For the full formal report, please refer to Northeast Securities' macro research report, "Which Areas of the Manufacturing Sector are Moving to the Next Level After the Epidemic?".
Northeast Macro: Shen Xinfeng
1. Manufacturing industry is in the early stage of recovery, with some areas showing outstanding performance
China's economy has continued to recover since the outbreak was brought under control, with the growth rate of industrial value-added rising rapidly. Since Q2, manufacturing revenues have bottomed out and inventories have fallen from high levels, entering the early stages of recovery.
Inventory cycle perspective. From the perspective of the inventory cycle, computers, special equipment, food and non-ferrous rebound faster; from the perspective of profit improvement, computers, equipment manufacturing, food, pharmaceuticals and other areas of outstanding growth in scale; to revenue margins to measure the efficiency of the point of view, computers, equipment manufacturing, automotive, pharmaceuticals and other areas of the field has been improved from the listed companies in the data can be found in the high-end manufacturing industry is mainly in the sub-division of evidence of quality and efficiency; the industry to improve quality and efficiency. Industry to improve the quality of the evidence of efficiency; from the perspective of leverage measured by gearing, computers, automotive, black and beverage recovery is more healthy.
Comprehensive view, computer communications electronics, food and beverage in the cycle, profit, efficiency and leverage in four dimensions have outstanding performance; equipment manufacturing, automotive in three dimensions of the performance is better; pharmaceuticals, rubber and plastic, tobacco, paper in two dimensions of the advantage.
2. Overseas demand contributes greatly to China's manufacturing recovery
2.1. Macro level, external demand is an important driving force for the recovery of the manufacturing industry
Accumulated industrial profits in January-August this year from a structural view of the lower reaches of the downstream & gt; middle reaches of the river & gt; upper reaches of the river, the characteristics of the recovery of the demand-pulling Obviously. [1]So far in 2020, the weighted profit growth rate of upstream, midstream and downstream industrial enterprises (by comparable caliber) was -37.9%, -9.8% and 9.4% respectively, with the upstream being significantly weaker than at the end of 2019 (-0.5%), while the midstream and downstream were stronger than at the end of 2019 (-13.3% and -1.5% respectively). This structure suggests that the current recovery is demand-side driven.
However, the demand structure shows that the momentum of export growth picking up is significantly better than the recovery of domestic social consumption, which suggests that external demand plays a key role in the manufacturing recovery process: Overseas epidemics have hit the economic production of other countries, resulting in a persistent gap between supply and demand, and the need for China to replenish production capacity (see the previous report, "Import Decline in the "False" - August trade data review), and will not be affected by the second outbreak of overseas epidemics.
2.2. industry level, the performance of manufacturing industry segments with a higher correlation with external demand
the aforementioned in the cycle, profit, efficiency and leverage in the four dimensions of the performance of manufacturing industry segments, such as computers, equipment manufacturing, pharmaceuticals, automobiles, food and beverages, etc., generally appeared in the year-to-date cumulative positive growth in value of export deliveries or growth rate of the February low point of the year
These are the characteristics of the newest and most important of all the newest products.
Computer communication electronics, special equipment, pharmaceutical export delivery value positive growth. This year, the export delivery value of the positive growth rate of the manufacturing industry segments are three, respectively, the pharmaceutical manufacturing (33.9%), computer, communications and other electronic equipment manufacturing (5.6%) and special equipment manufacturing (4.1%), these three industries have realized a positive year-on-year growth in profits (7.4%, 26.1% and 22.9%, respectively), but also to achieve the proportion of all manufacturing profits. All three industries realized positive year-on-year profit growth (7.4%, 26.1% and 22.9%, respectively), and also achieved an increase in the proportion of all manufacturing profits.
food, automotive, rubber and plastic, general equipment, export delivery value growth rate is negative, but compared to the low point of February this year, a significant rebound, and positive profit growth. Among them, food manufacturing, agri-food processing industry, general equipment manufacturing, automobile manufacturing, rubber and plastic products industry's export delivery value of the cumulative growth rate of January-August this year, respectively, -2%, -4.4%, -10.7%, -9.3%, -6.8%, the cumulative profits of these industries are growing, respectively, 10.8%, 17.7%, 7.6%, 1.5%, and 19.5%.
Textile and apparel, chemical, furniture, electrical machinery, black, non-metallic mineral products export delivery value growth rate rebounded but still negative, and negative profit growth. Electrical machinery and equipment manufacturing, furniture manufacturing, textile and clothing, apparel industry, black metal smelting and rolling processing industry, non-metallic mineral products industry, chemical materials and chemical products manufacturing export delivery value of the cumulative growth rate of January-August this year, respectively -1.3%, -18.3%, -21.3%, -28.9%, -11.5%, -10.2%, these industries had negative cumulative profit growth of -1.3%, -27.3%, -25.6%, -23.1%, -3.8%, and -22%, respectively.
