help the growth rate of social finance stabilize.
Monetary data: M1 growth fell further. The balance of M2 increased by 8.3% year-on-year, and the growth rate decreased by 0.4ppt month-on-month, and the slowdown since the beginning of the year is more obvious, mainly due to the decline in bond market interest rates, the better performance of wealth management and bond base, and the decline in income after the deposit interest rate cut at the end of last year, and the flow of some deposits to wealth management and debt base; The balance of M1 increased by 1.1% year-on-year, and continued to decline by 0.1ppt month-on-month, which is still at a historical low, reflecting the low degree of capital activation and the lack of obvious recovery signals of corporate business activities.
Investment views on bank stocks. On the whole, the credit and social finance data in March reflect the orientation of smooth credit, leaving some stamina for the second quarter, but from the perspective of credit demand, the overall demand in the fields of residents' house purchase, real estate investment, and private investment still needs to be recovered. We believe that high dividends on bank investment are still the main thread.
Risk warning: economic growth recovery is less than expected, real estate and local hidden debt risks.
real estate
The year-on-year decline in new home sales in March was the same as that in January-February, and slightly narrowed, and stabilizing demand remained the key. In March, the sales area and value of newly built commercial buildings nationwide fell by 18.3% and 25.9% year-on-year respectively, slightly narrowing from the same level in January and February (-20.5% and -29.3%), and the implied average price decreased by 9.3% year-on-year (-11.1% in January-February). The other sales data we monitor show a similar trend: the sales area of high-frequency new homes fell by 42% year-on-year in March (-44% in January-February), and the sales amount of the top 100 real estate companies fell by 47% year-on-year in March (-51% in January-February). Overall, new home sales in March showed a slight improvement in the seasonal month-on-month but remained weak in absolute terms. Despite the relatively strong performance of second-hand housing sales, the total sales of primary and second-hand housing in March did not improve significantly compared with the fourth quarter of last year, coupled with the weak expectations of residents fed back by the previous real estate survey (see the report "How to view the real estate sector and market trend since the beginning of the year?", we believe that we must still pay close attention to the marginal pressure on the aggregate demand of the housing market, as well as the further support that may be given by the policy side, such as the "four limits", interest rates, and the "three major projects".
In March, real estate investment and financing continued to perform weakly, and attention was paid to the implementation of the "project white list". In March, real estate investment still fell by 10.1% year-on-year (-9.0% in January-February), the year-on-year decline in funds in place for real estate enterprises further widened to -29% (-24.1% in January-February) due to the drag of sales collection, the area of new construction fell by 25.4% year-on-year (-29.7% in January-February), the area of completed construction fell 21.7% year-on-year (-20.2% in January-February), and the year-on-year decline in construction area at the end of March was still -11.1%, and the performance of investment and financing indicators was weak. The result of sales pressure dragging down property investment is in line with our previous forecast, while the year-on-year decline in completions for a consecutive quarter may reflect the impact of the decline in sales since mid-2021. Looking ahead, we still believe that the pressure on investment-side indicators may continue to exist until the sales boom improves, and the implementation of the "project white list" mechanism can slightly alleviate this pressure.
Pay attention to the allocation value of the real estate sector. At present, the total demand of the real estate market is still under pressure, although the land supply has been at an absolute low level, the number of second-hand housing listings is still marginally upward, so that there is still downward pressure on housing prices and expectations, and further efforts from the policy side are urgently needed. In addition, due to the relatively more supportive relationship between supply and demand and greater room for policy development, the housing prices in the leading cities may stabilize earlier, so it is recommended to take into account the core cities of land reserves and the highly elastic targets that may benefit from the policy. In terms of real estate service targets, we recommend investors to capture alpha opportunities with stable and positive growth or fundamentals that are expected to meet an inflection point, and also pay attention to companies with investment transaction value in the volatility of real estate beta.
Risk warning: policy adjustment or fundamental repair is not in line with expectations, and the credit side of real estate enterprises is deteriorating at an accelerated pace.
Dazong Products
Energy: Under the high base, crude oil processing and oil table need to maintain positive growth
In March, the mainland imported 11.6 million barrels per day of crude oil, a year-on-year decrease of about 6.2% due to the high base, but an increase of about 7.5% from January to February, and continued to rise month-on-month. Domestic crude oil processing and refined oil consumption both performed steadily, recording positive year-on-year growth against the backdrop of a high base in March last year. Specifically, the domestic crude oil processing volume rose to 15.08 million barrels per day in March, an increase of about 3.9% from January to February and a year-on-year increase of about 0.8%, and the domestic refined oil meter demand rose to 14.715 million barrels per day, an increase of about 2.6% from January to February and a year-on-year increase of about 1%. The mainland's net exports of refined oil products in March were 365,000 barrels per day, an increase of 121% from January to February, but still lower than the same period last year. In the first quarter as a whole, domestic crude oil processing volume recorded 14.7 million barrels per day, an increase of about 0.7% year-on-year, and refined oil meters recorded 14.47 million barrels per day, an increase of about 4.8% year-on-year. In terms of oil products, from January to February, domestic gasoline, kerosene and other transportation oil demand maintained growth, which was the main source of year-on-year increase in refined oil meter demand.
In terms of natural gas, the supply increased year-on-year, and the demand for overseas gas imports continued to rise. China's natural gas production recorded 21.6 billion cubic meters in March, +5.5% year-on-year and +7.1% month-on-month in February, while overseas gas imports were about 15 billion cubic meters, +24.6% year-on-year and +3.9% month-on-month in February. In March, the mainland's natural gas meter demand recorded 36.5 billion cubic meters, +12.6% year-on-year and +5.8% month-on-month in February.
In terms of coal, the output of raw coal in March 2024 was 399.33 million tons, a year-on-year decrease of 4.2%, with an average daily output of 12.882 million tons. The import of coal and lignite was 41.379 million tons, a year-on-year increase of 0.5%. Under the influence of safety supervision and other factors, coal production is still under pressure, and the average daily output of raw coal has rebounded slightly from 11.76 million tons in January and February, but it still maintains a downward trend year-on-year. In terms of imports, the absolute volume is still at a high level of more than 40 million tons, but the year-on-year growth rate has slowed down significantly. With the decline in domestic coal prices, the import window has narrowed significantly. On the demand side, power generation and thermal power were weaker, with year-on-year growth of 2.8% and 0.5% respectively in March. Non-electricity demand such as cement and pig iron remained weak, with production falling 22% and 6.9% year-on-year respectively in March, becoming the main factor suppressing current coal prices.
Ferrous metals: The demand for "golden three" has failed, and the supply and demand of black are weak
In March 2024, crude steel output was 88.27 million tons, down 7.8% year-on-year, with an average daily crude steel output of 2.85 million tons. The output of pig iron was 72.66 million tons, a year-on-year decrease of 6.9%, with an average daily output of 2.34 million tons. Steel exports were 9.888 million tons, a year-on-year increase of 25.3%. Iron ore imports were 100.718 million tons, a year-on-year increase of 0.5%. The output of coke was 39.37 million tons, down 6% year-on-year.
The demand performance of the traditional peak season of the "Golden Three" is not satisfactory. The apparent domestic steel consumption we estimate fell by 11% year-on-year in March. From the perspective of micro data, thread consumption is still weak, housing construction and infrastructure physical workload are relatively weak, from the macro data, real estate new construction and construction area still maintain a double-digit decline, infrastructure weaker than expected, mainly the municipal drag. However, since April, there have been some signs of recovery in the infrastructure workload compared with the previous month. In terms of manufacturing, the demand boom is still resilient, manufacturing investment and equipment and equipment purchases have maintained high growth, and steel exports have also continued to maintain growth at a high level. On the supply side, steel mills maintained a low production rhythm in March under the pressure of profits, but after the sharp decline in raw material prices, the repair of the profit side may drive steel mills to resume production.
On the raw material side, under the support of the early shipment plan and the amount of non-mainstream ore, the supply side of iron ore appears to be relatively abundant, the growth rate of imports is faster than the growth rate of consumption, and the port inventory is obviously accumulated. Coking coal maintained weak supply and demand, and domestic production fell more, judging from the current announced output in the first two months, coking coal fell by 8.2% year-on-year. Inventories remain low. Imported Mongolian coal is relatively abundant, which has an impact on domestic coking coal prices.
