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From the New Energy and Sustainable Living Expose Market, see how companies like Contemporary Amperex Technology (300750.SZ) are implementing sustainability in the new energy sector.

With people's increasing concern for environmental protection, the concept of "sustainable lifestyle" is receiving more and more attention. Recently, the "Full Moon Mid-Autumn, 'New' Wave Surging" new energy and sustainable living market was held at the Longhua District Shuangzhao Shuangyin Party and Mass Service Center. It is understood that this market gathered 10 representatives of new energy vehicle owners, with each owner's booth telling a story of a better life and each item practicing a sustainable lifestyle. It is hoped that this event can inspire more people to pay attention to and participate in the practice of sustainable living, working together to build a better future. As the core technology of new energy vehicles, helping companies better solve the problems of power battery technology and cost is crucial to helping companies have confidence in the electrification transformation, thereby promoting the promotion and popularization of clean energy vehicles worldwide. Contemporary Amperex Technology (300750.SZ), as a leader in the power battery industry, also plays a role in the value of sustainable energy in applications, mechanisms, ecosystems, and other levels. It is understood that from 2017 to 2023, Contemporary Amperex Technology's power battery usage has been the global leader for seven consecutive years. According to SNE research data, in 2023, the global total assembly volume of power batteries is approximately 705.5GWh, a year-on-year increase of 38.6%. Among them, Contemporary Amperex Technology's global cumulative assembly volume of power batteries reached 259.7GWh, a year-on-year increase of 40.80%, with a market share of 36.8%, firmly ranking first. In addition to the core business of power batteries, Contemporary Amperex Technology's business scope also includes energy storage batteries, battery material recycling, and other more diverse dimensions. On the level of sustainable development construction, Contemporary Amperex Technology takes the concept of a zero carbon city as a starting point and lays out directions such as photovoltaic power generation, energy storage stations, electric logistics, and transportation systems; on the other hand, the company has currently realized integrated photovoltaic storage charging station construction, and is also compatible with renewable energy access, enabling the power grid, renewable energy, energy storage systems, and charging facilities to form an intelligent microgrid system under the control and management of the energy management system. It is understood that Contemporary Amperex Technology released its zero-carbon strategy in April 2023, aiming to achieve core operational carbon neutrality by 2025 and value chain carbon neutrality by 2035, becoming the first globally leading battery company to achieve carbon neutrality. Currently, Contemporary Amperex Technology has achieved carbon neutrality in four factories. In the future, it will also expand innovative zero-carbon solutions to zero-carbon communities, zero-carbon islands, zero-carbon cities, ultimately achieving a zero-carbon world. As a leader in the new energy industry, besides its own efforts, Contemporary Amperex Technology has always been promoting the sustainable development of the new energy industry. In addition to Contemporary Amperex Technology, this market also welcomed many brands that uphold the concept of sustainable development. For example, Ocean Recycled Toys- Super Crab (non-profit), which uses waste such as fishing nets, industrial plastics, and fabric scraps to breed different recycled products, launching a variety of sports equipment; AGAIN sustainable coffee aroma, which turns coffee grounds into luxurious fragrances, innovatively adding scent profiles while making good use of coffee grounds, aiming to provide comfort and happiness for consumers in their busy daily lives. Using the market as a platform to focus on the new energy industry and sustainable development lifestyle, providing exhibition space for companies to integrate their development ideas into the beautiful market of the city. This market event is an exploration of sustainable culture and sustainable lifestyle, integrating industry promotion, knowledge sharing, product experience, and cultural interaction, working together towards a better future for sustainable development.
16/09/2024

Haitong: Promoting the prosperity of the automobile industry by exchanging old for new, AI driven autonomous driving technology will be implemented.