Overall, external demand for manufacturing industry segments to drive the role of obvious.
2.3. At the company level, listed companies in industries such as computers and pharmaceuticals expanded their overseas business the most
This year, there are 1,149 listed companies disclosed the data of their overseas business revenues through the mid-term report, among which there are 992 companies that also announced their overseas revenues last year, and 409 of them saw year-on-year growth in their revenues. Of these 409 listed companies with overseas revenue growth, the largest number is in the computer industry, with 102 total ****; followed by pharmaceuticals, specialty equipment, machinery and chemicals, with 45, 42, 41 and 38 respectively.
More representative companies are: the chemical industry, the three poly environmental protection this year reported overseas business income of 1.386 billion yuan, a year-on-year increase of 438.43%; communications industry, Yi Hua shares reported overseas business income of 1.014 billion yuan, a year-on-year increase of 422.45%; the automotive industry, BYD reported overseas business income of 24.003 billion yuan, a year-on-year increase of 328.74% In the automobile industry, BYD reported an overseas business income of RMB 24.003 billion, an increase of 328.74% year-on-year; in the machinery industry, Exton reported an overseas business income of RMB 585 million, an increase of 305.90% year-on-year; in the pharmaceutical industry, JiuAn Healthcare reported an overseas business income of RMB 792 million, an increase of 280.48% year-on-year; in the iron and steel industry, CITIC Special Steel reported an overseas business income of RMB 3.244 billion, an increase of 185.37% year-on-year; and in the pharmaceutical industry, FISHYE Medical reported an overseas business income of 1.019 billion yuan, a year-on-year increase of 172.91%; the textile industry's stable medical reported overseas business income of 1.131 billion yuan, a year-on-year increase of 163.07%; the pharmaceutical industry's Kewa Bio reported overseas business income of 270 million yuan, a year-on-year increase of 161.04%; the computing industry's Wave Information reported overseas business income of 5.172 billion yuan, a year-on-year increase of 123.22%; Electronic industry Feirongda reported overseas business income of 304 million yuan, an increase of 123.18%; the electronics industry's high German infrared reported overseas business income of 279 million yuan, an increase of 117.69%; the electronics industry's Lixin Precision reported overseas business income of 33.035 billion yuan, an increase of 71.44%, etc..
2.4. technology level, biological / life sciences and electronics is China's manufacturing strengths
General Administration of Customs export statistics of high-tech products help us to analyze the strengths of China's manufacturing industry and shortcomings. January-August this year, China's high-tech products export cumulative year-on-year growth of 2.2%, sub-categories in the growth rate is lower than the overall include aerospace technology (-19.4%), computer and communications technology (0.8%), computer-integrated manufacturing technology (0.1%), photovoltaic technology (-9.9%) and materials technology (-1.5%), growth rate is higher than the overall include Biotechnology (2.3%), Life Science and Technology (19.6%), Electronics (6%) and Other Technologies (16.1%). Overall, electronics and bio/life sciences are areas of technological superiority for China's manufacturing, but there is no export advantage in computer communications and integration, materials, optoelectronics, aerospace and other technologies.
3. Self-revolution of manufacturing is the foundation of a strong nation
3.1. The story of traditional cyclical investment will not be repeated in the past
How to evaluate the role of real estate and infrastructure in the current round of recovery?
What is the role of real estate and infrastructure in the current recovery?
First of all, the role of real estate in driving the manufacturing industry has declined significantly. This year, the land auction market and real estate sales are hot. But the real estate development investment is mainly land purchase cost growth rate is high, construction growth is not high, new construction and completion growth rate is even negative, which means that this year's real estate investment on the construction of the relevant industry chain driven role is relatively limited. On the other hand, from the point of view of social zero consumption data, construction and decoration materials, furniture sales growth rate is negative, weaker than the overall growth rate of social zero, indicating that real estate sales on the decoration-related industry chain is not very prominent.
Finally, the traditional cyclical investment growth has a ceiling.
The real estate industry in the short term or strong sales growth and maintain a high rate of investment, real estate financing "345 new rules" (3 red line, 4 risk management, 5 percentage points of the debt growth rate gear) forcing real estate companies to rely on the sales of money back, the short term or even may be driven by the new construction and the period of housing sales growth. But in the long run, the tightening of the capital side will eventually lead to a contraction of the investment side. Infrastructure, we previously measured the annual growth rate is expected to be 8.3% (see the previous report "new and old infrastructure space is vast, infrastructure investment is expected to grow at more than 8% during the year"), but the local financial resources consumed by the epidemic after the tighter, most of the region's general budget revenues fell year-on-year, so we believe that the follow-up of the infrastructure to enhance the space, but the rate of growth will not be very fast.
