Interview with Yang Yu of Great Wall Fund: How to look at the valuation and investment opportunities of the new energy sector?

Today, the account finally returned some blood, but it still failed to make up for the loss of the previous two days and continued to lie flat.

Yesterday, the liquor plate pulled out a long-lost big yang line, leading the rise of two markets, and today it was burped...

Now this position is bottoming out liquor, and I think it's still too optimistic.

The reason is that the performance of the consumer sector this year is under pressure, and the consumption data of each holiday is not as good as expected; another reason is that the valuation of liquor is still unattractive, and institutions will not huddle together, which can be seen in the previous article.

Cyclical stocks, still not finished! It is only because the power ration across the country has disrupted the market sentiment, the plate market may be consolidating for a period of time, and the cyclical stocks in the limited production area may have to say goodbye.

Recently, I have interviewed several fund managers in the direction of new energy, and today I first sorted out the research notes of Yang Yu of the Great Wall Fund and shared it with you.

There is also a very bullish fund manager, the champion of this round of bull market (2019 so far), his research notes are still being sorted out, are full of dry goods, sorted out will also be sent out at the first time, you can pay attention to my account first.

Yang Yu of the Great Wall Fund, the Great Wall Industry Rotation Hybrid, managed by the Great Wall Industry Rotation Hybrid Fund, as of September 28, the great Wall Industry Rotation Hybrid Fund managed by him had a return of 84.25% during the year, temporarily ranking second.

The following is the original text of the interview:

1. Hello Mr. Yang, the Great Wall Industry Rotation Hybrid Fund you manage, the highest return during the year has doubled (as of August 31), what investment opportunities have you mainly seized, can you share the mining process of these opportunities?

Yang Yu: Around 2020, I feel that the new energy industry is beginning to be clear that it is an industry with a lot of space in the future. When I started studying this industry in 2017, the industry had not yet reached the parity stage, and the core driving force behind it was carbon emission reduction, which was supplemented by subsidies when the cost side was not cost-effective.

In this process, we can slowly feel that this industry is changing, although each reduction in subsidies will have some shocks to the industry, including the photovoltaic "5.31" policy, 2018, 2019 electric vehicle reduction, new energy vehicles also have stage pain, but under the pain can still feel that the company's competitiveness is getting stronger, and the vitality of industrial development is also getting stronger.

In 2020, I think both photovoltaic and new energy vehicles have reached the industrial inflection point, that is, from the policy cycle to the cycle of spontaneous development. Even under the influence of the epidemic, electric vehicles still have more and more independent consumption at the C-end, so the inflection point is very obvious.

So from 2020, we are very optimistic about this industry, and the next decade will be a rapid growth explosion. In the process, I also felt that focusing on this track was a better option for me, so I started focusing on the carbon neutral track at the end of 2020.

2, look at your current heavy stocks, mainly photovoltaic and lithium battery industry chain direction, but like photovoltaic and power batteries, last year to this year almost continued to rise, institutional group is also very serious, how do you see the current valuation and group situation of these two sectors?

Yang Yu: The current new energy sector should be overdrawn next year's EPS, but if the current market value corresponds to next year's EPS valuation, I don't think there is any bubble.

The whole market is more rational when valuing and expecting this track, from the perspective of the current hub, I think there will be no bubble until next year, and it is unlikely that there will be a bubble from the perspective of growth rate. At the current point in time, I just think that the rise of PE is indeed more difficult, but by the second half of next year or even the year after, it is possible to make EPS money.

3, rose so much, and repositioned in a direction, are you anxious now? Just like the "Mao Index" of the extreme group at the beginning of the year, it is said that the disintegration will disintegrate, and now there is a fear that new energy will also disintegrate?

Yang Yu: Judging from the stage of industrial development, the speed of development and the degree of valuation matching, we are not particularly worried about the so-called disintegration of the group. As long as the industry continues to develop rapidly and excellent companies can follow the growth of the industry, we can still make money, not that it is particularly well studied and we must not continue to make money.

5, new energy vehicles, there is a market view: optimistic about upstream materials and downstream vehicles, the midstream by the profit squeeze at both ends, similar to a "smile curve", how do you think of the long-term revenue space and competition pattern of the three links of the industrial chain?

Yang Yu: The hypothesis of the "smile curve" is that if the midstream does not open the gap, everyone's technical level is similar, and the so-called "smile curve" may be seen, which is generally based on the upstream core is the resource-side barrier, the downstream is the brand, it is easy to form oligopolies, and the midstream does not have a very hard barrier.