Haitong released a research report stating that the valuation of the overall market in the first half of 2024 is hovering around the median. Against this backdrop, the valuation performance of the automotive sector as a whole is poor, but there is still differentiation. After the median volatility in the dealer sector, Q2 saw a significant rise, while the other sectors all exhibited median volatility. When comparing various industry sectors horizontally, the valuation level of the automotive sector in the first half of the year remains at a relatively high level, mainly due to the strong production and sales of automobiles lifting the overall valuation level of the sector. Currently, the policy of replacing old vehicles with new ones has a certain support effect on the prosperity of the automotive industry. After the end of the price war in the passenger vehicle industry, sales volume and profitability are expected to gradually recover; the recovery in the commercial vehicle industry is driven by exports, and there is still internal repair momentum in the domestic economy. Key points from Haitong are as follows: - Domestic automotive sales in the first half of 2024 reached 14.05 million units, up by 6.1% year-on-year, with the performance of passenger vehicles on par with the overall automotive industry. - According to data from the National Bureau of Statistics, the automotive manufacturing industry achieved a total operating income of 4.7672 trillion yuan in the first half of 2024, an increase of 6.1% year-on-year, and a total profit of 237.7 billion yuan, up by 9.2% year-on-year. The industry sales profit margin (total profit/total operating income) is 5.0%, and the three expense ratio totals about 5.4%. Compared with the same period in 2023, the sales net profit margin has slightly increased, which we judge to be mainly due to the subsidy policy driving up sales volume, but the ongoing price war in the industry continues to disrupt profitability. - The replacement of old vehicles with new ones in Q2 of 2024 boosted the prosperity of the industry, but the profitability of the passenger vehicle sector was affected by the price war. - Overall, the profitability of the vehicle sector in Q2 of 2024 is not bad, indicating that the impact of the price war has eased. The replacement of old vehicles with new ones has boosted the industry's prosperity, and large models driving smart driving are beginning to drive corporate operations. Haitong recommends Li Auto, Inc. Sponsored ADR Class A (02015), BYD Company Limited (01211), LEAPMOTOR (09863), and pays attention to Tesla, Inc. (TSLA.US), and XPeng, Inc. ADR Sponsored Class A (09868). - In the parts sector, the main focus is on industrial upgrading and prosperity growth. Recommendations include Bethel Automotive Safety Systems (603596.SH), NEXTEER (01316), Ningbo Tuopu Group (601689.SH), Shanghai Baolong Automotive Corporation (603197.SH) for industrial upgrading, and Anhui Zhongding Sealing Parts (000887.SZ), Foryou Corporation (002906.SZ), and Huayu Automotive Systems (600741.SH) for prosperity growth. Others recommended are Shanghai Hajime Advanced Material Technology (301000.SZ), Sichuan Chuanhuan Technology (300547.SZ), and Rayhoo Motor Dies (002997.SZ). - In the commercial vehicle sector, recommendations include Sinotruk Jinan Truck (000951.SZ), CIMC Vehicles (301039.SZ), Weichai Power (000338.SZ), and Yutong Bus Co., Ltd. (600066.SH) for opportunities in both domestic recovery and overseas growth. Risk warnings: Risks of lower-than-expected vehicle sales; risks of significant fluctuations in raw material prices; risks of significant fluctuations in exchange rates.
16/09/2024

Guosheng Securities: Consumer battery downstream demand recovers, emerging markets are expected to create marginal opportunities.

Guosheng Securities released a research report stating that lithium batteries can be divided into cylindrical lithium batteries, square lithium batteries, and polymer soft pack lithium batteries according to their packaging forms, with the polymer soft pack form being more suitable for consumer battery scenes. According to EVTank data, smartphones and laptops are the two largest application markets for small soft pack batteries, accounting for nearly 50% of the market. Due to the year-on-year declines of 3.2% and 13.9% in global smartphone and laptop shipments in 2023, the global small soft pack lithium-ion battery shipments in 2023 decreased by 2.6% to 5.48 billion units. With the basic completion of destocking in the downstream of consumer electronics, it is expected that the consumer battery industry will see a recovery. Guosheng Securities' main points are as follows: In 2023, the top three companies in global small soft pack lithium battery shipments are ATL, Zhuhai CosMX Battery, and Ganfeng Electronics, with domestic companies expected to continue to increase their market share in the future. Looking at the competitive landscape of small soft pack lithium-ion batteries in 2023, ATL under TDK ranks first with shipments of over 1.3 billion units, Zhuhai CosMX Battery has risen to the second position globally, and Ganfeng Electronics has rapidly climbed the ranks through large shipments of TWS, e-cigarettes, and smart wearable batteries. In addition, the top ten companies globally also include LGES, Liven, Eve Energy Co., Ltd., Shenzhen Highpower Technology, Chongqing Vdl Electronics, BYD Company Limited, and Zhongshan Tianmao. As Japanese and Korean companies gradually exit the consumer battery market, the market share of domestic manufacturers is expected to continue to rise. It is estimated that the demand for consumer lithium batteries will reach 123GWh in 2024, an increase of 8.8% compared to the previous year. The demand for lithium batteries is expected to reach 165GWh by 2028, with a CAGR of 7.9% from 2023 to 2028. In the traditional consumer electronics sector: annual growth is relatively stable Smartphones: In 24Q2, smartphone shipments increased by 6.5% year-on-year, achieving positive growth for four consecutive quarters. The development of GenAI functions is expected to drive sustained growth in the global smartphone market. IDC predicts that global smartphone shipments will grow by 4% in 2024, with a CAGR of 2.3% from 2024 to 2028; Laptops: After experiencing continuous year-on-year declines for eight consecutive quarters, the first two quarters of 2024 saw year-on-year growth, with a 3.0% increase in shipments in 24Q2. It is expected that AIPC will drive simultaneous increases in sales volume and prices. IDC predicts that global laptop shipments will increase by 2.0% in 2024, with a CAGR of 2.4% from 2024 to 2028; Tablets: Thanks to the arrival of the new product cycle, global tablet shipments increased by 22.1% in 24Q2, with Huawei and Xiaomi both increasing by 40% and 95%, respectively. In the emerging consumer electronics sector: AR/VR, portable energy storage, electric bicycles, and low-altitude economy have great growth potential Wearable devices: In 24Q1, global wearable device shipments reached 113 million units, an 8.8% increase. IDC predicts that wearable device shipments will increase by 10.5% in 2024, with a CAGR of 3.6% from 2024 to 2028. The CAGR for VR and AR shipments are 29.2% and 87.1% respectively; Portable energy storage: From 2016 to 2021, the CAGR of global portable energy shipments and market size was 148% and 184% respectively. With the increase in outdoor participation by residents and the continuous strengthening of disaster preparedness awareness, the portable energy storage market will develop rapidly; Electric bicycles: In 2022, global electric bicycle shipments reached 87 million units, an increase of 13.6%. Due to fluctuations in lithium carbonate prices and the impact of the sharing market, the sales of lithium battery electric bicycles reached 27.35 million units, a decrease of -0.8%. It is expected that the penetration rate of lithium batteries will gradually increase in the future. Electric tools: In 2022, the global shipments of electric tools were 470 million units, a year-on-year decrease of 19.3%, with electric garden tools being the only segment of electric tools that saw an increase in shipments in 2022. EVTank predicts that the shipments and market size of global electric tools will grow at a CAGR of 10.9% and 11.3% from 2022 to 2026. Low-altitude economy: This year, the low-altitude economy was mentioned for the first time in the government work report. As of the end of March 2024, China had a total of 69,000 low-altitude economy-related companies, with more than 1,600 newly added in 24Q1. EVTank predicts that the global eVTOL fleet will reach 26,000 by 2035, with a total market size of $160 billion. Investment recommendations: In the traditional sector: with the basic completion of destocking in the downstream of consumer electronics and the increase in demand for traditional products brought about by AI applications; in the emerging sectors: the rapid development of emerging sectors such as AR/VR, portable energy storage, electric bicycles, drones, etc. will drive consumer battery demand; Increase in market share of domestic companies: as Japanese and Korean companies gradually exit the global consumer battery market, the market share of domestic manufacturers is expected to continue to rise. It is recommended to pay attention to Sunwoda Electronic (300207.SZ), Zhuhai CosMX Battery (688772.SH), Shenzhen Highpower Technology (001283.SZ), and Jiangsu Azure Corporation (002245.SZ). Risk warning: Demand for downstream consumer batteries falls short of expectations, fluctuations in raw material prices, and risks in model calculations.
16/09/2024

