musicbingonearme| Gangtise Investment Research Daily| 2024-05-27

Source Gangtise to invest in research

-- Manufacturing | Technology (7)--

[AI PC] experts sayMusicbingonearmeDomestic machine manufacturers hold a positive attitude towards AI PC. Although they rely on overseas chip technology, they have unique advantages in machine manufacturing and localization model development. According to the situation of the domestic market, domestic manufacturers will develop customized local models, especially in high-value industries such as government, finance and telecommunications. Through the integration of end (device side), edge (edge computing), cloud (cloud computing) and network (network), the overall solution is provided, which has a competitive advantage over traditional PC manufacturers such as Asustek, Dell and Hewlett-Packard. At present, the domestic AI PC is roughly divided into three price segments, high-end about 8000,000 yuan, middle-end about 6000 yuan, low-end about 400000000 yuan. At present, the hardware cost of AI PC has increased slightly (less than 8 per cent), but the overall offer of AI PC has increased by about 5 per cent, and the company bears about 3 per cent of the cost.

[energy Storage-US] experts said that the new installed capacity of the US large storage market is 19GWh in 2023, is expected to be 34GWh in 2024, is expected to increase to 43GWh by 2025 and may reach 89GWh by 2030. The US tariff policy is mainly aimed at power batteries and may be intended to restrict the import of electric vehicle batteries in the short term, especially from China. At present, Vision Power and Guoxuan Tech have production capacity in the United States, while other manufacturers such as the Ningde era have avoided tariffs by setting up factories in other countries such as Mexico and Vietnam. Vision Dynamics's energy storage battery plant in the United States has a gross profit margin of 60%.

[energy Storage-Middle East] experts said that energy storage growth in the Middle East market is mainly driven by energy restructuring and the demand for new energy transformation, and the new energy storage volume is expected to be about 7GWh in 2024 and may double in 2025. Energy storage projects in the Middle East tend to be large-scale, such as the 6GWh order signed by Saudi Arabia and Sunshine Power, and the Red Sea Project 1 in which Huawei participates.Musicbingonearme.3GWh, etc. The volume of individual projects in the energy storage market in the Middle East is huge, and the price level is relatively low all over the world. In addition, the 6GWh project contracted by Sunshine Power needs advance funding, and the project model may not be healthy enough, there is a risk of delay and the construction of supporting facilities lags behind. The project that can actually be landed in 2024 may be the 400MWh reserve of NEOM Metro.

[low-altitude economy] experts say that low-altitude aircraft currently mostly use VHF and satellite communications, and long-distance transport UAVs need satellite communications to ensure communication capacity and security. VHF communication is suitable for land flight; satellite communication is suitable for long-distance flight, providing data link service and satellite telephone function, but the cost is high. Large UAV is generally equipped with VHF and satellite communication system, but according to the requirements of flight airspace and air route, satellite communication is not mandatory and can be installed selectively. Small drones may choose VHF communication systems or 5G communications in the future because they are low-cost and suitable for short-distance communications. 5G communication mainly covers low-altitude areas and is suitable for performing UAVs with low cost, large bandwidth and no additional infrastructure investment.

According to analysts, domestic industrial robot production in 2023 was about 283000 sets, unchanged from the same period last year, while 2024Q1 production reached 120000 units, an increase of more than 5% over the same period last year. Industries with better demand for industrial robots downstream in 2024 include electronics, home appliances and automobiles, and the annual demand growth rate is expected to be about 10%. Affected by the high demeanor of some downstream industries, domestic industrial robot shipments are expected to have a high single-digit growth in 2024.

[automobile] experts say that the annual sales of cars in the 10 ASEAN countries are about 3 million, mainly in Thailand, Malaysia, and Indonesia; the annual output is about 4 million, some of which are used for export, with Thailand and Indonesia as the main production bases. Malaysia has its own local brands, and most of them are produced and sold by themselves. Japanese cars dominate the Southeast Asian market, with a market share of about 70 per cent, while Chinese car companies sold about 150000 units in Southeast Asia in 2023, with a market share of about 5 per cent. Thailand requires that the localization rate of cars is not less than 40% in order to enjoy zero tariff within ASEAN. Despite price competition, Chinese car companies that export to Thailand through trade can still make a profit because the price in the Thai market is usually 1.3 to 1.5 times higher than in the domestic market.