Non-ferrous metals: The global manufacturing industry is repairing, driving the demand for industrial metals upward
Copper: Macro expectations drove copper prices up, but the recovery of downstream starts after the holiday was weak. On the supply side, according to SMM statistics, the cumulative output of copper in March was 999,500 tons, a year-on-year increase of 5.06%. In terms of import and export, data from the General Administration of Customs showed that 2.330 million tons of copper concentrate and mineral sands were imported in March, up 15.9% year-on-year, and 474,000 tons of unwrought copper and copper products were imported, up 16.2% year-on-year. The SMM Imported Copper Concentrate Index continued to hit new lows in the last week of March, closing at $6.38/mt. On March 28, the CSPT team once again proposed a joint production cut, suggesting a production reduction of 5-10%, and temporarily not setting a guide processing fee for spot copper concentrate procurement in the second quarter. Entering April, smelters will enter an intensive maintenance period, according to SMM research, 7 smelters will enter maintenance in April, involving a crude refining capacity of 1.21 million tons. We expect monthly copper production to decline in April. In terms of downstream demand, high copper prices have brought a certain fear of heights, and the start of construction is slightly weaker than in previous years. According to SMM research, the operating rate of copper pipe enterprises in March was 85.97%, an increase of 38.34 percentage points month-on-month and a year-on-year decrease of 4.33 percentage points, and the operating rate of copper strip in March was 73.07%, an increase of 29.77 percentage points month-on-month and a year-on-year decrease of 3.93 percentage points. Looking ahead, the demand for copper pipes may be the first to be repaired driven by the increase in air conditioning production after the weather warms up. In terms of inventory, as of April 12, LME copper inventories continued to climb to 124,000 tons, and domestic copper social inventories returned to accumulation, recording 405,000 tons.
Aluminum: Marginal recovery of export demand, rigid supply support for high profits. According to SMM statistics, the cumulative output of electrolytic aluminum in March was 3.555 million tons, a year-on-year increase of 4.19%. As of the end of March, SMM statistics show that the domestic electrolytic aluminum production capacity is about 45.19 million tons, the domestic electrolytic aluminum operating capacity is about 42.1 million tons, and the electrolytic aluminum production in Yunnan has resumed more than 200,000 tons by the end of March. In terms of downstream demand, the operating rate of domestic aluminum downstream processing leaders was 64% in March, of which photovoltaic orders were more eye-catching. According to the data of the General Administration of Customs, the net export of unwrought aluminum and aluminum products in China was 512,000 tons in March, an increase of 2.9% year-on-year. In terms of types, aluminum strips, aluminum foils, and aluminum extrusions were exported to 489,000 tons/228,000 tons/195,000 tons, respectively, an increase of 6.1%/2.7%/33.4% year-on-year. Among them, the highest-growing aluminium extrusions are mainly exported to Southeast Asia, or to respond to the region's rapidly rising demand for real estate and infrastructure. At the same time, we have also observed the upward trend of aluminum spot premiums in overseas mature economies, which may support the marginal recovery of overseas demand. As of the end of March, the average cash profit of electrolytic aluminum has approached 4,000 yuan/ton, but due to its supply rigidity at this stage, we believe that its high profit has enough solid support. In terms of inventory, high aluminum prices have suppressed downstream shipments, and domestic aluminum ingot and aluminum rod inventories rebounded at the end of March and the end of February after experiencing an inflection point to the warehouse, and as of this week, the social inventory of aluminum ingots rose to 854,000 tons, and the social inventory of aluminum rods rose to 254,000 tons.
Agricultural products: Grains continued to grind the bottom, and pigs and oils fell strongly
Maize: Production continued to decline marginally, and domestic imports increased. According to the USDA's April supply and demand report, the marginal reduction in corn production in Argentina and West Africa led to a slight downward revision of global corn production in 2023/24 by -0.19%, and feed demand by -0.35% month-on-month, so global corn ending stocks were lowered by -0.42% to 318 million tons. Domestically, according to the forecast of the Ministry of Agriculture and Rural Affairs in April, spring plowing is imminent, and farmers' planting intentions are stable. The operating rate of corn deep processing enterprises remained high. Considering that corn imports have remained high this year, the Ministry of Agriculture and Rural Affairs this month estimated that mainland corn imports in 2023/24 would rise by 14.29% month-on-month to 20 million tonnes.
Soybeans: In the "vacuum" of information, waiting for South American soybeans to be marketed. According to the USDA's April supply and demand report, in addition to the 1.15% month-on-month reduction in U.S. soybean exports, the new season soybean production forecast of the main producing countries is basically the same as the previous month, and the EU production forecast is slightly lowered. With the gradual listing of South American soybeans, the global soybean supply may increase, and the impact of U.S. soybeans on global soybean prices has weakened. Domestically, spring sowing is being carried out in an orderly manner from south to north, farmers' planting intentions have improved, and soybean sales have accelerated. According to the CASDE April report, the forecast for this month is unchanged from the previous month, and the market price is running smoothly.
Hogs: The spot price trend is stable and weak, but the futures market fluctuates greatly, and the prices of near-month and long-month contracts have retreated sharply. Since February, the second fattening or drive the pig price to continue strongly, the off-season is not light, but the supply may lead to the phenomenon of "high slaughter, high average weight" in April and May, so the pig price continues to rise and the momentum is insufficient. In March, the average price of foreign three-yuan live pigs was 14.73 yuan/kg, up 1.96% month-on-month.
Palm oil: Palm oil production recovers with the arrival of the ramp-up season. According to the MPOB report, the output of horse palm in March was 1.29 million tons, an increase of 2.77% month-on-month, the export was 1.49 million tons, an increase of 31.76% month-on-month, and the inventory was 1.67 million tons, a decrease of 21.08% month-on-month. It should be noted that Malaysia's palm oil inventories fell sharply to an eight-month low at the end of March, despite higher production and higher exports, so prices remain supported in the near term.
chemical industry
As of April 12, China's chemical product price index rose 0.2% from the same period in March and fell 0.8% from a year earlier. Affected by the decline in domestic real estate fundamentals and the pressure on demand in Europe and the United States, the overall demand for chemical products is weak, and the recent rise in international crude oil prices has led to certain pressure on the transmission of chemical costs in the petroleum industry chain to the downstream.
Chart: China Chemical Product Price Index
Source: Wind, CICC Research
Chart: Growth rate of total revenue and profit of chemical raw materials and chemical products
Source: Wind, National Bureau of Statistics, CICC Research
Investment Strategy:
We expect strong earnings for upstream resource stocks in 1Q24 and are bullish on upstream resource companies with higher dividend yields. Due to OPEC+'s continued production cuts and geopolitical influences, international crude oil prices have continued to rise recently, with Brent crude oil prices rising 17% year-to-date. Benefiting from higher oil prices, we expect the earnings of domestic oil and gas companies and oil service companies to remain strong in the near term, and we continue to be bullish on upstream resource companies with higher dividend yields.
Bullish on coal-to-olefins and ethane cracking to ethylene companies that benefit from higher oil prices. Recently, international crude oil prices have rebounded but domestic coal prices have declined, the cost of naphtha cracking to olefins process route has risen, the price spread of domestic coal-to-olefins and ethane cracking to ethylene process route has expanded, and the low-cost production capacity of satellite chemistry and Baofeng Energy is expected to continue to expand, and we continue to be optimistic about satellite chemical investment opportunities.
Continue to be optimistic about the prosperity of the refrigerant industry. Since April, the price of refrigerant plate products has been sideways, and the prices of some varieties have increased slightly, and we believe that there is still room for upside after the stock price of related companies is slightly consolidated, mainly: the current price difference between large varieties of R32 is about 15,000 yuan, and we believe that the current profit per ton still cannot fully reflect the current supply and demand pattern. At the same time, approaching the high temperature period, the air-conditioning plant has a strong willingness to stock, and the refrigerants used in domestically produced air-conditioning (including export air-conditioners) are included in the domestic quota. At present, air conditioning factories are more willing to sign long-term orders, and we believe that the price of R32 long-term orders still has room to rise.
Optimistic about the medium and long-term growth of good chemical enterprises. From the perspective of the cycle, the current profitability of major chemical products is at a low level, considering that the new projects of some leading chemical companies are expected to contribute to the profit increment in the next two years, the current stage is a better time to lay out the chemical leading white horse.
Risk warning: PMI at home and abroad is lower than expected, PPI growth is lower than expected, and international crude oil prices have fallen sharply.