Huachuang Securities: Base effect combined with policy adjustments leading to high growth in monthly life insurance premiums.

Huachuang Securities released a research report stating that driven by base effects and policy adjustments, the growth rate of personal insurance premiums in August showed a small peak on a monthly basis; the prosperity of property insurance has slightly increased, with PICC's car insurance premiums continuing to rise, expected to contribute mainly to underwriting profits, but the growth rate of agricultural insurance is still slightly lower than expected. Looking ahead to the second half of the year, the growth logic of NBV in personal insurance may have opportunities for both volume and price driving, as further interest rate cuts are expected to bring continued improvement in value rates. With a low base for new policies, positive growth in premiums is expected; in terms of property insurance, if there is no extreme weather interference in the second half of the year and considering the impact of typhoons in the background of Q3 last year, COR may improve year-on-year. The base effect on the investment side will further weaken. The main points of Huachuang Securities are as follows: Personal insurance business: Taiping and New Chinas cumulative premium growth rates for January-August have reversed, with a high increase in single-month premiums in August According to the latest disclosures by insurance companies, the personal insurance premiums and year-on-year growth rates of listed insurance companies from January to August 2024 are as follows: China Life Insurance 564.9 billion yuan, +5.9% year-on-year; Ping An 409.7 billion yuan, +8.9% year-on-year; Taiping 191.7 billion yuan, +1.5% year-on-year; New China 130.3 billion yuan, +1.9% year-on-year; PICC 133.5 billion yuan, +7.0% year-on-year. The order of personal insurance premium growth rates in January-August 2024 is as follows: Ping An > PICC > China Life > New China > Taiping. However, the premiums in August all increased year-on-year, with significant improvements in growth rates: China Life +29.0%, +20.7%; Ping An +36.0%, +18.8%; Taiping +53.0%, +65.8%; New China +122.0%, +110.7%; PICC +79.2%, +56.4%. Base effects combined with policy adjustments have led to a high level of prosperity in personal insurance premiums for August. In the same period last year, when the designated interest rate for insurance products was officially lowered to 3.0%, and affected by the overdraft of previous demand, 2023m8 insurance premiums for insurance companies saw a significant decline in growth rates. In August 2023, the year-on-year growth rates for China Life/Ping An/Taiping/New China were -10.3%/+1.5%/+3.4%/-6.8%, while PICC increased by 42.0% year-on-year, mainly due to the extremely low base brought about by the endowment insurance in August 2022. This year in August, aside from the low base, due to the further reduction of scheduled interest rates for traditional insurance, dividend insurance, and universal insurance in September/October, benefiting the short-term sales, the premiums of listed insurance companies all showed high growth in August, with a significant acceleration in growth rates. PICC: New policies are breaking out, while renewals are playing a stabilizing role. Cumulative premium growth rates have further expanded, with life insurance up 5.7% year-on-year and health insurance up 10.1% year-on-year. For life insurance, new policies for endowment insurance decreased by 10.3% year-on-year, with a 9.2% narrowing in month-on-month decline; in August, the year-on-year growth rate for new endowment insurance policies was +417.8%, benefiting significantly from the short-term sales during the period of interest rate adjustment. Renewal premiums increased by 23.3% year-on-year. Property insurance business: Listed insurance companies' premium growth rates are on the rise According to the latest disclosures by insurance companies, the cumulative property insurance premiums of listed insurance companies for January-August 2024 increased year-on-year as follows: PICC 382.2 billion yuan, +4.3%; Ping An 211.0 billion yuan, +5.3%; Taiping 142.2 billion yuan, +7.7%. The order of increase in property insurance premiums from January to August 2024 is Taiping > Ping An > PICC. In August, the property insurance premiums all increased, with Taiping showing an accelerated growth rate: PICC +7.0%, -0.6%; Ping An +12.5%, -6.1%; Taiping +9.5%, +3.5%. Growth rates in August: Ping An > Taiping > PICC. People's Insurance Company of China (PICC) Property Insurance From a cumulative perspective, the overall growth rate increased by 0.3%, mainly contributed by car insurance/accident and health insurance/liability insurance/guarantee insurance, partially offset by the positive impact. Car insurance increased by 3.0% year-on-year, with a month-on-month increase of 0.2% on the basis of an increasing base. In August, there was still no apparent boost in demand for the automobile market, with a year-on-year decline of 5.0% in car sales. However, sales of new energy vehicles continued to show an upward trend, with a year-on-year increase of 30.0% in August, expected to constitute a significant increase in the field of car insurance. For non-car insurance, accident and health insurance/liability insurance increased by 7.2%/12.6% year-on-year, with month-on-month growth rates of 1.2%/1.1%, and a month-on-month increase in guarantee insurance of 3.3% to -8.3%; agricultural insurance/enterprise property insurance/freight insurance increased by 1.7%/2.4%/7.7% year-on-year, with month-on-month growth rates of -0.7%/-0.5%/-1.2%. From the perspective of August alone, car insurance growth rate increased by 0.5% to 4.4%, guarantee insurance growth rate reversed to 27.7%, agricultural insurance premiums decreased year-on-year (-9.7%), but increased month-on-month by 5.7%. Investment recommendation: Currently, we recommend China Pacific Insurance (601601.SH), a solid basic life insurance company, and PICC P&C (02328), a leading company with long-term investment value. Risk warning: Regulatory changes, reforms falling short of expectations, worsening natural disasters, continuous decline in long-term interest rates, and volatility in equity markets.
16/09/2024