According to analysts, the cost of the Box system is about 1500 yuan, the cost of the One Box+ESP system is about 300 yuan more than that of the One Box system, and the cost of the IPB+RBU and DPB+VIP systems is about 1800 yuan to 1900 yuan. At present, One Box system occupies the highest share, and is gradually replacing Two Box. With the growth of self-driving vehicles, the proportion of integrated electronic control system will increase. In addition, Bethel and Freddy Power on-line braking system will have more than 1 million sets of vehicles in 2024.

-- consumption | Medical Care (8)--

[ecommerce] analysts said Tmall, JD.com and Douyin had good growth in April, especially Douyin, which was mainly concentrated in jewelry, jade and clothing. Tmall's leading position in the field of clothing accessories has declined, taking the lead in home office, medical and health care, mother and child categories, while JD.com remains stable in the category of digital home appliances. The 618 e-commerce festival in 2024 runs from May 20 to June 20, and is expected to be strong in beverage, gold and jewelry sectors.

According to experts on the Douyin platform, Douyin has set a sales target of 198 billion yuan, with an average daily sales of 11 billion yuan. The total budget of Douyin subsidy is about 3 billion yuan, of which 18-2 billion yuan will be used for C-end users' subsidies. The cosmetics and textile and clothing industries have a target of 18% of the 618 event, and the growth rate is expected to be higher than that of the market. The target of the sports outdoor industry in 618 activities is 5.5%, and the overall growth rate is expected to be higher than that of the market.

[IVD] analysts said that since 2024Q2, the immune plate of the IVD industry has grown by more than 10%. From the growth point of view, the growth rate of second-tier companies has substantially outpaced that of the industry, and the beneficiaries are mainly first-tier domestic companies (mainly Mindray, Antu, new industries). In terms of foreign investment, Siemens fell sharply, Abbott fell by 1015%, and Beckman was not very ideal. Roche grew by about 10%. The acceleration of domestic substitution for foreign investment is mainly due to price pressure. From the perspective of collection expectation, the results of the proposed selection will be announced in early December 2023 and will theoretically land in July 2024, but the luminescence is mainly closed reagents, which will involve the change of the overall equipment, and the final landing time is expected to be in October or November 2024. After the introduction of the luminous collection policy at the end of 2023, the overall channel inventory decreased significantly, and there was no obvious replenishment demand in the 2024H1 channel. The channel side will replenish the inventory after the price is reduced.

[farizumab] experts said that although farizumab is currently on the market, the proportion of patients entering domestic hospitals is relatively small, and the proportion of patients using the drug is only 10.15%, and the dosage is expected to be slow. Although farizumab has double targets, the increase of targets does not necessarily lead to a doubling of therapeutic efficacy. In the case of unreasonable prices, it may not be preferred, but will consider single-target drugs with higher cost-effectiveness.

[API] analysts said that the average gross profit margin of the 2024Q1 API sector was 37.64%, an increase of 2.21pct over the same period last year and about 4.23pct on a month-on-month basis. The overall price decline of 2024Q1 APIs narrowed, and the PPI of APIs reached 95.9 in April, which continued to narrow compared with the 95.7 decline in March. Global medical terminal inventory clearance is coming to an end from 2022 to 2023, and downstream demand is expected to continue to recover. It is expected that the prices of subsequent products will bottom out, the demand will pick up, and the cost of raw materials will be stable. Under the background of the gradual realization of the elasticity of preparations and CDMO, the profitability of APIs will enter an upward trend.