Delivery
Key points: The supply and demand of passenger transport fell in the off-season, the price of international freight and air freight increased, and the high level of sea freight was adjusted
Passenger transport: Supply fell in March, pay attention to the potential demand inflection point. In March, the supply and demand of domestic routes fell month-on-month, with the load factor falling by 2.3ppt month-on-month to 77.3%, and the supply and demand of international routes recovered to 67%/65% of the same period in 2019 (vs. 71%/66% in February). March is the traditional off-season for the civil aviation industry, looking ahead, May Day is approaching or accompanied by the recovery of industry volume and price, we recommend continuing to pay attention to the potential demand inflection point in the off-season.
Freight: Express delivery volume increased by 25.6% more than expected, air freight rates recovered, and the peak season focused on European and American demand. In March 2024, the express business volume increased by 25.6% year-on-year, exceeding expectations. In terms of cross-border logistics, the demand for air freight is booming and the supply pattern continues, and the TAC Shanghai Pudong export air freight index at the end of March increased by 21% compared with the end of the previous month. Shipping: Container freight rates have slowly fallen from the highs after the Red Sea conflict, and oil freight rates have rebounded in the off-season, but they are still at a high level, with an average VLCC freight rate of $51,000 per day in March.
Risk warning: economic growth is less than expected, oil prices have risen sharply, and the renminbi has depreciated sharply.
Textile clothing jewelry
In March, the zero amount of clothing, shoes, hats, and knitted textiles was 118.2 billion yuan, a year-on-year increase of +3.8%, and the cumulative amount from January to March was 369.4 billion yuan, a year-on-year increase of +2.5%. On a month-on-month basis, the growth rate of a single month in March and from January to March increased by 1.9/0.6ppt respectively compared with January + February, which was an improvement. In terms of channels, online clothing consumption from January to March was +12.1% year-on-year, and the growth rate was -5.7ppt month-on-month. From the macro level of the industry, clothing consumption in March showed a weak recovery trend. From the micro perspective of the top listed companies, we expect that the year-on-year turnover in March will remain basically flat or slightly increased, and there will be no significant decline under the high base of +17.7% year-on-year in March last year, among which the market resilience of sports brands and mid-to-high-end brands is relatively stronger. We believe that the trend of clothing consumption grading continues, and more affordable brands may benefit.
Risk warning: the recovery of terminal demand is less than expected.
The scenery is public and environmentally friendly
Power Operations:
Monthly data from the National Bureau of Statistics: The growth rate of power generation in March 2024 weakened month-on-month, with industrial power generation above designated size +2.8% year-on-year, down 2.3ppt from the growth rate of 5.1% in the same period last year, and down 5.5ppt from the growth rate of 8.3% in January-February 2024. On the other hand, the repair of the service industry in March slowed down under the high base of last year, and the total amount of social zero in March was +3.1% year-on-year, and the growth rate was -2.4ppt month-on-month, compared with +10.6% in the same period last year. In terms of power supply, wind power was +16.8% year-on-year, with a growth rate of +11ppt month-on-month, while photovoltaic power was +15.8% year-on-year, with a growth rate of +0.4ppt month-on-month. Hydropower generation was +3.1% year-on-year, and the growth rate was +2.3ppt month-on-month. In the off-season, the growth rate of thermal power was weak, and at the same time, it was squeezed by other power sources, and the power generation was +0.5% year-on-year, and the growth rate was -9.2ppt month-on-month. Nuclear power generation turned from an increase to a decline, with a year-on-year growth rate of -4.8% and a month-on-month growth rate of -8.3ppt.
Power operation views and target recommendations: In terms of thermal power, under the off-season of thermal coal demand, the supply of domestic and imported coal is abundant, the current coal price has fallen to 813 yuan/ton, and the average price of thermal coal (Q5500) in Jingtang Port in 1Q24 is -20% year-on-year, the decline is much greater than the electricity price, and we are optimistic about the continuation of the profit release trend in 1Q24 thermal power performance. Year-to-date, the capacity price mechanism has been implemented well, ancillary services have broadened revenues, and thermal power is expected to usher in Davis's double-double. In terms of green power, the top-level government work report reaffirmed the firm and positive tone of new energy development, and the liberalization of wind and solar power rationing rates reflects that the policy attaches importance to the construction of delivery and opens up the consumption space in the province. In terms of hydropower, the year-on-year growth rate of power generation across the country improved in March, but in terms of provinces, there may still be a shortage of hydropower output in some areas due to drought weather. In terms of nuclear power, Fangchenggang Unit 4 was connected to the grid, and the construction and operation of nuclear power plants were stable.
Photovoltaic industry chain:
From January to February 2024, demand at home and abroad will grow brightly. Module exports in January and February exceeded expectations. According to China Customs, from January to February 2024, Chinese mainland modules exported a total of 44GW, +52% year-on-year, and the export value was US$5.3 billion, -24% year-on-year. Among them, module shipments in January were 22.60GW, +57% YoY and +34% MoM, and module exports in February were 21.01GW, +47% YoY and -7% MoM. In January/February, exports to the Netherlands amounted to US$3.1/US$410 million, +74%/+33% month-on-month, exports to Europe as a whole amounted to US$852/US$987 million, +29.8%/+15.9% month-on-month, and India's strong demand continued since the second half of '23, with exports to India in January/February amounting to US$5/290 million, +37%/-43% month-on-month , the month-on-month decline in February may be due to the imminent implementation of the ALMM component list policy, and operators have a certain wait-and-see. From January to February, the new domestic photovoltaic installed capacity exceeded expectations. According to the National Energy Administration, from January to February 2024, 36.72GW of new domestic PV capacity was added, +80.3% year-on-year. Among them, we estimate that 20-21GW will be added in January and about 16GW will be added in February (Spring Festival factor). Structurally, from the perspective of State Grid data, in January, the State Grid added 8GW of regional centralization, +48.66% year-on-year, and distributed added 10.67GW, +57.15% year-on-year, accounting for 56% of the total.
Major PV production: In April, the growth rate of module production scheduling narrowed, and the sharp drop in polysilicon prices drove down the main production prices. Driven by domestic orders starting construction after the Chinese New Year + overseas module demand such as Europe, cell production in March recovered significantly month-on-month, with global module production scheduling in March reaching about 56GW, up more than 50% month-on-month, driving demand for N-type cells. At the end of February and the beginning of March, the price of TOPCon cells was increased by 2 cents/W. According to Solarzoom, as of last week, the quotations of P-type dense and N-type polysilicon fell by 15%/15.9%/13.3% to RMB 51/58/52/kg compared with the end of March, driving the main production prices to enter a downward channel again, while N-type 182/210 wafers fell by RMB 0.1/0.3/pc to RMB 1.65/2.5 respectively from the end of March. TOPCon cells and modules fell by 6/2 cents/W from the end of March to RMB 0.43/0.96/W, respectively.
Auxiliary materials: This year's Q1 photovoltaic film and glass profitability has experienced a bottoming out rebound. Q1 The price of EVA particles entered an upward channel, and the price of photovoltaic film rose at the end of February, resulting in a single flat profit of the film from January to February, and it was repaired to a certain extent in March. After the price of adhesive film increased again in April, we believe that profitability has been further improved. In terms of photovoltaic glass, the price of glass fell from January to February, the price of 2.0mm glass fell more than that of 3.2mm glass, the gross profit margin advantage disappeared, and the overall profit margin declined due to the increase in natural gas costs in the heating season. In March, the price of glass remained stable, the cost decreased slightly, and the profit of the single flat began to be repaired, and the price of glass in April was raised by 0.5-1 yuan/square meter, and the cost of natural gas fell, and the overall profit rose. In terms of silver paste, the price of silver continued to rise in Q1, and silver paste manufacturers could obtain inventory income and improve overall profitability. The inverter industry Q1 overseas market is still in the destocking stage, April began to repair, the expected demand increased by 15%-20% month-on-month, domestic, this year's Spring Festival is late, domestic bidding is more in the Spring Festival after the opening of bids, Q1 calibration is less, in April domestic projects began to calibrate, the head inverter manufacturers orders rose.
After the higher-than-expected growth in cell, glass, and adhesive film in March, module production growth narrowed to single digits in April, while polysilicon prices began to fall sharply in April. At this point in time, we believe that we should pay attention to the following directions: 1) the cell, glass, adhesive film, and silver paste sectors with relatively good performance in 1Q, 2) the destocking process of the inverter sector and the changes in marginal demand, and 3) the subsequent bottoming out of polysilicon prices will bring opportunities for the main industry chain to stabilize and rebound, and focus on the integrated module sector.