In the long run, under the new development pattern of "double cycle", the future focus of urbanization policy will be to increase the urbanization rate of the household population, unclogging the economic cycle, rather than real estate investment and traditional infrastructure investment.
China's GDP share of consumption has been significantly lower than that of developed countries, the policy side will most likely adhere to the long-term "housing without speculation" to reduce the crowding out effect of high prices and release consumer demand (see the previous report, "How to Understand the New Situation of the "double cycle "). At present, the urbanization rate of China's total population has been significantly higher than the urbanization rate of the household population (a gap of 16 percentage points in 2019), which has become an important issue that hinders the economic cycle and limits residents' consumption. Compared with traditional urbanization policies such as promoting farmers to buy houses in the city (which is more conducive to real estate and infrastructure), the policy of raising the urbanization rate of the household population by removing and reducing the restrictions on settling in the city and promoting the civilization of the "population with residence permits" will be more capable of enhancing the sense of belonging, activating the potential for consumption, and increasing the efficiency of the optimal allocation of human resources, thus providing more favorable support for the upgrading of the industry. Providing more favorable support, the policy space is larger and the marginal effect is healthier, and has been the focus of policy support, such as the General Office of the State Council's Circular on the Issuance of a Program to Promote the Settlement of 100 Million Non-Household Population in Cities (2016) and Opinions on the Reform of the Institutional Mechanism for Promoting the Social Mobility of Labor and Talents (2019), the National Development and Reform Commission's Opinions (2019), and Key Tasks of New Urbanization for 2019 and 2020, among others.
3.2. A strong manufacturing country is the key to eternal prosperity
The current round of the epidemic has brought challenges to the economy, but it has also brought opportunities for "Made in China" and "Made by China" leaders.
The first is industry concentration and structural optimization. The impact of the epidemic on all aspects of society and the economy has objectively become a kind of "litmus test" to test the quality of enterprises, making some of the strength, high efficiency, core competitiveness and risk resilience of outstanding enterprises to stand out in the aftermath of the crisis, thus increasing the concentration of the industry and optimizing the structure of the industry.
The second is to improve efficiency and stimulate potential. Although the crisis has had an impact on the revenue and profits of enterprises, it has also stimulated the potential of enterprises, forcing them to mobilize resources, improve efficiency, innovate and grow to cope with the severe situation and enormous pressure, and cross the cycle, thus promoting industrial upgrading and technological progress. January to August this year, China's manufacturing revenue margin of 5.54% (cumulative profit / revenue from January to August this year), compared with the same period last year's 5.46% has not decreased but increased.
The third is the institutional advantage, domestic demand guarantee.
China's efficient epidemic prevention and control, the recovery of economic production and social life leading the world, which for some of the demand for the main battlefield in the country's leading enterprises to provide a "home field advantage", so that compared with the same industry overseas competitors demand more secure. The current domestic consumption recovery progress is weaker than the production, but is still continuing to pick up, did not form a significant drag on production. In the first half of this year, China's GDP accumulated -1.6% year-on-year, but significantly higher than Europe, the United States and Japan and other major economies.
Fourth is to turn the crisis into an opportunity to develop overseas. This year, overseas production and sales were hit by the epidemic, foreign companies are relatively more serious damage to the competitive strength, which is objectively conducive to Chinese enterprises to obtain more global market share. Year-to-date China's cumulative total exports equivalent to the United States 109.7% (98.9% at the end of last year), the European Union's 110.68% (104.53% at the end of last year), Japan's 394.93% (354.80% at the end of last year), South Korea's 486.61% (460.96% at the end of last year), 902.68% in Vietnam (948.75% at the end of last year), Indonesia's 1523.68% (948.75% at the end of last year). ), Indonesia's 1523.50% (1492.25% at the end of last year), the Philippines' 3915.02% (3524.02% at the end of last year), and Mexico's 611.01% (542.54% at the end of last year). This indicates that China's share of the global export market has expanded compared to all major exporting countries/economies (except Vietnam).
After the current round of the epidemic, as the low-end excess capacity is cleared more thoroughly, economic hazards are exposed earlier, and the industrial structure is upgraded further, there will be a number of excellent Chinese enterprises to take a new step forward in their comprehensive strength, and some of the "China's No. 1" leading manufacturing companies will move to the "global No. 1" position. "The world's first" to move forward, which will also greatly enhance the durability of the future economic recovery. We believe that real estate, infrastructure recovery driven by the industry chain marginal improvement will eventually converge, the manufacturing industry's self-revolution is to stay evergreen, the national prosperity of the basis.