Guosheng Securities: Environmental Protection Industry Transformation and Upgrading, Grasping the New Opportunities of Water Management and Solid Waste Resource Utilization.

Guosheng Securities released a research report stating that the overall operating income of the environmental protection industry in the first half of 2024 was 167.04 billion yuan, with a year-on-year growth rate of 2.6%; the net profit attributable to the parent company was 12.3 billion yuan, with a year-on-year growth rate of -13.2%, mainly due to fluctuations in product and raw material prices leading to a narrowing of profits. The overall demand from the industry's upstream and downstream sectors maintained a stable growth trend, but due to intense market competition, profit margins have been squeezed. The industry is undergoing transformation and upgrades, seizing new opportunities in water services and solid waste recycling. Currently, the environmental protection sector is highly differentiated, and it is optimistic about companies with outstanding technological capabilities, excellent cash flow, and high dividends from undervalued quality state-owned enterprises. Guosheng Securities' main points are as follows: Pressure on performance in the first half of 2024, with a slight decline in overall profitability According to the Guosheng Environmental Protection Portfolio, the overall operating income of the environmental protection industry in the first half of 2024 was 167.04 billion yuan, with a year-on-year growth rate of 2.6%; the net profit attributable to the parent company was 12.3 billion yuan, with a year-on-year growth rate of -13.2%, mainly due to fluctuations in product and raw material prices leading to a narrowing of profits. Revenue in the second quarter of 2024 continued to grow by 0.5% year-on-year, while net profit attributable to the parent company declined by 31.0% year-on-year. The overall demand from the industry's upstream and downstream sectors maintained a stable growth trend, but profit margins were squeezed due to intense market competition. Overall decline in industry profitability, with proper cost control The overall gross profit margin of the environmental protection sector in the first half of 2024 was 24.5%, a decrease of 0.3 percentage points from the same period last year; the overall net profit margin was 8.1%, a decrease of 1.4 percentage points from the same period last year. This may be related to a decrease in investment return rate year-on-year by 0.6 percentage points, an increase in operating cost ratio year-on-year by 0.3 percentage points, and an increase in asset impairment rate year-on-year by 0.1 percentage points. In the first half of 2024, the industry's overall period expense ratio was 14.4%, unchanged from the same period last year, indicating strong cost control capabilities. Significant growth in operating cash flow net amount for the industry in the first half of 2024, with an increase in investment cash outflow The operating cash flow net amount for the environmental protection industry in the first half of 2024 was 77.3 billion yuan, an increase of 34.9% year-on-year, mainly due to a decrease in purchases and an increase in receipts. Among them, the solid waste management sector had 68.1 billion yuan (an increase of 104.3% year-on-year), maintaining ample operating cash flow; the atmospheric governance sector had 1.7 billion yuan (an increase of 160.0% year-on-year), the water treatment sector had 1.5 billion yuan (an increase of 156.0% year-on-year), and the operating cash flow turned positive; the water service operation sector had 33.6 billion yuan (a decrease of 30.2% year-on-year), with a decline in cash flow. Financing cash flow was 109.1 billion yuan (an increase of 44.3% year-on-year), and net outflow of investment cash flow was 297.9 billion yuan (an increase of 25.3% year-on-year). As environmental protection policies continue to be introduced, industry demand is further released, leading to an increase in external investments. Sub-sectors performance differentiation Solid waste management and water service operations are developing well, while energy conservation lags behind. In terms of revenue growth, the performance of solid waste management/atmospheric governance/water service operation/water treatment/monitoring/energy conservation in the first half of 2024 showed year-on-year growth rates of 13.9%/3.6%/3.5%/-1.4%/-2.4%/-32.1%; in terms of net profit attributable to the parent company, the performance of monitoring/solid waste management/water service operation/atmospheric governance/water treatment/energy conservation in the first half of 2024 showed year-on-year growth rates of 45.0%/15.7%/-2.4%/-15.7%/-42.0%/-388.5%. The solid waste sector is benefiting from the stable operation of waste incineration and power generation projects, gradually strengthening profitability; hazardous waste resource utilization is reducing costs and increasing efficiency, enhancing industry prosperity. Water service operations benefit from increased operational efficiency and stable revenue growth. Atmospheric governance benefits from continued policy tightening, maintaining stable revenue. Energy conservation and water treatment are constrained by intensified market competition, narrowing profit margins, and facing pressure in the industry's development stage. Industry transformation and upgrading, seizing new opportunities in water services and solid waste resource utilization Currently, the environmental protection sector is highly differentiated, and it is optimistic about companies with outstanding technological capabilities, excellent cash flow, and high dividends from undervalued quality state-owned enterprises. Key recommendations include Beijing GeoEnviron Engineering & Technology, Inc.(603588.SH), which benefits from carbon neutrality and expanding demand in the resource utilization field; and Qingdao Huicheng Environmental Technology Group(300779.SZ), which won major hazardous waste projects and is entering the waste plastic recycling market. Undervalued, high dividend, excellently managed, and continuously growing environmental state-owned enterprises Jiangxi Hongcheng Environment(600461.SH) and Grandblue Environment(600323.SH). Risk warning: Environmental policies and inspection efforts are lower than expected, project construction progress is slower than expected, and increased industry competition poses risks.
16/09/2024