Wind power industry chain:
From January to March 2024, we counted that the public bidding volume of the wind power industry reached about 34GW, a year-on-year increase of 28%, and achieved rapid growth under the base of 2023.
According to the information of the procurement and recruitment network, we have statistics that in March 2024, the average winning price of wind turbines for onshore projects with towers was 2,154 yuan/kW, an increase of 247 yuan/kW from the previous month, and the average winning price of wind turbines for onshore projects without towers was 1,527 yuan/kW, an increase of 39 yuan/kW from the previous month.
For most of 2023, the industry will be affected by the unsmooth progress of key offshore wind power projects, and we have recently observed the progress of key offshore wind power projects in Jiangsu and Yangjiang, Guangdong, and other projects in regions with large resources such as Zhejiang and Fujian are also entering the end of the preliminary preparation stage. It is recommended to pay attention to: 1) the boom is expected to accelerate the upward sea breeze industry chain, 2) the cost side is expected to improve in 2024, and at the same time benefit from the sea breeze volume of the whole machine link, 3) benefit from the improvement of raw material costs and the long-term space of overseas markets of the head wind parts companies.
Risk warning: the risk that the price reduction of raw materials is less than expected, the risk that demand is less than expected, and the risk of international trade.
steel
The Bureau of Statistics released data for March: the apparent consumption of crude steel in March 2024 was 79.317 million tons, a year-on-year increase of -7.4%. The crude steel output was 88.588 million tons, a year-on-year increase of -4.6%.
In March, demand continued to diverge, and fundamentals bottomed out twice. The manufacturing and construction sectors continued their divergent trend in March. According to the data, the area of new housing construction in March was 78.54 million square meters, a year-on-year increase of -25.6%. The real estate sales area/sales volume was 112.99 million square meters/1,078.8 billion yuan, a year-on-year increase of -23.7/-28.5%. At the same time, the manufacturing industry was still strong in March, with fixed asset investment +9.9% year-on-year, and downstream output such as automobiles/home appliances also continued to grow. On the whole, we believe that the fundamentals of steel are still weak, the volume and price of real estate sales are sluggish, and the start end has declined significantly, resulting in a sluggish demand for steel. The industry entered negative feedback, the price of the charge fell sharply, resulting in a scissors difference, and the industry's profits bottomed out for the second time in March, with a loss of nearly 8 percent, falling close to the lowest level in history. From the beginning of the year to the end of March, the price of the entire black series fell rapidly, reflecting the pessimistic expectations of the market.
The manufacturing boom is expected to pick up, and it is optimistic that the valuation of core assets will be repaired. We emphasise that stock price movements do not depend solely on actual demand, and that changes in expectations and differences between actual developments and expectations are also sources of sector alpha. The market remains pessimistic about steel due to the continued sluggish fundamentals of the industry, and we believe that as long as the expectation of improvement in the fundamentals of the industry strengthens or there is a phased improvement, the valuation of the sector is ready to be repaired. We are optimistic that the recovery of the manufacturing industry exceeds market expectations. 1) Forward-looking indicators have improved, with the manufacturing PMI showing an expansion trend of +3.5% year-on-year to 50.8 in March. In addition, we have observed that orders for steel grades with consumable properties, such as tool and die steels and cutting tools, have also been restored. 2) Steel exports are still strong, mainland steel exports in March +37.9% month-on-month to 9.888 million tons, +28.5% year-on-year, overseas manufacturing demand is a strong hedge against the decline in domestic real estate demand. 3) Domestic equipment modernization and trade-in of consumer goods are expected to support demand in the medium term. In the medium term, the improvement in steel demand for manufacturing is worth looking forward to. Finally, steel inventory since the active destocking cycle, the current inventory has fallen to a low level, the buffer between supply and demand is thinner, if the follow-up steel demand recovery or recovery is expected to continue to strengthen, the inventory cycle is likely to enter the passive or active replenishment, the two form a resonance, further support the rise in steel prices and the repair of steel enterprise profits.
At the current point in time, the domestic manufacturing industry has maintained a good recovery momentum, after the market is still pessimistic about the industry's demand expectations due to the decline in the real estate boom. At the current point in time, we believe that the expectation is expected to be repaired, and it is difficult to falsify in the short term, we are optimistic about this round of steel valuation repair market, the undervalued manufacturing leading steel companies ushered in the gradual repair of profitability and valuation, and excess returns can be expected. In terms of targets, we suggest focusing on two main lines: 1) the undervalued "core assets" of state-owned steel at the bottom and 2) the leading enterprises of special steel new materials.
Risk warning: the real estate boom will decline further, and the global economy will accelerate the downturn.
internet
The National Bureau of Statistics (NBS) today released online consumption data for March 2024, which we estimate based on the data released by the National Bureau of Statistics:
In March 2024, the total online retail sales (including physical and virtual items) were 1.16 trillion yuan, an increase of 7.4% year-on-year, and the growth rate decreased from 15.3% in January-February 2024. In March 2024, the sales of online physical goods increased by 6.8% year-on-year to 984.7 billion yuan, slowing down from the 14.4% year-on-year increase in January-February 2024, but the performance is still stable.
From the express delivery data, the State Post Bureau expects the year-on-year growth rate of express business volume in March to be about 25.6%, and we estimate that the gap between the express business volume and the online physical growth rate in March 2024 has expanded by 10 percentage points compared with the first two months of this year.
From the perspective of online and offline shopping structure, offline retail sales in March 2024 increased by 1.9% year-on-year to 2.9 trillion yuan, a decline from the year-on-year increase of 3.2% in January-February 2024, reflecting that the overall consumer sentiment still needs to be recovered, on this basis, online consumption continued to gain share, and the penetration rate of online shopping reached 25.2% (the percentage of online physical sales in total social retail sales) in March 2024, compared with 24.4% in the same period last year This has improved (22.4% penetration rate in January-February 2024). The penetration rate of online shopping reached 23.3% in 1Q24, up from 21.9% in the same period last year.
Online sales of physical goods were divided by category, the sales of food and consumer goods performed relatively well in March, and the growth rate of sales of clothing goods slowed down due to the impact of temperature: online sales of food goods increased by 10.5% year-on-year to 106.1 billion yuan in March, online sales of clothing goods increased by 2.8% year-on-year to 209 billion yuan in March, and online sales of consumer goods increased by 7.8% year-on-year to 741.7 billion yuan in March. In 1Q24, the sales of food, clothing and consumer goods increased by 21.1%, 12.1% and 9.7% respectively.
Risk warning: intensified competition in the industry, macroeconomic uncertainty.
media
Recently, the valuation of the media sector has fluctuated, which may be affected by the sentiment of the AI theme and the performance period. We believe that the performance of the first performance period of the year may be an important window period for the market to track fundamental changes and set the tone for the 2024 full-year performance trend, and we recommend continuing to pay attention to the performance of subsequent A-share companies and the annual business plan. Digital media: "Walking with the Phoenix" topped the list of dramas played in March, and high-quality content promoted the healthy development of members' business. We believe that the overall performance of long videos in March is flat due to the number of episodes supplied, and high-quality content promotes the healthy development of membership business, so it is recommended to pay attention to the online rhythm of key content in 2024 and the competitive landscape of various platforms. Film and television theaters: According to Yien data, the national box office including service fees in March 2024 will be 2.78 billion yuan, an increase of 45.9% year-on-year. We believe that the introduction of a large number of imported films and diversified themes in March will drive a year-on-year boost in the box office of the market, and with a number of key films in the May Day file being finalized, the audience's viewing demand is expected to further recover. Social Community: Differentiating performance, holding industry conferences to update business strategy. Online games: According to Qimai data, the domestic iOS game turnover in March 2024 increased by 11% year-on-year/month-on-month, and continued to show a good upward trend year-on-year. Marketing and advertising: After the Spring Festival, the advertising market fell month-on-month. We judge that the advertising market in the first quarter is still in a moderate recovery under the off-season. Book publishing: The retail market remains under pressure, and the short video channel is thriving.
