Engineer Dividend Relays Demographic Dividend, Continue to Be Bullish on Made in China

  We continue to be firmly optimistic about Made in China. At present, under the background of the rotation of the global industrial cycle, China’s manufacturing industry has entered a new stage of development and faces new historical opportunities. The dividend of domestic engineers is gradually becoming explicit, which is reflected in the gradual formation of core independent technologies by manufacturing enterprises, the extension of the industrial chain to high value-added parts, and the continuous realization of domestic substitution in various sub-sectors. In 2020, due to the impact of the epidemic, the domestic manufacturing industry will continue to grow vigorously. In 2021, the overall economic trend will continue. In addition to the active repair of domestic demand, it will also fully undertake overseas demand. At present, the global high-end industrial chain continues to shift to China. In advanced manufacturing industries such as photovoltaics, lithium batteries, and industrial automation, China has been at the forefront of the world. The technical bottlenecks in semiconductors and other segments of the manufacturing industry are continuing to break through. Based on the huge end market demand of 1.4 billion people, more domestic manufacturing enterprises and brands can make trial and error downstream, and accumulate technology and project experience. The improvement and enhancement of technology and market competitiveness will further deepen import substitution.
  Looking ahead to 2022, we are not pessimistic about investment in Chinese manufacturing equipment.
  First, the prosperity of advanced manufacturing may continue to maintain a high level. In recent years, the added value of high-tech manufacturing has increased year by year in the proportion of industrial added value above designated size, and the growth rate is significantly faster than the overall manufacturing industry. It performed particularly well during the epidemic, and the underlying role has gradually emerged. In 2021, the amount to be raised from the additional issuance projects of listed manufacturing companies will be maintained at a relatively high level. The absolute amount of financing for advanced manufacturing industries such as electronics and new energy is relatively high, which is expected to drive greater investment in equipment.
  Second, traditional manufacturing is also building the foundation. On the one hand, the policy supports loose liquidity towards the manufacturing industry. The executive meeting of the State Council decided to increase policy measures to support the manufacturing industry to promote the stable development of the real economy, emphasizing the expansion of the scale of medium and long-term loans and credit loans in the manufacturing industry; on the other hand, copper, Prices of major raw materials such as steel have fallen, which may support a recovery in manufacturing profitability. It is expected that loose liquidity and marginal improvement in profitability will drive the overall capital expenditure of the manufacturing industry to improve.
  In addition, the improvement in freight rates and the easing of international relations may have a positive impact on exports and support domestic manufacturing demand in 2022.
  Based on this, three main lines can be grasped in 2022: first, under the dual-carbon goal, the growth track determined by the prosperity of lithium battery, photovoltaic and wind power is preferred; second, the active deployment of new competitions for weak-cycle consumption upgrades such as cultivated diamonds and high-pressure cleaners Thirdly, under the background of independent and controllable upgrading, focus on the opportunities of sub-sectors under the general trend of domestic substitution. Finally, optimistic about specializing in new areas. Specialization and specialization are essentially the embodiment of the accumulation of dividends for engineers in subdivisions. Small and medium-sized enterprises make up for the lack of platformization with industrialization and specialization, and explore differentiated competitive advantages in subdivisions through technological breakthroughs in subdivisions. With the advancement of the new strategy of specialization and specialization, continuous import substitution will be the core driving force and long-term development trend of my country’s advanced manufacturing industry in the next 3-5 years. The engineer dividend will relay the demographic dividend, the long-term momentum of my country’s manufacturing upgrade will increase, and high-end manufacturing will have broad prospects.

New Energy Vehicles: From Price to Quantity, Unchanged High Prosperity

  In 2021, the global new energy vehicle will enter a high boom. Under the constraints of rising consumption and carbon neutral policies, it is estimated that the growth rate of global new energy vehicle production and sales in 2022 will exceed 50%, and it is expected to further exceed expectations. In terms of the industrial chain, in 2021, the prices of resources and materials with tight supply and demand will rise, and profits will expand. Power batteries will bear greater cost pressure. In 2022, the supply of 6F, lithium iron phosphate, copper foil and other links will still be tight. The margin of supply and demand is tightening, and the power battery will see the bottom inflection point of profitability in 2022, and it is expected to continue to repair in 2023. Therefore, the midstream manufacturing sector is optimistic about power batteries with good profit expectations, separators and negative electrodes with low unit profitability and good supply and demand margins, copper foils with tight supply and demand and low valuations, as well as electrolytes, iron-lithium positive electrodes, and ternary positive electrodes. A leading company that achieves Alpha through share expansion, new technologies and integration.
Wind and solar storage: step growth under the established trend