[liquor] Liquor dealers around Taihu Lake said that there was pressure on the price of Maotai in the off-season in 2024, and the company chose to ship Maotai during the peak season and not to sell it in the off-season; the overall moving sales of Wuliangye has been maintained at about 10% since 2024; the number of high national cellar visas increased by 2025% in 2024, and the number of low national cellar visas increased by more than 25%. In 2024, the company's national cellar inventory increased by about 20% compared with the same period last year. Since 2024, the overall performance of Yanghe is weak, and the overall signing volume has increased by less than 10%. In 2024, the overall signing volume of this world margin has increased by about 25%, and the overall mobile sales growth rate of this world margin has increased by more than 25%. The number of ancient 20 visas of ancient wells in 2024 has increased by 20%. The number of ancient 16 visas has decreased by 20%, and the overall number of ancient wells has increased by about 15%. At present, ancient wells are not profitable enough for old dealers. The target of Shuijingfang in Jiangsu in 2024 is 1.2 billion yuan, which should be able to complete about 1 billion yuan, and the company can achieve a 20% increment of shipments; there is no pressure for the overall mobile sales growth of Fenjiu in 2024, and the inventory of Fenjiu is low.

Beer analysts said beer industry production fell 9 per cent in April from a year earlier, and sales of listed companies such as Tsingtao Beer and China Resources Beer are also expected to decline from a year earlier. In April, there was more precipitation across the country, and there was a trend of high closure in catering channels, affecting beer consumption. Despite the decline in sales, inventory levels have improved significantly compared with the same period last year, with industry terminal inventory of about 1 month in April in 2024 and 2-3 months in the same period in 2024. It helps to reduce the sales pressure during the peak season. Historically, major sporting events have had a limited impact on beer demand, and weather factors have a greater impact, and the Paris Olympic Games may not significantly increase beer sales.

[pork] experts say the recent rapid rise in pork prices is supported by a decline in pig weight, a steady proportion of secondary fattening sales and a decline in the number of piglets. The number of newborn piglets began to decline in October or November 2023, resulting in a periodic decline in the supply of fattening pigs in April and May 2024. Although the proportion of secondary fattening sales is still higher than that in March, the growth rate is limited from 6.3% in early April to 7.35% in mid-May, indicating that the admission rhythm of secondary fattening groups is relatively stable. Compared with the end of February to March, during this round of rise, the body weight of pigs has declined, and there is no obvious phenomenon of holding down the fence and sparing sales. This round of pig price rise is essentially different from the rise from the end of February to March. There is no obvious phenomenon of holding down the fence and sparing sales in this round, and the slope of this round of rise is expected to be lower than that in 2022.

-- Materials | Energy (7)

[soda ash] analysts said that the soda ash industry is about to enter the off-season, and the maintenance is gradually increasing. The maintenance cycle of Shandong Haihua is about 15 days, and that of Sanyou Chemical is about one month. At present, the operating rate of the industry is 800.85%. The domestic soda ash inventory is 800000 tons, and the weekly ratio is reduced by 40, 000 tons.

[raw salt] experts say that the price of raw salt in Qinghai has risen from 150,000,160 yuan / ton in the previous period to about 300 yuan / ton at present, mainly due to environmental protection rectification. 70% of the raw salt enterprises in Qinghai have been affected, and the raw salt stocks of local soda ash and caustic soda enterprises have basically been consumed, and it is expected that it will take 2 to 3 months to restore the previous supply level, and the increase in market prices in the later period is limited.

[polyester filament] experts said that in 2024, the new production capacity of polyester filament in China was 1.2 million tons, while the production capacity was eliminated and stopped by 1.48 million tons. It is estimated that the increment of texturing machines for the whole year is 1000 to 1200, an increase rate of 40.5 percent, an increase of at least 50,000 for water-jet looms, and at least 20,000 for warp and weft knitting machines. At present, the domestic polyester filament warehouse exists for about 30 days, and the industry operating rate is 86%. The plan of joint production reduction of the head enterprises by 10% has not been fully implemented, and the downstream operating rate is 76%.

[nylon] analysts said demand for sunscreen clothing in the summer of 2024 was higher than expected, especially after the peak April sales season, consumers in the middle and high end of the price range rebought more than expected. The head company has received full orders during the peak season, and the lock volume does not lock the price. With the increasing consumer demand for lightweight sports and outdoor clothing, brand companies are actively meeting this demand, resulting in finer nylon yarns. The proportion of fine elastic wire below 40D in head enterprises has increased rapidly, approaching 60%, and the demand for ultra-fine wire below 20D has begun to emerge, which expands the profitability of the wire drawing link. In addition, it also involves the upgrading of materials, such as from nylon 6 to nylon 66, as well as the use of recycled nylon to meet the upgrading needs of consumers for comfort and environmental protection. The permeability of recycled nylon is currently only 2%, which has seven times the growth space compared with recycled polyester.