Risk warning: the macroeconomic prosperity is lower than expected, the industry regulatory policy changes, and the progress of profit repair is slow
Car
Passenger car demand in 1Q24 got off to a good start, with monthly wholesale and exports hitting record highs. Driven by stable market demand and high export growth, wholesale sales in March exceeded the high point of the same period in 2018 and hit a new high of 2.189 million units. The penetration rate of new energy vehicles has rebounded to a high level, and the sales of plug-in hybrid models have increased year-on-year. In March, the wholesale sales of new energy passenger vehicles reached 810,000 units, a year-on-year increase of +31.1%, and the corresponding new energy penetration rate reached 37%. The new car cycle has kicked off, and the superimposed policy encouragement is expected to further stimulate the release of automobile consumer demand.
Looking ahead, we see that the market has accelerated the pace of new car releases, the inflection point of demand in March is in line with our previous prediction, and the Beijing Auto Show in April will usher in many new car releases, we remain optimistic about the overall performance of car companies in 1Q24, and independent brands are expected to continue to strengthen growth momentum, and it is recommended to pay attention to car companies with strong product cycles. In terms of policy, the Ministry of Commerce, together with 14 departments, issued the "Action Plan for Promoting Large-scale Equipment Renewal and Trade-in of Consumer Goods", focusing on scrapped vehicles, emission standards, technology upgrades, etc., we expect to have a significant effect on domestic automobile demand throughout the year, and look forward to the implementation of specific rules in the near future.
Risk warning: competition in the domestic market intensifies, exports are less than expected.
Light industry retail beauty
The National Bureau of Statistics announced: the total amount of social zero in March was 3.90 trillion yuan, a year-on-year increase of +3.1%, and the growth rate driven by the change in the base rate fell by 2.4ppt month-on-month; after excluding the base effect, the five-year compound growth rate was 4.2% compared with March 2019, and the growth rate was flat month-on-month; the total amount of social zero from January to March was 12.03 trillion yuan, a year-on-year increase of +4.7%. Structurally, offline service consumption grew faster in March, and upgraded categories such as sports and entertainment goods performed well in commodity retail.
In January and March, the social zero was +3.1% year-on-year, and the growth rate of service consumption was relatively fast, and the online penetration rate further increased. (1) In terms of business formats: retail sales of goods in March were +2.7% year-on-year, and catering revenue was +6.9% year-on-year, down 1.9ppt /5.6ppt respectively from January to February; (2) In terms of channels: online, online retail sales of physical goods from January to March were +11.6% year-on-year, and the growth rate fell by 2.8ppt month-on-month, and the online penetration rate from January to March increased by 0.9ppt to 23.3% compared with January and February, and the online trend continued. The retail sales of department stores were +6.3%/+5.2%/+2.2%/-2.4% year-on-year respectively, and the performance of different business formats continued to diverge.
2. Upgraded categories such as sports and entertainment products performed well. (1) Required categories: Grain, oil and food, Chinese and Western medicines, and daily necessities in March were +11.0%/+5.9%/+3.5% year-on-year, respectively, with a month-on-month increase of 2.0ppt/3.9ppt/4.2ppt;(2) Optional categories: Sports and entertainment products in March were +19.3% year-on-year, and the growth rate was +8ppt month-on-month, and we believe that with the warming temperature, the increase in outdoor travel heat will increase the demand for supplies; clothing and textiles, gold, silver and jewelry, and cosmetics will be +3.8%/+3.2%/+ year-on-year respectively2.2%;(3) Real estate post-cycle categories: home appliances, building materials, and furniture were +5.8%/+2.8%/+0.2% year-on-year respectively, and the growth rate of home appliances and building materials improved month-on-month.
3. Policies to promote consumption such as "trade-in for the new" have been implemented one after another, and we are optimistic about the momentum of consumption recovery. On April 12, the Ministry of Commerce and 14 other departments jointly issued the "Action Plan for Promoting the Trade-in of Consumer Goods" to promote the trade-in of automobiles and household appliances and the "renewal" of home decoration, kitchen and bathroom nationwide. Some localities have also introduced policies to promote the trade-in of consumer goods, providing shopping subsidies for consumption such as automobiles and home appliances. We believe that the continued efforts of pro-consumption policies are expected to help consumption continue to recover and pick up.
We are optimistic about the performance of leading companies in the retail and beauty sector of young workers in 2024 and recommend three main lines:
1) The leader of the new consumption track;
2) Smart home and other home faucets;
3) Brand going overseas and cost-effective consumption leader.
Risk warning: macroeconomic downside risk, intensified industry competition, industry regulatory policy changes.
Chart: Growth of total retail sales of consumer goods
Source: Wind, CICC Research
Chart: Growth of total retail sales of consumer goods by enterprises above designated size
Source: Wind, CICC Research
Chart: Year-on-year growth in retail and catering revenues
Source: Wind, CICC Research
Chart: Year-over-year growth in online retail sales of physical goods
Source: Wind, CICC Research
Chart: Online retail sales of physical goods accounted for zero share
Source: Wind, CICC Research
Chart: Cumulative year-on-year growth in online retail sales of food, clothing and use
Source: Wind, CICC Research
agriculture
1. Livestock and poultry industry chain: the enthusiasm for supplementing the column is good, and the pig price boom in 2Q24 may start to fluctuate upward
1) Pig breeding: the enthusiasm of sows and secondary breeding supplements has increased, and the number of pigs slaughtered by sample listed pig enterprises has increased in March. From the pig price point of view, according to Yongyi Consulting, since April, the average price of commercial pigs is 15.2 yuan / kg, compared with the end of March (March 31) -0.2%, the price of commercial pigs fluctuates, we believe that due to the phased disturbance of sows and two breeding columns, since March, sows and two breeding columns are more active, March Yongyi sample point / Ganglian sample point can reproduce sow inventory was +1.6%/+0.11% month-on-month, April 1-10 secondary fattening slaughter accounted for +1.96ppt month-on-month to 6.27% We judge that the average price of live pigs is expected and the guidance of live pig futures is good to support the enthusiasm of farmers for second breeding. From the perspective of the sample enterprises, we estimate that the number of pigs slaughtered by the sample listed pig enterprises in March was 12.445 million, +14.3% month-on-month/+2.8% year-on-year, and we judge that the month-on-month increase is due to the low base of the Spring Festival holiday in February. We judge that the 2Q24 pig price boom or start to shock upward, the current pig breeding industry is in the end of the cycle under the tight capital chain of production capacity grinding stage, the core competition enterprise capital reserves and cost control capabilities.
2) Poultry breeding: the price fluctuations of chicken seedlings, chickens and chicken products are weak, and the fundamentals of supply and demand have improved recently. From the price side, according to Boya and Xun, the price of chicken seedlings in March was 3.7 yuan / feather, corresponding to a month-on-month growth rate of -13%, the price of chickens was 7.7 yuan / kg, corresponding to a month-on-month growth rate of -4%, and the price of chicken products was 9.6 yuan / kg, corresponding to a month-on-month growth rate of -2%, and the price shock was weak; to 9.6 yuan/kg, mainly due to the low start of slaughtering enterprises, the overall supply is tight, and the distribution end is concentrated to stimulate demand. We believe that there is still room for improvement in the supply and demand pattern of white feather chickens, and it is recommended to pay attention to meat products companies that benefit from the growth in demand for cost-effective chicken products.
3) Feed: The price of raw materials fluctuated slightly, and the price of fertilizer was under marginal pressure. On the raw material side, according to iFinD, the price of soybean meal in March was 3,455 yuan/ton, corresponding to a month-on-month growth rate of +0.9%, the price of corn was 2,348 yuan/ton, flat month-on-month, and the price of fishmeal was 12,857 yuan/ton, corresponding to a month-on-month growth rate of -2.2%. Under the background of long-term losses and relatively weak demand for downstream farming, the price of fertilizer products was under pressure, and the terminal price of full-price fattening material in March was 3,312 yuan/ton, corresponding to a month-on-month growth rate of -2.1%. We are optimistic about the opportunities for leading feed companies with cost control capabilities and platform-based market share increase in the context of industries with high profit pressure.
4) Animal protection: The industry is weak, pay attention to thematic investment opportunities such as non-plague vaccines and pet animal protection. From the perspective of industry batch issuance data, according to the data of the National Veterinary Drug Basic Database, the number of animal vaccine batches issued in March was -12.0%/+25.7% year-on-year/month-on-month, respectively, corresponding to the number of animal vaccine batches issued in 1Q24 year-on-year/month-on-month were -4.7%/-14.6% respectively; We believe that if the pig price reverses, it is expected to drive the improvement of breeding profits and epidemic prevention demand, and the animal protection industry is expected to usher in a boom recovery. We believe that the front-end R&D strength and the ability to build a comprehensive solution platform are the core differentiated competitive advantages of animal protection enterprises, and the concept of non-plague vaccines is expected to bring stock price catalyst in the short term, pet medical care is expected to open the first year of domestic substitution, and related companies are expected to release medium and long-term performance elasticity.
