Market NewsCitic Securities: technology stocks have an outstanding performance-to-price ratio, paying attention to smart cars and leading companies of Internet platforms.Review of the technology market: the technology sector has fallen sharply and gradually entered the relaxation stage
Since the beginning of 2022, China's technology sector as a whole has fallen by about 20%, and overall valuations have fallen back to the all-time low of the past five years. Since the second quarter, domestic local epidemic relief, policy assistance and other factors have pushed the trend of the plate into a relaxation stage. Looking forward to the second half of the year, we expect China's science and technology assets to gradually strengthen on the basis of relaxation, and we suggest to focus on the smart electric vehicle sector with strong alpha attributes, as well as local technology giants and high-quality companies with growth advantages.
Industrial trend: technological progress leads to the acceleration of digital intelligence, and smart cars are the first to land.
The development of digitalization has entered the second half and is constantly evolving in the direction of depth. The improvement of basic computing power such as AI and semiconductors brings huge amounts of data and drives the promotion of intelligence. Digital and intelligent continue to blend, and finally point to the two directions of individuals and enterprises. On the personal level, after smart phones become mature, we judge that with the gradual improvement of car intelligence, smart cars are expected to become the next Internet portal after PC and mobile phones. At the enterprise level, the digital intelligence process of thousands of industries is accelerating, driving the development and investment opportunities of Xinchuang, industrial software, cloud computing and other industries.
Intelligent car: electrified and intelligent accelerated landing
We estimate that in 2022, China's total sales of new energy passenger vehicles will be 5.7 million (+ 72%), with a penetration rate of 25%, and smart electric vehicles will quickly infiltrate. In terms of industry, the innovation around electrification and intelligence will bring about the gradual release of scientific and technological dividends. In terms of electrification, the continuous growth of new energy vehicle sales will lead to the continuous growth of demand for electronic and electrical architecture, batteries, energy storage and other aspects, and related companies will continue to benefit. In terms of intelligence, with the rapid improvement of intelligent vehicle penetration, intelligent driving in the field of perception systems, decision-making systems, high-precision positioning, intelligent cockpit, automotive software, vehicle networking and the Internet of things as linked attributes will usher in new investment opportunities. We recommend that we pay attention to the leading head companies in the fields of vehicle, RoboTaxi & RoboTruck, vehicle chip, vehicle domain controller, camera & millimeter wave radar, vehicle software and so on.
Subdivide the scene: the promotion of digital intelligence of individuals and enterprises brings new growth momentum
Driven by technological progress, there is also a new growth scene in the digital intelligence of individuals and enterprises. On the personal side, represented by consumer electronics, although the growth of smartphones is gradually slowing down, the new scene of the next generation of smart hardware such as VR/AR and AIoT is expected to open up and become a new growth momentum. On the enterprise side, the digitization and intelligence of thousands of industries are accelerating, and cloud computing enabling enterprises to reshape their business, store energy for enterprise transformation, and nurture the development of enterprises has become an inevitable trend; at the industry level, Xinchuang and industrial software are expected to continue to benefit. at the same time, there are investment opportunities in automobile, energy, finance and other races with a high degree of verticality.
Science and Technology Cornerstone and Local supply chain: technological Progress and Local demand bring Investment opportunities
In the current complex and changeable international environment, China's 14th five-year Plan proposes to take scientific and technological self-reliance as the strategic support for national development, and the importance of China's local market and national security has increased significantly. The innovation and security of scientific and technological cornerstones will bring broader investment opportunities. On the hardware side, the localization of semiconductors continues to move forward, and local wafer factories continue to expand production, leading to a strong demand for equipment. at the same time, light-asset design companies are also participating in global competition. On the software side, Xinchuang advances steadily and relies on the iterative upgrading of the local market demand. In addition, operators also play an important role in infrastructure construction. Overall, the dividend of technological progress continues and brings greater investment opportunities for semiconductors, software, operators and other industries.
Internet: it is expected that the platform economy will develop more healthily, and the construction of cultural digitization will continue to advance.
In the current market environment, considering macro pressure and liquidity discount, the valuation of head companies such as Alibaba and Tencent Holdings has reached a five-year low. Although the logic of the industry has changed and the current low valuation reflects the pessimistic expectations of the market, looking to the future, Chinese Internet companies still have comparative advantages in the international competition of the next generation cloud computing and AI-driven digital economy. In the medium to long term, the growth of the Internet sector is still worth looking forward to. Returning to fundamentals, driven by policy assistance and local epidemic mitigation, the macro-economy is expected to gradually improve in the second half of the year, and Internet companies' online advertising, e-commerce and other businesses are expected to gradually stabilize. At the same time, Internet companies actively focus on the strategic layout of going out to sea, which is expected to open the growth space for the next 3-5 years. In addition, with the support of policies, the continuous promotion of cultural digitization and the acceleration of the circulation and popularization of Chinese classical culture are expected to bring new investment opportunities in the fields of radio and television network construction, data center construction, cultural tourism and cultural consumption.
Investment strategy:
We believe that the continuous promotion of digital intelligence and the continuous landing of smart cars will bring new dividends to the technology industry. Driven by economic recovery and policy assistance, the performance-to-price ratio of the A-share technology sector that has withdrawn sharply before will be further highlighted. It is recommended to focus on the leading companies in smart cars, semiconductors, cloud computing, Internet of things, industrial software, Internet platforms and Xinchuang and other related fields.
Risk factors:
The uncertainty of global and domestic epidemics; the risk that domestic government and enterprises'IT spending falls short of expectations due to weak macroeconomic growth; the risk of sustained tightening of economic regulation on Internet platforms; the intensification of international trade frictions; the risk that relevant industrial policies fall short of expectations; the risk of global liquidity falling short of expectations; and the risk of profits and cash pressure caused by new business investment. The core technology of the enterprise and the progress of product research and development are not as expected.
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