However, it is not appropriate to simply use the "smile curve" to understand all the industrial chains, because in the case of differentiation at the manufacturing end, it should be expected that the leader can have a better return on investment, as long as there is corresponding demand in the downstream, and a relatively good return on investment has been achieved, and the production capacity is constantly released, and the final profit is constantly going up, and the pattern is good enough.

So we must evaluate in different links, some links do not have technical barriers, as long as we buy equipment can be invested, because there is no corresponding cost advantage or better return on investment, production capacity investment will soon appear profit squeeze, from this point of view, it must be the bottom of the "smile curve". However, if the midstream can achieve the creation of barriers and technical barriers, it is also a very good investment direction.

Can form barriers, whether it is technical barriers or cost barriers in the midstream manufacturing link, or can form an oligopoly upstream, is a better investment direction, downstream if I achieve branding, or have a better driving experience or automatic driving capabilities, in the end can be to achieve the value of the whole car bonus, it is certainly a better downstream link. These three directions can find corresponding and better investment targets.

In short, the "smile curve" is a way to help us analyze, but not a conclusive conclusion.

6. How does the long-term space of photovoltaics compare with new energy vehicles? The market believes that there is a strong seesaw role between photovoltaic and new energy links, that is, there is internal friction, which is long and long, what do you think?

Yang Yu: From the perspective of policy support, the compound growth rate of new energy vehicles in the future is indeed higher than that of photovoltaics. From a long-term steady-state perspective, there is more room for new energy vehicles.

Why do I think photovoltaics can also make better investments? My personal feeling about tracking the industry is that the cost reduction rate and the industrial competitiveness improvement rate are even faster than the batteries on the side of new energy vehicles.

If we do not only look at the space of photovoltaics based on the perspective of policy support, but based on the perspective of the rapid increase in the penetration rate of photovoltaics in the entire energy market, the final market ceiling is also high enough to accelerate the process of carbon neutrality, and even not only from the pressure of carbon neutrality policy, but from the replacement of the original energy form after it continues to reduce costs, so the final space is very large.

Can this matter be predicted accordingly? I don't think so, but after all, it has a carbon neutral base, and the compound growth rate in this case is also acceptable for us to invest. If the industry can achieve the rapid iteration or rapid replacement expected at the beginning, it should be able to see a higher growth rate, and the industry cost performance is very high, which is the first point.

Second, why have we often felt that the profitability of the photovoltaic industry chain is constantly flowing and switching rapidly in history? The core is because the past demand is more affected by the policy, the phased demand is better, the capacity supply has a relatively large cyclicality, and then the policy is more affected, there will be oversupply, and the profitability of some links will be more miserable. As for what the future holds, we believe that the core is to carefully analyze each link based on the supply and demand framework. As for the investment perspective, I don't think there is a particularly big difference between the various links.

7. How do you see the energy storage sector?

Yang Yu: The consensus expectation of the market is that this year is the first year of energy storage, which should break out. I think the long-term of energy storage is completely unquestionable, because in the future to build a new energy-based energy system, energy storage will definitely erupt, which is not questionable.

The only thing to explore is the question of the timing of the outbreak, including whether the peak-to-valley spread policy can stimulate a large enough energy storage increment. For example, some areas also have large enough peak-to-valley spreads, but because of other factors, there is no particularly large outbreak. We do not have to question that energy storage will definitely break out in the future, but whether the short-term expectations of the market at this point in time are optimistic.

However, whether from the perspective of national policy or the perspective of future necessity, energy storage is a very obvious trend, so I prefer to agree with the market's judgment of its direction, the only consideration is to track the land on the ground, and the market's optimistic or cautious perspective does not affect the optimism of this sector.

9. In addition to which sectors we talked about above, which segments are you mainly optimistic about investment opportunities in the second half of the year?

Yang Yu: My investment strategy is more biased towards the perspective of fundamentals and competitiveness, and I see more industries, which are based on the perspective of good companies to select targets, including companies with strong competitiveness in all aspects, and initially screen. On this basis, I will take advantage of the market's misjudgments and cyclical factors to enhance.

After looking at so many attributes of the industry, I think I am still relatively good at looking at manufacturing companies and technology companies, may be related to my science and engineering background, I have a better understanding of these two industries and judgment, so the future will be biased in the manufacturing industry to pay attention to four directions, namely photovoltaics, new energy vehicles, automotive semiconductors, automatic driving, the latter two I need to accumulate for a long time. I am more conservative in investment, and only if I have a considerable understanding of the industry, I will invest in the corresponding industry.