2. Planting industry chain: The industrialization of biological breeding is expected to expand and speed up, and the market environment of the seed industry will continue to be purified.
1) Seeds: The first batch of glyphosate transgenic crop herbicides were approved, which is expected to help accelerate the industrialization of biological breeding. (1) On March 29, the Pesticide Control Institute of the Ministry of Agriculture and Rural Affairs announced the third batch of pesticide products to be approved for registration in 24 years, among which, the glyphosate transgenic crop herbicide of Jiangshan Co., Ltd. and Xin'an Co., Ltd. was registered and publicized in the first batch, which completed the last step of the legal use of biological breeding and is expected to help accelerate the industrialization of biological breeding. (2) The Ministry of Agriculture and Rural Affairs decided to continue to carry out the activities of the National Seed Industry Supervision and Law Enforcement Year in 2024, and recently released the "2024 National Seed Industry Supervision and Law Enforcement Year Activity Plan", which is expected to continue to purify the seed industry market environment. We believe that the seed industry is upgrading in science and technology, expanding the industry, and optimizing the pattern, and it is recommended to pay attention to investment opportunities that resonate with fundamentals and policies
2) Planting: The price of staple grains is running weakly, and spring plowing and spring sowing are generally progressing smoothly. According to China Huiyi, the price of corn in March was 2,348 yuan/ton, flat month-on-month, the price of soybean in March was 4,480 yuan/ton, corresponding to a month-on-month growth rate of -4.6%, the price of wheat in March was 2,799 yuan/ton, corresponding to a month-on-month growth rate of -0.1%, the price of mid-to-late rice in March was 2,830 yuan/ton, corresponding to a month-on-month growth rate of +0.8%, and the domestic sugar price in March was 6,585 yuan/ton, corresponding to a month-on-month growth rate of +0.5%, which was generally weak. According to the latest agricultural dispatch of the Ministry of Agriculture and Rural Affairs, as of April 13, 13.2% of the intended area of spring sowing grain has been completed nationwide, and the progress is slightly faster than that of 0.1 percentage points year-on-year, and the overall progress is smooth. The overall high level of domestic grain prices has fallen, and it is recommended to pay attention to the cost improvement opportunities of downstream sectors such as feed and aquaculture.
3. Brand industry chain: optimistic about the high-quality development prospects of agricultural brand leaders.
1) Pets: Marginal repair of export OEM, and domestic pet food brands maintained excess growth online in March. From the perspective of export sales, according to the data of the General Administration of Customs, from January to February, the export scale of pet food in mainland China increased year-on-year, with the export volume +43.5%/+22.8% year-on-year respectively, and the export value was +37.9%/+28.4% year-on-year, respectively, achieving a rapid recovery under the low base;In terms of domestic sales, according to the data of Jiuqian and Feigua, the online pet food channel (Tmall + Jingdong + Douyin) achieved sales of 2.1 billion yuan in March, a year-on-year increase of +5.2%;On the brand side, the online sales of Fleetgate under Ganbao were +196.1% year-on-year , to achieve excess growth, Zhongpet's Zeal/leading +26.2%/+70.8% year-on-year respectively, Petty's Jueyan +58.3% year-on-year. We are optimistic about the broad development prospects of the continuous rise of domestic pet food leaders in the context of marginal repair of export OEM and rising volume and price in the domestic market.
2) Kitchen Food: CBOT soybean prices fell, and USDA's April report was bearish. Internationally, according to Bloomberg, the average price of CBOT soybean futures in March was 1,185 cents per bushel, corresponding to a month-on-month growth rate of +1.1%. In its April supply and demand report, the USDA lowered its estimate for global soybean production in 2023/24 by 120,000 mt to 397 million mt, and global soybean ending stocks by 50,000 mt to 114 million mt, still the highest in five years. Domestically, we judge that the prices of raw materials such as soybeans may enter a volatile downward range. We are optimistic about the marginal recovery of the profitability of the brand agricultural leader in the short term, and the medium and long term optimistic about its creation of a one-stop ecological platform for industrialization in the catering field with grain, oil and food as the core, which is expected to increase the profit margin and high-quality development.
Investment suggestions: optimistic about the improvement of the industry and the increase in the market share of agricultural leaders under the transformation of science and technology: 1) livestock and poultry industry chain: recommend leaders with management, capital and technological advantages. 2) Planting industry chain: optimistic about the opportunities for industry change in the context of seed industry revitalization. 3) Brand industry chain: optimistic about the rise of pet food leaders and the recovery of kitchen food profits.
Risk warning: fluctuation of raw material prices, animal disease risk, bad weather, food safety risk.
Electric new
1) Batteries and materials: Domestic sales in March strengthened month-on-month and exports performed well, and we are optimistic about the Beijing Auto Show and new car launches to drive demand growth. In April, the production schedule of the industrial chain continued to improve. The inflection point is gradually approaching, and the profitability of all links is expected to gradually stabilize in 2024.
2) Industrial control: PMI improved in March, of which the order side and the small and medium-sized enterprise side improved significantly. On the order/revenue side, the overall order growth rate was under pressure under the base effect in March, and domestic capital was still better than foreign capital.
3) Energy storage: domestic large-scale storage bidding and bidding, focusing on the construction of energy storage projects in emerging markets. With the peak-to-valley spread between the United States and Germany and overseas electricity prices remaining volatile, we are optimistic that overseas energy storage assets will benefit from the high electricity price spread and be profitable.
4) Power equipment: From January to February 2024, the investment in power supply engineering and power grid engineering increased by 8.3% and 2.3% year-on-year. The main network has entered the order + performance cashing period, and the first-time equipment manufacturers have performed well. Distributed power generation and charging piles are expected to catalyze the wave of distribution network transformation. We continue to be optimistic about the export opportunities of power equipment.
Risk warning: the macroeconomic downturn, raw material prices fluctuate, the policy implementation is less than expected, the technical route changes, and the downstream demand is less than expected.
Food & Beverage
The zero data in March slowed down from January to February, and the performance of grain, oil and food must be stable. According to the National Bureau of Statistics, the total retail sales of consumer goods in March were +3.1% year-on-year, slowing down from the 5.5% growth rate in January-February. In March, the total retail sales of urban consumer goods were +3.0% year-on-year, and the total retail sales of rural consumer goods were +3.8% year-on-year. In terms of consumption type, retail sales of goods in March were +2.7% year-on-year, and catering revenue was +6.9% year-on-year, both of which slowed down significantly from January to February.
In terms of industries, compulsory consumption showed strong demand resilience. The retail sales of grains, oils, food and beverages increased by 11.0% and 5.8% year-on-year respectively, and the retail sales of tobacco and alcohol increased by 9.4% year-on-year. Among them, only the zero growth rate of grain, oil and food in March was higher than that in January and February, and we expect that the demand for grain and oil will rebound, the speed of enterprise destocking will accelerate, and the wholesale prices of rapeseed oil and soybean oil in March will rise slightly year-on-year.
In terms of liquor, the price of Moutai continued to rise after stabilizing, and the fundamentals of the leading liquor were stable and the performance was certain. Since March, it has entered the off-season of liquor consumption, the overall demand has continued to be stable, and mainstream brands have entered the stage of controlling goods and raising prices. The decline in Moutai's early batch price was mainly due to the increase in short-term supply in the off-season in March, and the overall confidence and price expectations of the channel in the off-season were weak. The company has successively introduced measures to control quantity and price, and the batch price of Moutai has continued to rise after stabilization. We expect that the follow-up wholesale price will stabilize between 2,500 yuan and 2,700 yuan and fluctuate normally, and there is no need to worry too much about the price. In the early stage of the market, under the pessimistic mood, Moutai and other liquor leaders continued to pull back, the fundamentals of the head companies were stable, the performance of the first quarter was certain, and the current valuation was cost-effective, so we continue to recommend the liquor sector.