[vitamin] analysts said that the proportion of vitamins used downstream for feed additives is more than 60%. In recent years, China's total feed production has continued to grow, from 193 million tons in 2013 to 322 million tons in 2023, of which 3% and 6.4% in 2022 and 2023, respectively. The profits of the aquaculture industry are also continuing to repair, which is expected to lead to a gradual improvement in vitamin demand. On the supply side, vitamin prices have continued to decline in the past two years. DSM plans to stop vitamin business by the end of 2025, and the supply and demand of the industry is expected to be optimized. It is estimated that when the price of vitamin An increases by 10 yuan / kg, the annual net profit of Xinhecheng, Zhejiang Pharmaceutical, Andisu and Jindawei will increase by 60 million yuan, 42 million yuan, 38 million yuan and 30 million yuan respectively. It is estimated that when the price of vitamin E increases by 10 yuan / kg, the annual net profit of Xinhecheng and Zhejiang Pharmaceutical will increase by 450 million yuan and 376 million yuan respectively. It is estimated that when vitamin B1 and B6 rise by 10 yuan / kg at the same time, Tianxin Pharmaceutical's annualized net profit will increase by 100 million yuan.

[alumina] analysts said that at present, the production capacity of alumina in China is 103 million tons, and the actual operating capacity so far this year is 8000-85 million tons. In 2024, the newly built production capacity of alumina in China is about 4.2 million tons (compared with 700-8 million tons in previous years). The growth rate has slowed down significantly. It is estimated that the actual output of alumina for the whole year is 86.3 million tons, the output of electrolytic aluminum is 42.9 million tons, and the excess supply of alumina is 250000 tons.

According to analysts, the current cost of VLCC is about $130 million, an increase of 5060% over the same period in 2019, the average daily operating cost increased by $4000, and 2024Q1 VLCC-TCE freight reached $50, 000 per day, up 15% from the same period last year. It is expected that the oil transportation industry will be in short supply in the next 2 ~ 3 years.

--Finance| Infrastructure (4 companies)--

[Electricity] Experts said that the substantive advancement of the power system reform in 2024H2 may not be fast, and many details are still under discussion. It takes time to improve the long-term operation of the spot market, the expansion of the scope of provincial market entities, the joining of business entities, and the improvement of mechanisms and systems. Comprehensive advancement is expected to be around 2026, when supply and demand will be more relaxed, and long-term operation may be achieved after trial operation and improvement. The issues of the auxiliary service capacity market and the entry of new energy into the market are under discussion. The key directions in the near future are clear but implementation is difficult. In addition, the rules and details for market-oriented trading of green electricity are expected to be introduced before the end of 2026.

[Civil Aviation] Analysts said that as of early May, Civil Aviation of China had restored 148 international destinations and reached 67 domestic destinations. At present, international transportation capacity has recovered to around 80% in 2019, and passenger volume has recovered to around 70% in 2019. It is expected that the main force of the growth of Q3 international routes will mainly come from Southeast Asia, Europe, Central Asia and other regions.

[Real Estate] Experts said that from January to April, the transaction area of new houses in Zhengzhou City was about 1.06 million square meters, and the transaction area of second-hand houses was about 2.06 million square meters. The just-needed nature of second-hand houses is relatively obvious, which has a greater impact on new houses. As of April, second-hand housing prices in Zhengzhou City continued to decline, down 17% compared with the same period in 2023, and new housing prices dropped 56% compared with the same period in 2023.

[Paint] Experts learned from the Beijing Paint Retail Market that it is expected that about 1/10 of Beijing's paint and accessory supply stores will face difficulties in capital turnover and profits that cannot support expenditures, or even exit from the market in June. From the perspective of downstream demand, the real estate market is facing huge challenges. At present, the demand for infrastructure and public buildings in central and state-owned enterprises is relatively good, but it does not reflect the volume. In Beijing, in addition to government affordable housing, housing improvement for troops and enterprises and institutions, there is very little demand for commercial real estate.