Open Securities: Online alcohol sales were good in August, focus on packaged drinks and snacks.

Open Source Securities released a research report stating that the online sales performance of alcoholic beverages in August was good. As Mid-Autumn Festival approaches, the liquor market has already started stocking up for the festival, with channels more inclined towards top brands that capture consumers' minds quickly. There is an increasing differentiation within the liquor industry. In the mass-market segment, packaged beverages benefited from the peak summer consumption season, performing well in sales. The snack industry continues to show dividends, with online sales in August holding steady compared to the previous year. Considering the continuous boost from events like summer vacation, Mid-Autumn Festival, and National Day, companies that focus on launching new products and entering new channels are expected to benefit. It is recommended to pay special attention to the snack sector of the mass-market. Key points from Open Source Securities: Alcoholic Beverages: Online sales revenue growth, concentration of liquor brands declining while beer brands are increasing In August 2024, Alibaba's alcoholic beverage industry online sales reached 8.0 billion yuan, a year-on-year increase of 5.0%. Domestic liquor sales performed relatively well, with a year-on-year increase of 21.3%. The online sales of domestic liquor brands accounted for the highest proportion, reaching 66%. The concentration of top liquor brands in the industry decreased by 36.2 percentage points to 43.5% month-on-month. The concentration of top beer brands increased by 2.2 percentage points month-on-month to 32.7%. Food: Sales of snack foods remain steady, while sales of grains, oils, and fast food decline Snack Foods: In August 2024, Alibaba's online sales of snack foods reached 27.7 billion yuan, essentially unchanged year-on-year. Sales volume increased by 1.3% year-on-year, while the average selling price decreased by 1.1% year-on-year. Traditional pastries performed well, with a 43% year-on-year increase. The concentration of top snack food brands in the industry decreased by 1.7 percentage points to 8.3%. Grains, Oils, and Fast Food: In August 2024, Alibaba's online sales of grains, oils, and fast food reached 22.2 billion yuan, a year-on-year decrease of 8.3%. Sales volume increased by 4.0% year-on-year, while the average selling price decreased by 12.1% year-on-year. Baking ingredients performed well in August with a 30.6% year-on-year increase. The concentration of top brands in the grains, oils, and fast food industry increased by 0.75 percentage points to 13.62% month-on-month. Beverages and Instant Drinks: Online sales of dairy products and instant drink cereals decrease, while packaged beverage sales increase Dairy Products: In August 2024, Alibaba's online sales of dairy products reached 9.8 billion yuan, a year-on-year decrease of 5.9%. Sales volume decreased by 2.4% year-on-year, while the average selling price decreased by 3.6% year-on-year. Low-temperature milk products performed well, with a 109.2% year-on-year increase in August. Packaged milk accounted for a high percentage of online sales, reaching 43.5%. The concentration of top dairy product brands in the industry decreased by 10.3 percentage points to 36.7% month-on-month. Instant Drink Cereals: In August 2024, Alibaba's online sales of instant drink cereals reached 0.8 billion yuan, a year-on-year decrease of 21.3%. Sales volume decreased by 20.5% year-on-year, while the average selling price increased by 1.7% year-on-year. The concentration of top brands in the instant drink cereals industry decreased by 0.41 percentage points to 32.7% month-on-month. Packaged Beverages: In August 2024, Alibaba's online sales of packaged beverages reached 6.4 billion yuan, a year-on-year increase of 7.7%. Sales volume increased by 19.2% year-on-year, while the average selling price decreased by 9.6% year-on-year. In August 2024, carbonated beverages performed well with a 29.8% year-on-year increase; fruit-flavored beverages followed with a 20.2% year-on-year increase. Ready-to-drink tea accounted for a high percentage of online sales, reaching 17.2%. Stock Recommendations: It is suggested to pay more attention to Wuliangye Yibin (000858.SZ), Shanxi Xinghuacun Fen Wine Factory (600809.SH), Kweichow Moutai (600519.SH), etc. Risk Warnings: Lower-than-expected macroeconomic performance, food safety risks, and increased industry competition.
16/09/2024

