Source | Deep Blue Finance
Written by | Wang Xin
The wind knows the strength of the grass, and the fire sees the real gold. Since the second quarter of this year, the market rebound has come to an abrupt end, and a wave of rapid adjustment has caught many people off guard, some sectors have fallen below the lows of the beginning of the year, but some sectors have bucked the trend and become the vanguard of the rebound, such as the chip sector.
According to the data, since the market stopped falling and rebounded on February 5 at the beginning of the year, the CSI Chip Industry Index (H30007) has risen by 22%, leading the performance and significantly outperforming the market average.
The trend of the CSI Chip Industry Index (blue) and the Shanghai Composite Index (red), data as of July 30, 2024
Let's take a look at some representative stocks, such as North Huachuang, Weir shares, and GigaDevice, all of which have unknowingly risen by more than 50%, and it is precisely because of the strength of individual stocks that the free float market value of the 50 companies involved in the CSI Chip Industry Index has returned to more than one trillion yuan, and the latest is 1,208.065 billion yuan.
Before that, the chip industry was actually bearish for three and a half years, and the high point of the last round of the cycle was still stuck on July 30, 2021, after which the CSI chip industry index fell all the way, and it was equivalent to a triple discount at the bottom of the year at the beginning of the year.
Everything is a cycle, and behind the "nirvana rebirth" of chip stocks, it is mainly dominated by cyclical forces.
As inventories approached normal levels, the profitability of the A-share chip sector improved across the board. According to Wind data, the year-on-year growth rate of operating income and gross profit margin of the six major semiconductor chip sub-industries in A-share in the first quarter all rebounded compared with the previous quarter.
Judging from the information in the semi-annual report, NAURA Huachuang, a leading domestic semiconductor equipment company, expects to achieve operating income of 11.41 billion yuan to 13.14 billion yuan in the first half of 2024, a year-on-year increase of 35.4%-55.93%; The net profit attributable to the parent company was 2.57 billion yuan to 2.96 billion yuan, a year-on-year increase of 42.84%-64.51%. Many brokerages believe that it continues to grow at a high rate, and the scale effect is prominent.
The performance of the domestic CIS leader Weir and the storage leader GigaDevice, which has just come out of the dark moment of inventory, is also exciting.
Weir shares are expected to have revenue of 11.9 billion yuan to 12.18 billion yuan in the first half of 2024, a year-on-year increase of 34.38% to 37.54%. Net profit was 1.31 billion to 1.41 billion yuan, a year-on-year increase of 754% to 819%. GigaDevice expects to achieve a net profit of 520 million yuan in the first half of the year, a year-on-year increase of 54.2%. Both companies mentioned that after experiencing sluggish market demand and gradual inventory depletion in 2023, market demand continued to recover, which led to significant revenue growth.
For this round of rebound in the chip industry, we should also look at a larger pattern.
Whether it is the fiery AI industrial revolution or the rapid iteration of new energy vehicles under carbon neutrality, more and more chips need to be used, and the absolute number of chips in a high-end smart electric vehicle has exceeded 5,000. Undoubtedly, the direction represented by chips is the new quality of productivity, which is expected to reshape the valuation of the industry in the new round of scientific and technological revolution and industrial transformation.
Policy signals are also clear. Since 2014, every five years there will be a new large fund established, on May 24, the third phase of the national chip fund was formally established, the third phase of the investment direction of the big fund aimed at the most urgent direction of import substitution in the mainland, the analysis believes that this may be expected to 340 billion to leverage nearly a trillion yuan of capital investment.
So, what are the investment opportunities in the chip sector next, and how should we grasp them in the future? Let's take a look at the views of three fund managers who have laid out the chip industry.
Bosera Xiao Ruijin:
The core leading manufacturer of the localization of super-equipped semiconductor equipment and the AI computing power chip company
Xiao Ruijin, fund manager of Bosera Semiconductor Theme Mixed Fund, known as the "first brother of science and technology" of Bosera Fund, recently shared his latest views in the second quarterly report of Bosera Semiconductor Theme Mixed Fund. He pointed out that after the decline in the second quarter, the investment opportunities in the A-share market in the third quarter of this year are more certain. The market style is expected to be dumbbell-shaped, and the dividend value style will continue in the second quarter, but the growth style will also be repaired in anticipation of the Fed's first rate cut.
At the same time, he believes that the market investment opportunities will be more structured and diversified in the third quarter. First, we are optimistic about the industrial chain of smart phones, artificial intelligence computing power, new energy vehicles and semiconductor components, which are jointly driven by technological innovation and total economy; Second, with the beginning of the US dollar interest rate cut cycle, industrial metals such as copper and aluminum and precious metals industries are expected to reflect relative returns; Third, we are optimistic about the total economy-driven construction machinery, mass consumption, Internet and other industries.