In terms of mass goods, the post-holiday demand was relatively stable, and the catering supply chain was slightly weak. The demand side of mass food returned to a stable state after the holiday, and the channel replenishment of dairy products, beer and condiments after the festival was normal, and the performance in the first quarter was in line with our expectations. Due to the relatively weak performance of the catering side in March, the revenue growth of catering supply chain enterprises also slowed down in March. On the cost side, the prices of barley, soybeans, pork and raw milk continued to maintain a downward trend in March, and we believe that the profitability of the industry is expected to improve year-on-year. We recommend the dairy beverages, beer and snack food sectors where demand remains solid and costs are declining.
Risk warning: intensified competition, weak demand, offline business expansion is less than expected, macroeconomic downturn affects the demand for liquor, expansion outside the province is less than expected, and food safety risks.
Non-bank finance
Capital market industry: In the short term, the performance of small and medium-sized brokerages and financial information targets with a high proportion of brokerage and proprietary operations may be better, and individual stocks are recommended to focus on characteristic targets with more flexible business structure or more prominent growth;
Insurance and health management: Since mid-February, the sector has been adjusted under the influence of factors such as annual report disclosure and weak economic expectations, and we believe that the insurance investment base is expected to be significantly reduced from 2Q, and the liability side has more than expected space on the basis of high base and low expectations, and the gradual implementation of regulatory policies will significantly improve the industry's debt costs.
Risk warning: regulatory uncertainty, intensified competition in the industry, and large market volatility.
machine
Construction machinery
In March, excavator sales fell 2.3% year-on-year. According to the data of the Construction Machinery Industry Association, the sales volume of the excavator industry in March was 25,000 units, a year-on-year decrease of 2.3%, and the previous value was a year-on-year decrease of 41.2%. From January to March, a total of 50,000 excavators were sold, a year-on-year decrease of 13.1%. In March, the loader industry sold 12,000 units, a year-on-year decrease of 5.8%, and the previous value was a year-on-year decrease of 32.6%. From January to March, a total of 27,000 loaders of various types were sold, a year-on-year decrease of 9.1%.
Domestic sales turned positive in March, while overseas demand continued to decline. In terms of regions, the domestic sales of excavators in March were 15,000 units, a year-on-year increase of 9.3%, a year-on-year decrease of 49.2%, and the export sales volume was 10,000 units, a year-on-year decrease of 16.2%, and a year-on-year decrease of 32.0% in the previous month. From January to March, the domestic sales of excavators were 26,000 units, a year-on-year decrease of 8.3%, and the export sales were 24,000 units, a year-on-year decrease of 17.9%. In March, the demand for excavators turned positive. Exports continue to decline, and we observe a slowdown in U.S. demand in early 2024 on a regional basis.
We expect excavator sales to reach 185,000 units in 2024, down 5% year-on-year. In 2023, the industry will sell a total of 195,000 excavators, a year-on-year decrease of 25.4%, of which 90,000 units will be sold domestically, a year-on-year decrease of 40.8%, and 105,000 units will be sold overseas, a year-on-year decrease of 4.0%. We expect domestic sales of about 85,000 units in 2024, corresponding to a slight decline in sales in 2023. In 2024, we expect export sales to decrease by approximately 5% y/y to 100,000 units, and consolidated sales in 2024 to approximately 185,000 units, a decrease of approximately 5% y/y. Looking ahead, we expect that with the adjustment of real estate policies, the domestic sales of excavators can be stabilized from 2024, while the main market on the export side may enter a downward cycle from 2023.
Industrial automation
In March, the manufacturing PMI increased by 1.7ppt month-on-month, and rebounded above the boom and bust line, and the manufacturing demand rebounded from March to April. 1) Macro: The manufacturing PMI in March increased by 1.7ppt month-on-month to 50.8%, we believe that February was affected by the Spring Festival holiday, and there was a recovery in manufacturing demand in March, and it is recommended to pay attention to sustainability. Among them, the new orders PMI increased by 4.0ppt month-on-month to 53.0%, the export orders PMI increased by 5ppt month-on-month to 51.3%, and the production PMI increased by 2.4ppt month-on-month to 52.2%. 2) Meso: According to the National Bureau of Statistics, the cumulative output of domestic industrial robots from January to February was -9.8% year-on-year to 76,000 units, and the cumulative output of domestic machine tools from January to February was +19.5% year-on-year to 92,000 units. 3) Micro orders: According to our industry research, since March, the orders of manufacturing enterprises have rebounded significantly due to the impact of downstream operating rates, and we believe that the manufacturing demand in the second quarter is worth looking forward to.
The high-end upgrading of the manufacturing industry continues to advance, which is conducive to the domestic substitution of the machine tool industry. In March 2024, the Ministry of Industry and Information Technology and other seven departments jointly issued the Implementation Plan for Promoting Equipment Renewal in the Industrial Sector, and on April 7, the People's Bank of China announced the establishment of a re-loan for scientific and technological innovation and technological transformation with a quota of 500 billion yuan, encouraging and guiding financial institutions to increase financial support for technology-based small and medium-sized enterprises, technological transformation and equipment renewal projects in key areas. We believe that equipment renewal or stimulate the demand for machine tools, it is recommended to pay attention to high-end five-axis machine tool enterprises, CNC system leaders, and lead screw guide rail enterprises.
The humanoid robot industry chain has accelerated its landing, or exceeded expectations. Nvidia held the 2024 GTC conference on March 19, and the conference released its new product training chip + simulation software in the field of humanoid robots, which we believe may accelerate the construction of a general model ecology for the entire industry;In February 2024, Tesla updated the latest walking video of Optimus Prime, compared with the first walking video in December 2023, we judge that the control algorithm and foot sensor perception have been further enhanced. On February 24, 2024, UBTECH released a video of the humanoid robot Walker S entering the NIO factory for practical training, including the quality inspection of front and rear door locks, seat belt detection, quality inspection of headlight covers, and car labeling. We are optimistic about the long-term trend of the humanoid robot industry, and recommend paying attention to high-quality assets with stronger certainty in the T-chain and opportunities for the extension of the low-valuation industrial chain.
Lithium battery equipment
Industry demand continues to boom. According to the China Association of Automobile Manufacturers, in March 2024, the sales volume of new energy vehicles in mainland China was 883,000 units, a year-on-year increase of 35.3%, and according to the China Automotive Power Battery Industry Innovation Alliance, the installed capacity of power batteries in mainland China was 35.0GWh, a year-on-year increase of 26.0%.
We expect that in 2023, the growth rate of domestic orders for lithium battery equipment will be under pressure, and the growth rate of overseas orders will rise. In 2021, the scale of downstream expansion will be about 300GWh, and in 2022, it will be about 500GWh, and orders for lithium battery equipment will continue to maintain double-digit high growth in 2022. Looking ahead, we expect that in 2023, the growth rate of domestic orders for lithium battery equipment will fall and the growth rate of overseas orders will rise, in addition to the demand for energy storage will maintain high growth, but the comprehensive demand may still decline; We are optimistic about the leading enterprises of lithium battery equipment in the medium and long term.
The composite copper foil test is expected to pass one after another, and mass production may start at any time before the end of the year. According to our tracking, the 1600-lap test standard for ternary batteries sent by major battery manufacturers for PP composite copper foil sampled by material leaders has passed this week, and we believe that the 1700-lap test standard for lithium iron phosphate batteries may also end in the near future (12 laps per day in 1C environment). After passing the high-temperature cycle test, that is, meeting the strict standards of the battery factory from the first principle of the product, coupled with the low-cost mass production capacity of the material, we believe that the real mass production of composite copper foil is expected to start at any time before the end of the year.
Composite aluminum foil equipment is expected to be localized, significantly reducing material costs and increasing its penetration. Composite aluminum foil is a new type of cathode current collector material, which can effectively improve the safety of batteries. Previously, the market has expected that high costs and difficulty in reducing costs are the main problems restricting the mass application of composite aluminum foil. According to our industry chain research, the price of a single imported evaporation equipment is about 50 million to 60 million yuan at this stage, and 3-4 evaporation equipment is required for 1GWh, and the depreciation of equipment accounts for 60%-70% of the total cost, which is the main obstacle to cost optimization. According to our industrial chain research, the recent domestic composite current collector equipment leader is actively realizing the localization of composite aluminum foil magnetron evaporation equipment, the equipment or has been basically successfully developed, we expect or is expected to reduce the cost of equipment by more than 50%, thereby greatly improving the economy of composite aluminum foil, we believe that the penetration rate of composite aluminum foil to improve the space and capital expenditure may have a large expected difference.