Guosen: Switching fixed interest rates, increasing demand for insurance configuration.

Guosen released a research report stating that since August, the life insurance industry has been gradually switching products, driving a rapid increase in short-term premiums in the industry. With the continued switching of remaining products in September and the low base from last year, there is a positive outlook for the year-on-year increase in industry premium income. In addition, as the scale of premium income increases, it is favorable for insurance funds to allocate to high dividend (OCI equity) and long-term bond assets, which are relatively stable sources of incremental funds in the current market. It is recommended to pay attention to China Pacific Insurance (601601.SH) and China Life Insurance (601628.SH), which benefit from both assets and liabilities, and to maintain the "outperform the market" rating for these two insurers. "Speculative halts" activate short-term premium growth in the industry From January to August 2024, the five listed insurance companies on the A-share market achieved original insurance premium income of 2.1655 trillion yuan, a year-on-year increase of 5.6%. Influenced by the industry's planned interest rate switch, life insurance companies have increased their short-term sales efforts. Among them, Ping An Insurance, China Life Insurance, The People's Insurance, China Pacific Insurance, and New China Life Insurance saw year-on-year increases of 7.6%, 5.9%, 5.0%, 4.1%, and 1.9% in premium income in the first eight months, respectively. Recently, regulators have continued to guide the insurance industry to lower debt costs, reducing the interest rate risk under the current shortage of assets in insurance funds. As the only financial product in the market with medium to long-term liquidity attributes, savings-type insurance still has certain attractiveness, and "speculative halts" have activated short-term premium growth in the industry. Ordinary products switch interest rates as scheduled, increasing premium allocation demand for insurance funds Recently, in response to the policy of lowering interest rates, ordinary products in the life insurance industry completed the switch by the end of August, with the upper limit of the announced interest rate for newly filed ordinary insurance products being 2.5% (a decrease of 50bp). Looking at monthly premium income, listed insurers all achieved significant year-on-year increases. New China Life Insurance, PICC Life Insurance, Taiping Life Insurance, Ping An Life Insurance, and China Life Insurance saw monthly premium increases of 122%, 79%, 53%, 36%, and 29%, respectively. In September, dividend insurance and universal insurance will undergo product switching, favoring the continuation of premium growth in September. It is expected that the corresponding increase in premium will significantly increase the short-term asset allocation demand for insurance funds, along with factors such as the end of the quarter, with the core allocation direction possibly focusing on bonds and high dividend stocks measured at FVOCI. Property insurance premium growth picks up, with a significant year-on-year increase in monthly premium income As of the end of August, the "Big Three" collectively achieved property insurance premium income of 698.7 billion yuan, a year-on-year increase of 5.3%. Taiping Property Insurance, Ping An Property Insurance, and PICC Property Insurance saw year-on-year increases of 7.7%, 5.3%, and 4.3%, respectively. As of the end of July, PICC auto insurance and Taiping auto insurance businesses achieved year-on-year growth rates of 2.5% and 2.8%, respectively. Looking at monthly premium income, the three aforementioned insurers all achieved significant year-on-year improvements, with Ping An Property Insurance, Taiping Property Insurance, and PICC Property Insurance seeing year-on-year increases of 12.7%, 9.5%, and 7.0%, respectively. Since August, affected by frequent natural disasters and typhoons, the level of claims in the property insurance industry is expected to increase to some extent, but the overall risk level is manageable. The stability of the full-year COR of listed insurers is still promising. Risk warning: Market demand is lower than expected; agent reform is slower than expected; continuous volatility in the capital market; decline in long-term interest rates; stricter regulatory environment, etc.
16/09/2024

Zhongjin: Profit and valuation are both at cyclical bottoms, and the clearance of the steel industry is expected to further accelerate.