In terms of portfolio management, he said that the current global semiconductor has entered a new round of upward cycle, and in the third quarter, it will continue to overallocate consumer electronics chip design manufacturers, overallocate core leading manufacturers of semiconductor equipment localization, overallocate domestic artificial intelligence computing chip companies, and continue to underallocate new energy and military-driven power and special semiconductors. In the future, we will closely track the demand and inventory of downstream industries such as consumer electronics, artificial intelligence, industry, communications, automobiles, new energy, and military industry, pay attention to the progress of independent innovation of semiconductors and the evolution of artificial intelligence technology, adjust the allocation weight in a timely manner, and effectively respond to potential policy risks.
CEIBS Song Weiwei:
We are optimistic about the innovation cycle of the artificial intelligence industry to drive the development of the chip industry
Song Weiwei, fund manager of the CEIBS CSI Chip Industry Index Initiation Fund, said in the second quarter report that under the influence of the industrial innovation cycle of artificial intelligence, the stock prices of domestic GPU chip companies and optical modules, servers, and copper connection companies related to the industrial chain of overseas chip giants continue to strengthen.
He believes that in the second quarter, the establishment of the third phase of the big fund is the biggest catalyst for the sector. The registered capital of the third phase of the large fund is 344 billion yuan, which exceeds the sum of the previous two phases. The investment of large funds will leverage social capital and local state-owned enterprise capital for equity investment, and will also leverage banks to invest in debt and loans. Catalyzed by this positive situation, the chip industry index rose 13.6% in 18 trading days. In addition to policy catalysis, the high growth of the downstream electronics industry in the chip industry has supported the fundamentals of the entire sector. According to the data, from January to May, the profit of the equipment manufacturing industry increased by 11.5% year-on-year, which is the industry sector that has contributed the most to the growth of industrial profits above the designated size this year. In terms of industries, benefiting from the rapid growth in the production of smart phones, computers and other products, the profits of the electronics industry increased by 56.8%. Correspondingly, a number of high-quality semiconductor companies released performance growth that exceeded expectations in the second quarter.
Song Weiwei judged that, on the whole, the recovery of consumer electronics products such as mobile phones and computers has promoted the bottoming out of the traditional semiconductor cycle, the establishment of the third phase of the domestic policy fund to drive the domestic substitution of chips, and the triple resonance of the artificial intelligence innovation cycle to drive the demand for high-end chips, the chip industry has shown strong resilience in the second quarter. Looking forward to the future, these three factors will continue to maintain the trend and promote the further development of the domestic chip industry.
Liu Huiying:
The growth of semiconductors will maintain a high growth rate in the medium and long term
Sino Analytica Growth Mix used to be a chip-themed fund managed by Cai Songsong, and the fund has been managed by Liu Huiying alone for 305 days. She concluded in the second quarterly report of the fund that the chip sector has a certain relative income relative to the whole market in the second quarter, the establishment of the third phase of the large fund indicates that the semiconductor comprehensive breakthrough through the United States blockade is gradually approaching, the first quarterly report performance of the chip design company has also established the turning point of semiconductor demand, and the launch of the "Eight Articles of Science and Technology" and the discussion of "Kete Valuation" convey the country's determination to vigorously develop science and technology enterprises. The plate fell to a certain extent at the end of June, but the long-term upward trend of China's chips in the future industry that was emphasized before remains unchanged.
Liu Huiying believes that the technology industry is different from the special attributes of the traditional industry, and needs a group of "patient capital" to understand the nature of its industrial development, United States the rise of NASDAQ technology stocks, it is a group of such support for the United States technology industry "patience and long money", it can be said that it is because they have made the industrial trend investment "systematic" and "scientific", and they have cultivated a global technology leader with a market value of tens of trillions of United States technology stocks.
Looking to the future, she said that she is firmly optimistic that China's science and technology will be able to break through the blockade of United States in an all-round way, and the growth of semiconductors in this process will maintain a high growth rate in the medium and long term. When Chinese technology companies fully break through the United States sanctions, China's overall technology industry will enter a decades-long period of rapid development (similar to the US stock NASDAQ), reshaping the profit distribution of the global technology industry chain, in the process, China's technology will produce a number of globally competitive technology giants.
Funds are risky and should be invested with caution. The above content is for informational purposes only and is not indicative of future performance and is not intended as investment advice. The opinions and forecasts expressed herein are current and are subject to change. Please do not quote or reprint without permission.