This article is from the WeChat public account: Guotai Junan Securities Research (ID: gtjaresearch) , author: Guotai Junan strategy team. The picture from Visual China.
In recent years, with the rise of China ’s technology industry and the increasing attention of mainland investors to global dynamics, the technology stocks of China and the United States have shown a clear trend of linkage.
For example, Tesla’s stock price has risen by 230% since October 2019.At the same time, domestic new energy automobile industry chain stocks have also risen significantly, of which power battery leader Ningde Times rose 116 %, Showing a high degree of convergence with Tesla.
Since the fourth quarter of 2019, Tesla and Ningde Times have risen jointly Source: Wind, Guotai Junan Securities Research
Take the semiconductor industry as another example. From 2015 to 2016, the Shenwan Semiconductor Index had clearly deviated from the Philadelphia Semiconductor Index and also deviated from the global semiconductor sales growth trend. Since 2017, the linkage of Sino-US semiconductor stocks has significantly strengthened.
China-US semiconductor stock trend linkage has strengthened since 2017 Data source: Wind, Guotai Junan Securities Research
So, in the current tide of global technology industry resonance, how can we re-examine the investment opportunities on the A-share technology industry chain in 2020?
In the report “China-US Technology Mapping Opportunities”, the Guotai Junan Strategy Team not only sorted out the phenomenon and logic of the Sino-US technology stock linkage, but also the next technology stock mapping route, and found three highly deterministic industries. Chain opportunity.
I. China-US technology stock linkage has a solid fundamental foundation
In fact, this round of Sino-US technology stock linkages has three basic fundamentals: macro, finance and business:
1. China-US business cycle is highly interlinked
From the OECD comprehensive leading indicators, the cyclical fluctuations of the Chinese and American economies have a very obvious correlation, and China is 3-6 months ahead of the United States.
At the same time, in the past few years, the trend of interest rates between China and the United States has been highly linked, which also shows that the economic cycles, monetary policies and liquidity environment of the two countries are highly related.
China-US economic cycles are highly interlinked, and China leads the United States for 3-6 months. Source: Wind, Guotai Junan Securities Research
2. The fundamentals of A-share technology stocks are greatly affected by overseas business
In 2018, the overseas business income of A-share technology stocks was about 670 billion yuan, accounting for 22% of operating income. Considering that overseas business income is not mandatory for disclosure in the annual report, for example, the revenue of Industrial Fulian is not included in the statistics, and some company customers are domestic companies, but their customers’ products are supplied overseas. On the surface it seems higher.
In addition, since 2006, the ROE of A-share technology stocks has a strong correlation with the growth rate of global semiconductor sales, which also shows that the profit side of A-share technology stocks depends on the global market.
A-share technology stocks account for more than 20% of overseas business. Data sources: Wind, Guotai Junan Securities Research
3. Increasing opportunities for business-driven linkages
On October 17, 2015, Tongfu Microelectronics announced that it intends to acquire AMD’s two packaging and testing business subsidiaries for USD 370 million.
Due to the downward trend of the semiconductor industry, the company needs to integrate its business, the company’s advanced packaging business is in the capacity release period and other factors. The company’s profitability in 2016-2019 is average.
But with AMD ’s earnings exceeding expectations and the semiconductor industry boom cycle going upwards, since 2019, the share price of Tongfu Microelectronics and AMD have risen significantly and simultaneously.
Tongfu Microelectronics acquired AMD packaging and testing business, the stock price rose sharply with AMD in 2019 Source: Wind, Guotai Junan Securities Research
II. Different perspectives on the allocation of technology stocks by Chinese and foreign institutions
ExhaustedSource: Wind, Guotai Junan Securities Research
Since SAP’s (including Japan) in the Asia-Pacific region accounts for only about 15% of its operating income, UFIDA’s domestic business accounts for only 100%, The linkage between the two before 2017 is weak.
However, SAP’s cloud service transformation was effective earlier than UFIDA, and its stock price rose earlier than UFIDA-SAP’s cloud business revenue has grown rapidly since 2012, and the stock price has entered an upward trend; UFIDA’s cloud revenue share accelerated in 2017 The stock price started to rise.
# Logic IV: Domestic substitution logic
Texas Instruments VS Saintbond
Texas Instruments, founded in 1930, is a leader in the global analog chip industry. The Shengbang shares, established in 2007, have huge gaps from global leaders Texas Instruments in terms of revenue volume, financial indicators, product types, downstream applications, and years of establishment.
The performance of Shengbang shares with Texas Instruments has similar trends and different elasticity. Data source: Wind, Guotai Junan Securities Research
But because China is the world’s largest analog chip manufacturing base and consumer market, Shengbang shares have deeply cultivated China and achieved higher growth.
Especially since July 2017, Shengbang’s shares have risen by 7.5 times (excluding the continuous daily limit at the beginning of the listing) , during the same period, Texas Instruments Up 80%, about 10 times the latter.
Although the two trends have a certain degree of linkage, the strong rise of Shengbang shares mainly reflects the domestic substitution of China’s semiconductor industry after the Huawei incident.Urgency.
Fourth, look for the next technology blue chip, investment opportunities under the linkage of Sino-US technology stocks
After understanding the linkage and differences between Chinese and U.S. technology stocks, we still have to return to the most important issue of this article-the trend of Sino-US technology stock linkages starting in 2019, which investments have been brought to the A-share industry chain opportunity?
We started combing from the three major industrial chains, trying to give investors a more panoramic view.
Tesla industry chain
From the second half of 2019, with the construction of Chinese factories, Tesla’s electric vehicle delivery volume reached another record high, and its stock price increased rapidly, from the original level of 200 US dollars to 900 US dollars.