CICC released a research report stating that at the current point in time, both profitability and valuation of the steel industry are at a cyclical bottom, there is no need to be pessimistic. The industry consolidation is expected to further accelerate, with high value-added steel varieties production and sales advantages, core assets with high quality cash flow are expected to achieve profit and valuation repositioning, excess returns are expected. The report recommends focusing on two main themes: 1) investing in core manufacturing assets with stable cash flow and dividends at the bottom, and specifically recommends Baoshan Iron & Steel (600019.SH) and Hunan Valin Steel (000932.SZ); 2) leading companies in special steel materials, especially leaders in the sub-sectors that benefit from the recovery of the manufacturing industry and growth certainty, and specifically recommends TIANGONG INT'L (00826), the global leader in high-growth tool and die steel. Data: The National Bureau of Statistics announced macroeconomic data for August: crude steel production fell by 10.1% year-on-year to 77.69 million tons, net steel exports increased by 17.6% year-on-year to 8.99 million tons, and the apparent consumption of steel decreased by 12.8% year-on-year to 68.70 million tons. Demand continues to differentiate, with strong export performance Real Estate: The construction index has slightly improved but remains at a low level. In August, real estate investment completion/new construction area decreased by 8.5%/-17.2% year-on-year to 0.84 trillion yuan/57 million square meters, with narrower monthly declines of 0.5/2.3ppt; new home sales continued to operate weakly with sales value/sales area down by 17.1%/-12.6% year-on-year to 0.64 trillion yuan/65 million square meters, showing that the current real estate volume and price still face downward pressure. It is expected that the demand for steel in real estate may not significantly improve in the short term. Infrastructure: Funding and physical work are marginally stabilized, with infrastructure investment up by 4.4% year-on-year, and excavator working hours up by 3.3% to 93 hours. Manufacturing: The August manufacturing PMI dropped slightly by 0.3ppt to 49.1%, downstream sentiment is showing differentiation, with steady growth in production and sales in sub-sectors such as ships/engineering machinery. Export: Steel net exports in August increased by 17.6% year-on-year to 8.99 million tons, indicating strong external demand. However, global PMI is still in the contraction zone with a downward trend, coupled with the gradual narrowing of China's export steel price advantage, looking ahead we believe steel exports may show signs of a high-level downturn. Raw material supply and demand trend weakens, the profitability of the black industry chain is expected to undergo rebalancing Since the third quarter, prices in the black industry have weakened, with steel companies' profit margin falling below 5%, close to historical lows. Quality leading steel companies represented by Baoshan Iron & Steel/Hunan Valin Steel have shown steady profitability, with 1H24 ton steel net profit still maintained at over 100 yuan (the average for the steel industry being -45 yuan). The bottom excess profits continue to be sustained. Since September, raw material prices have continued to decline, rebar spot prices rebounded after hitting a low, with immediate production profits significantly rising to 70 yuan/ton, signaling a marginal recovery in industry profitability. Looking ahead, CICC expects that in the fourth quarter, Mongolian coal imports and overseas ore shipments will continue to increase, with the supply and demand weakening effect likely to keep raw material prices running at low levels. The profitability distribution of the black series is expected to undergo rebalancing, and steel companies with strong product structure advantages and bargaining power are expected to fully benefit, with profitability resilience possibly exceeding expectations. Risk factors: Deterioration in real estate market sentiment, global economic downturn.
16/09/2024

Zhongjin: Electricity price risk continues to be gradually released, regional differentiation intensifies.

Golden Finance released a research report stating that the overall performance of new energy electricity enterprises in the first half of 2024 was lower than market expectations. The profitability of new energy assets in the first half of 2024 continued to trend downwards, reflecting the pressure of decreasing utilization hours and comprehensive electricity prices, as well as the amplification of cost rigidity leading to a decline in profits. However, with frequent policies on environmental value and demand side in the industry, it is still recommended to focus on undervalued green energy tracks, and recommend CHINA POWER (02380) and Huaneng Power International, Inc. (00902). Industry data review: Regional differentiation is obvious, with better performance in the south, but regions like Northeast China, Hubei, Xinjiang, and Gansu are under pressure. Specifically: southern provinces have strong consumption capacity. Southeastern provinces (Jiangsu, Zhejiang, Shanghai, Anhui, etc.) have strong electricity demand, mainly depend on thermal power with strong regulation capacity, and wind and solar utilization rates are close to 100%. Southwest China (Sichuan, Chongqing, Yunnan, etc.) has resource and electricity price advantages, attracting high energy-consuming industries to move in, with high industrial production activity and wind and solar utilization rates above 97%. The consumption capacity in the three northern regions continues to be under pressure. Northeast China has weak demand, with wind/solar utilization rates in Eastern provinces declining by 3-4 percentage points compared to the previous year; Northwest China has a high proportion of clean energy but lacks regulation and transmission capacity. Inner Mongolia has strong electricity demand combined with poor wind resources, resulting in an improvement in consumption compared to the previous year. The consumption capacity of major hydropower provinces in central China is marginally declining. Performance review of electricity enterprises: In the first half of 2024, the profit of new energy electricity ranged from 0.12 to 0.26 yuan per kilowatt-hour, with a year-on-year decline of 11-13% for wind and 20-30% for solar; the price of green power rose and fell. Regarding consumption: wind utilization hours declined by a high single-digit percentage year-on-year, mainly due to poor wind resources, with the decline in the three northern regions greater than in southern regions, and the limit rate declining by less than 2 percentage points year-on-year. Solar utilization hours declined by a low single-digit percentage year-on-year, mainly due to limit restrictions, with the limit rate declining by over 3 percentage points year-on-year. In terms of electricity prices: The comprehensive electricity price accelerated its year-on-year decrease, with a larger decrease in solar compared to wind, mainly due to the rapid increase in scale of grid parity projects and a higher rate of increase compared to the same period last year. The trading price fluctuated, with limited impact on the comprehensive electricity price; solar faced greater pressure due to the time-of-use electricity price policy and concentrated output periods. Green power trading accounts for 8-13% of the market's electricity, with a premium of 4-5 points per kilowatt-hour; green certificate premiums range from 0.3-1 point per kilowatt-hour. While the unit premium has decreased year-on-year, the scale has increased rapidly. Outlook for the second half of 2024: New energy operators may face temporary pressure on volume and price, with expectations for a rebalance in consumption in the medium to long term. New energy prices may continue to be under pressure, but the impact is expected to weaken marginally. Since 2024, various policies have guided the decomposition of green electricity consumption responsibility towards users, with energy-intensive industries taking on the responsibility first. It is anticipated that the industry will evolve from current volume pricing pressure to short-term volume supplement pricing, and medium to long-term supply and demand rebalancing. At the same time, the acceleration of state subsidies repayment will ease the contradiction between high capital expenditure and leverage assessment, and the restrictions on equity financing. Risk factors: Unexpected rebound in limit rate, unexpected downward trend in market electricity prices, policies not meeting expectations.
16/09/2024