Photovoltaic equipment
On the demand side: On March 25, the National Energy Administration released the national power industry statistics for January-February 2024. According to the data, as of the end of February 2024, the cumulative installed power generation capacity of the country was about 2.97 billion kilowatts, a year-on-year increase of 14.7%. Among them, the installed capacity of solar power generation is about 650 million kilowatts, a year-on-year increase of 56.9%. From January to February 2024, 36.72GW of new PV capacity was added, a year-on-year increase of 80.3%. China exported about 21.9GW of PV modules in January 2024, up 35% month-on-month from 16.2GW in December 2023. Exports of around 21.2 GW of PV modules were exported in February, down slightly by 3% month-on-month. Cumulative exports now stand at 43.1 GW, up 45% from 29.7 GW in January-February 2023.
Prices in the industrial chain: Polysilicon, wafers, and cells fell, while modules stabilized. In terms of polysilicon, the average price level of dense blocks dropped from RMB 68/kg to RMB 67/kg from the beginning of March to the end of March, the average price of 182mm wafers dropped from RMB 2.05/pc in early March to RMB 1.8/pc at the end of March, the average price of 182mm mono-Si PERC cells decreased from RMB 0.49/W in early March to RMB 0.37/W at the end of March, and the average price of 182mm modules remained stable at 182mm in March The average price of double-glass TOPCon modules is 0.96 yuan/W.
On the supply side, the proportion of TOPCON equipment transformation demand in 24 years may increase. Judging from the equipment orders in the first quarter, we expect the proportion of transformation demand to increase this year, and we judge that the industry TOPCON will expand production at 200~250GW (including transformation needs) in 24 years, and pay long-term attention to poly-finger and bifacial poly new technologies.
In terms of industrial chain utilization rate: Compared with February, the utilization rate of polysilicon, monocrystalline wafers, monocrystalline cells, and modules of Tier1 enterprises all increased in March. In the polysilicon sector, the utilization rate increased from 95% to 100%, the wafer sector from 69% to 87%, the cell sector from 57% to 75%, and the module sector from 48% to 75%.
The expansion of large-scale integrated enterprises supports the demand for monocrystalline furnaces in 24 years. At present, the monocrystalline furnace market is relatively pessimistic, but we still have 100GW+ expansion plans in the market this year, mainly large integrated enterprises.
The price of crucibles fell slightly, and the differentiation between enterprises intensified. Affected by the downstream operating rate, the price of crucibles has dropped slightly recently, and the shipments of some enterprises have been slightly affected, but the price of 36-inch crucibles is still 30,000 yuan +/piece;
The release of 0bb mass production equipment is expected to drive 2H24 batch transformation/new demand. Recently, Otway and LEAD have successively released 0BB mass production equipment, which has gained in reducing silver consumption, increasing module power, and improving printing accuracy. According to the Otway public annual report performance meeting, the company expects that there should be 2,000 + units of equipment for 0bb transformation this year, or concentrate on batch orders in the second half of the year.
The pan-semiconductor layout of photovoltaic equipment companies is accelerating, and SEMICON exhibits are abundant. On March 20-22, SEMICON China 2024 was held at the Shanghai New International Expo Center, and a number of photovoltaic equipment companies participated in the exhibition. Photovoltaic equipment companies continue to expand the platform layout in the pan-semiconductor field, and each company focuses on different fields based on its own genes. For details, please refer to our published report "SEMICON Experience: Focus on the Platform Layout of Photovoltaic Equipment and the Progress of Localization of Semiconductor Quantity Testing Equipment"
Risk warning: technology iteration risk, downstream demand is less than expected, new product development is less than expected, exchange rate, raw materials, freight and other cost fluctuations.
Building materials
Cement: The demand is not strong in the peak season, and the price is weak and stable. From January to March, the cement output was 337 million tons, a year-on-year increase of -11.8%, of which the cement output in March was 154 million tons, a year-on-year increase of -22%. In March, the national cement shipment rate was -26ppt year-on-year to 36%, and the average price fell 2 yuan/ton to 358 yuan/ton month-on-month in February. On April 10, cement clinker in the Yangtze River Delta announced a rise of 30 yuan per ton, and the recent Zhejiang, the middle reaches of the Yangtze River and other peripheral areas have also risen, we believe that the current cement prices in most parts of the country are at a historical trough, corporate profits are generally meager, and the demand for price increases is strong, it is recommended to pay attention to the sustainability of subsequent price increases, if the price in the core area withstands the stress test of the rainy season + high temperature weather in the middle of the year, the prosperity of the industry peak season in the second half of the year may exceed expectations. We recommend that industry leaders with overseas logic and a high proportion of non-cement business should be preferred.
Glass: Production in March increased year-on-year, while prices decreased month-on-month. From January to March, the cumulative output of flat glass was +7.8% year-on-year to 248 million heavy containers, and the output in March was +9.6% year-on-year to 87 million heavy containers. In March, the production and sales rate of float glass slowed down slightly, and downstream customers mainly digested the inventory in the early stage, which was reflected in the average factory warehouse of the month +35% month-on-month to 57.1 million heavy containers, and the number of downstream deep processing order days was about 12 days, which was basically the same as that of the same period last year. Therefore, the average price of float glass including tax was -7% month-on-month to 1917 yuan/ton. Looking ahead, we recommend that we preferably select industry leaders with "float+" business.
Risk warning: the recovery of demand is less than expected, and the supply-side disturbance is more than expected.
household appliance
According to the data of the Bureau of Statistics, the total retail sales of consumer goods in March 2024 were 3,902 billion yuan, a year-on-year increase of +3.1%, of which the retail sales of consumer goods other than automobiles were 3,496.8 billion yuan, a year-on-year increase of +3.9%. Among them, the total amount of household appliances and audio-visual equipment was 73.7 billion yuan, a year-on-year increase of +5.8%.
The domestic sales of air conditioners increased year-on-year. 1) Since March 2023, the retail performance of air conditioners has exceeded expectations, and the current year-on-year base of air conditioning retail sales has increased. In March 2023, the omni-channel retail sales/volume of air conditioners were +10%/+8% year-on-year, and the domestic shipments and omni-channel retail sales of air conditioners in 2Q23 were +30%/+24% year-on-year, respectively. From January to February 2024, factors such as weather factors, manufacturers' promotion policies and rhythms drove high sales of air conditioners. We estimate that the total sales volume of air conditioners in all channels may decline slightly year-on-year in March.
The average retail price of air conditioners has increased steadily. Year-to-date, the average online/offline retail price of air conditioners was +4.4%/+0.9% year-on-year, showing a steady upward trend overall. Investors are worried that consumers are biased towards cost-effective products, which is mainly reflected in the rapid year-on-year growth of online channels and the year-on-year decline of offline channels. The increase in the proportion of cost-effective transaction models will also lead to a decline in the average retail price of some brands, such as the recent decline in the average retail price of Gree's offline air conditioners, but we have observed that the price of Gree's offline best-selling models remains stable.
On April 12, the Ministry of Commerce and other 14 departments issued a notice on the "Action Plan for Promoting the Trade-in of Consumer Goods", making detailed work arrangements for the trade-in of household appliances. The home appliance market is dominated by renewal demand, and trade-in helps maintain stable demand. China's home appliance market has entered a stock market dominated by renewal demand. We estimate that in 2022, the demand for refrigerators, air conditioners, washing machines, color TVs, and range hoods will account for 70%, 50%, 70%, 69%, and 35% respectively. At present, the recycling of household appliances is mainly through informal channels, and by supporting the improvement of the recycling system of used household appliances, the goal is to strive to increase the recycling volume of waste household appliances by 15%/30% by 2025/2027 compared with 2023. Specific measures include encouraging communities to set up temporary storage sites for waste household appliances, cultivating recycling enterprises to develop new models such as "Internet + door-to-door recycling" and "car instead of storage", organizing cooperation between after-sales service enterprises and recycling enterprises, developing the circulation of second-hand goods, incorporating renewable resource recovery facilities such as waste household appliances into the scope of local public infrastructure land, optimizing tax collection and management standards and methods, and promoting the practice of "reverse invoicing" when recycling waste household appliances by resource recycling enterprises.
Risk warning: downside risk of real estate cycle, risk of market demand fluctuation, risk of intensified competition in the industry.
Article source:
This article is excerpted from: "March Economic Data and Asset Allocation" released on April 17, 2024
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