At present, Tesla is in the third valuation reshaping period. The cost reduction driven by the domestic Model 3 production, the promotion of Model Y, and the emerging smart driving business are expected to drive Tesla’s valuation up again. A step.
Tesla and A-share Tesla industry chain companies have strong linkages in stock prices. Data source: Wind, Guotai Junan Securities Research
So which companies in Tesla’s supply chain deserve special attention?
1. The domestic negative electrode leader and NEEQ company Beterui is the most obvious target for Tesla’s industrial chain. Tesla’s demand is expected to account for more than 30% of its negative electrode shipments.
Thanks to the explosion of Tesla’s sales of Model 3 in particular, Betty’s profits have started to increase significantly since Q1 of 2018, and the company’s stock price has exploded.
Betryui began to significantly increase profits since Q1 2018 (Unit: 100 million yuan) Data Source: Wind, Guotai Junan Securities Research
2. Ningde Times is the best target to benefit from Tesla’s valuation improvement.
Different from Baterui, a large amount of revenue indirectly comes from Tesla. In early February 2020, Ningde Times only disclosed that it intends to sign an agreement with Tesla. The supply of lithium-ion power battery products has become the third company to supply power batteries for Tesla after Panasonic and LG Chem. Along with this process, the company’s stock price rose sharply, mainly from the increase in valuation.
3. In terms of automotive structural parts, Xusheng shares account for a relatively large share of revenue. Other Houp shares, Enjie shares, Kuntailai, Tianci Materials, Ningde Times and other revenues account for a small proportion, basically less than 10%. The profit side has not changed much.
Apple industry chain
According to the 2019 edition of the world ’s top 200 suppliers disclosed by Apple, there are 30 companies from mainland China and 10 from Hong Kong, a total of 40 companies, which surpassed Japan for the first time in the supply chain in 2019. Together with the United States, it ranks second in the world, accounting for 20% of Apple’s global suppliers.
Regional distribution of Apple suppliers Data source: Apple, Guotai Junan Securities Research
In addition to the number of suppliers, the number of selected factories in China has also continued to increase.
In 2019, the Apple industry chain has 807 factories worldwide and 383 are in mainland China, accounting for 47.46%. From the perspective of product categories, 30 of the 40 mainland manufacturers supply structural parts, 6 supply functional devices, 2 supply camera modules, and only 1 supplier of semiconductor components and display panels.
2019 Apple’s Top 200 Global Suppliers List in China (Red is an A-share listed company) Data Source: Apple, Guotai Junan Securities Research
Smartphones enter the innovation cycle in 2019, and the Apple industry chain represented by TWS welcomes new opportunities. The stock prices of suppliers in related fields such as Weir, BOE, and Changdian Technology have increased significantly, reflecting the growth opportunities brought by changes in Apple’s performance to the upstream industry chain.
Fundamentals drive the linkage between the stock price of Apple and the A-share Apple industry chain company Source: Wind, Guotai Junan Securities Research
Google (cloud computing) Industrial chain
The trend of the A-share optical communications industry chain and Google’s linkage is not obvious, but it has a certain correlation with the capital spending of North American cloud computing giants.
Different from Apple and Tesla’s industrial chain, the demand of A-share companies is related to the sales of American leading companies. In the North American cloud computing industry chain, A-share company demand is related to the capital expenditure of upstream giants.
This is because American cloud computing vendors and network equipment vendors are the main customers of China’s optical communications companies.
In 2018, China’s eight A-share optical communication companies accounted for 53% of their overseas business revenue, and their overseas dependence was high. Cloud vendors such as Amazon, Google, Facebook, and network equipment vendors such as Cisco and Juniper are the major overseas customers of China’s optical communications companies.
Therefore, the trend of the A-share optical communications sector is related to the year-on-year growth rate of capital expenditures of North American cloud computing giants Google, Microsoft, Amazon, and Facebook.
The linkage between the A-share optical communication sector and Google’s stock price is not significant. Data source: Wind, Guotai Junan Securities Research.
The share price of the A-share optical communications sector is related to the capital expenditures of the North American cloud computing giant Data source: Wind, Guotai Junan Securities Research
Among the A-share optical transceiver manufacturers, Zhongji Xuchuang has significant advantages in terms of scale and cost. It is deeply tied to North American cloud vendors to benefit the network deployment of cloud data centers.
The main customers are Google, Amazon, Facebook, etc. Therefore, the capital expenditure of customers can reflect the prosperity of upstream optical module demand, and can be mapped into Xu Chuang’s performance.
US cloud vendors and equipment vendors in China’s industry chain Data source: Guotai Junan Securities Research
In 2017-2019, the revenue and profit trends of Zhongji Xuchuang are basically consistent with the changes of Google capex. Data source: Google announcement, Guotai Junan Securities Research
Zhongji Xuchuang ’s 400G optical modules will start production at the end of 2019. 2020-2021 is a key market point in time. It is estimated that by 2023, the overall market size of data center optical modules will be nearly US $ 4.8 billion, and the demand for 400G will rise rapidly. Many optical module manufacturers, including Xuchuang, will enter a period of rising performance.
Finally, while observing the mapping relationship between Chinese and American technology stocks, we must also be aware of the differences between Chinese and American technology stocks.
On the one hand, from the perspective of market capitalization, operating income, and net profit ratio, A-shares have limited representation of China’s technology stocks, and Chinese technology companies in Hong Kong and US stocks are the biggest players. On the other hand, A-share technology stocks The company has a high price-earnings ratio, but its profitability is relatively inferior to that of US technology stocks, and some of the leading A-share technology stocks are significantly smaller than the US stock benchmark companies.
This article is from the WeChat public account: Guotai Junan Securities Research (ID: gtjaresearch) , author: Guotai Junan strategy team.