Tianfeng Pring's profit cycle tracking: M1, social financing pulse at a new low Maintaining the judgment that the annual profit point 2.0 is approaching.

Tianfeng released a research report stating that the leading indicators of the Pring cycle fell to a low level, while the coincident and lagging indicators both fell slightly. Export performance in August was mixed, PMI continued to decline, the impact of financial data "squeezing liquidity" continued, M1 reached a new low, the pulse of social financing fell back, and the role of government bonds in the credit structure was enhanced, with a significant divergence in household loans. Waiting for countercyclical policies to strengthen, maintaining the judgment that the market is approaching the inflection point 2.0 within the year. Tianfeng's main points are as follows: 1) The key contradiction for the market to find the bottom lies in whether it can anticipate the turning point of performance. The market bottom usually precedes the turning point of performance by 1-2 quarters. When the economic cycle is in Phases 2-4 of the Pring cycle (i.e. the phase when coincident indicators are trending upward), stocks tend to perform well. 2) The Pring coincident indicator is crucial, but it needs to be combined with leading indicators for a comprehensive judgment. Since the turning point of coincident indicators lags behind the index bottom, relying solely on coincident indicators requires more time for verification (at least 1-2 months of recovery is needed to confirm the low point), which may lead to biased market judgments. Therefore, we believe that incorporating leading indicators in the judgment process will enhance foresight in determining the economic bottom. The key to breaking through the bottom-finding period lies in the sustainability of M1 recovery, with household medium and long-term loans being the core indicator. Household medium and long-term loans often lead corporate medium and long-term loans at the top and are usually closer to the bottom. Also, during the market bottom-finding period, both these indicators show an increase in year-on-year terms. 3) Higher frequency leading indicators need to be reflected in monetary prices. The bottoming out of narrow liquidity and monetary prices is a sufficient but not necessary condition for the market to reach a bottom. There is a lag between the decline in monetary prices and the rebound in demand. Support for monetary prices to stabilize often occurs in Phases 1 and 2 of the Pring cycle, with the bottoming out of monetary prices often synchronizing with or preceding the period of economic recovery. The macroeconomic outlook still faces certain pressures, with the manufacturing PMI continuing to decline in August, while unofficial Chinese PMI rose into expansion territory. The pulse of social financing fell back, new government bond issuance increased, and new RMB loans increased mildly. The decline in M1 widened in August, while M2 remained stable. The stock of social financing fell back year-on-year, with excess liquidity increasing. In August, the incremental scale of social financing was 3.03 trillion yuan, 98.1 billion yuan less than the same period last year. Structurally, new government bond issuance increased, new RMB loans grew less, and off-balance sheet financing declined but remained positive. In terms of loan structure, new short-term loans for households increased significantly, while new medium and long-term loans turned negative year-on-year. For corporate loans, new medium and long-term loans for enterprises increased slightly, new short-term loans for enterprises narrowed their decline, bill financing saw a slight decrease year-on-year, and the credit structure still needs improvement. The leading indicators of the Pring cycle fell to a low level, while coincident and lagging indicators both fell slightly. Export performance in August was mixed, PMI continued to decline, the impact of financial data "squeezing liquidity" continued, M1 reached a new low, the pulse of social financing fell back, the role of government bonds in the credit structure increased, and there was a significant divergence in household loans. Waiting for countercyclical policies to strengthen, maintaining the judgment that the market is approaching the inflection point 2.0 within the year.
15/09/2024
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