  In the past two years, carbon peaking and carbon neutrality policies at home and abroad have been continuously strengthened, driving the growth of new energy installations from top to bottom, improving the long-term growth and certainty of the industry, and we have also raised the overseas and domestic photovoltaic and wind power accordingly. installation expectations. Given the established general trend, the industry chain will continue to reduce costs, and the installed capacity is expected to explode in 2022: 1) Photovoltaic, domestic construction indicators are abundant and enterprises are highly motivated, power curtailment is eased and bottleneck capacity expansion is expected to reduce raw material prices, stimulate demand, and superimpose overseas photovoltaic power generation projects The rate of return continues to increase, and the global installed photovoltaic capacity is expected to reach 220-240GW in 2022, with a year-on-year growth rate of more than 40%; 2) Wind power, policy-side large base + old unit renovation + decentralized wind power continues to increase, and cost-side large megawatt belt The sudden cost reduction in the industrial chain will open up vast growth space. The installed capacity is expected to reach 50-60GW in 2022, with a year-on-year growth rate of more than 25%. Under the background of high demand, the tight supply links represented by integrated components, inverters, distribution, auxiliary materials and silicon materials are preferred. The energy storage industry is also approaching an inflection point. Overseas demand has increased significantly. Domestically, it can be expected that the industry space will expand rapidly after the implementation of the electricity price policy and cost reduction.
Power equipment: pay attention to the investment direction of new power system

  The core of the power equipment industry research lies in the judgment of the investment trend of the power grid. The current direction of the power grid company and the national level is the same, that is, the new power system has definitely become the main line of power grid investment in the 14th Five-Year Plan. For the specific implementation direction, we summarize the information on changes in power grid investment and subdivision planning since 2021, and judge that the structural characteristics of future power grid investment will become more and more obvious. Comprehensive energy services are several clear investment directions. In addition, new technology products such as distribution network digital sensing equipment, flexible DC, and reactive power compensation are also expected to appear in large volumes. With the gradual introduction and implementation of the 14th Five-Year Plan for Electric Power, it is expected that starting from 2022, the direction of power grid construction will be further clarified, and related fields and companies are expected to continue to benefit.

  At present, the automobile industry is entering an era of unprecedented changes in a century. Electrification is in full swing and the dawn of intelligence is emerging. From the perspective of the enterprise itself and the horizontal direction of the industry, we believe that the current automobile field has high investment attractiveness and allocation value. .
  From the perspective of industry prosperity, in 2021, the industry wholesale will be suppressed by the lack of cores, and the inventory will decrease. With the gradual recovery of chip supply in the fourth quarter of 2021, inventory replenishment and export have become the core driver of sales growth. It is expected that wholesale sales will reach 23.3 million units in 2022, a year-on-year increase of 8%-9%. Structurally, electrification and hybridization maintain a high degree of prosperity: in terms of electrification, in October 2021, the penetration rate of new energy has reached 18%, and it has two characteristics of accelerated regional exploration + plug-in hybrid rise. In 2022, the sales of new energy passenger vehicles will be 3.1 million and 5.1 million, respectively, corresponding to penetration rates of 14.5% and 21.9%; in terms of hybridization, with more technological breakthroughs of independent brands, hybrid vehicles in the economic market are also expected to become electrified. It is an important supplement to the future, and it is expected to accelerate the volume in the future.
  From the perspective of the whole vehicle, the share of self-owned brands will bottom out in 2021, and the share of traditional vehicles and new energy vehicles will increase, and the share of each city level will also increase in an all-round way, which reflects the product power and brand power of self-owned brands. comprehensive improvement. Intelligence and electrification are the long-term trend of change, and self-owned brands conform to the trend of change of the times: in terms of electrification, new energy has broken the technical barriers of joint ventures in traditional fields, and self-owned brands have achieved a leading position in the layout of electrified products and sales of electric vehicles; intelligent In terms of industrialization, independent brands have achieved overall leadership in product power with faster intelligent iteration and lower pricing. Therefore, we judge that the independent brands that have a strong new car cycle and actively embrace the era of smart electric are expected to take the lead in breaking through.
  From the perspective of components, in the smart electric era, the industry structure is expected to be reshaped, and the domestic supply chain will usher in new opportunities. Referring to the development history of the domestic supply chain of smartphones, we believe that, benefiting from factors such as independent rise, shortened development cycle, modular supply, and high-end configuration, domestic auto parts will usher in a historic opportunity, and a number of large-cap companies are expected to be born. . From the perspective of growth path, parts and components companies will continue to expand along the two paths of incremental and platform types, further building their own moat and product matrix, and accelerating the process of localization. In terms of track selection, tracks with increased bicycle value and penetration, such as lightweight, thermal management, lights, chassis electronics, domain controllers, car seats, and air suspension, have better investment value. From the perspective of customer driving ability, OEMs represented by Tesla, BYD, Hongqi and new car-making forces will deploy new functions more quickly and will have more flexibility for growth. From the perspective of investment rhythm, the current parts industry is at the end of production, the turnover rate of fixed assets has begun to rise, raw materials have declined from a high level, and the profitability of parts and components companies is expected to continue to improve.