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1、EquityResearchReport/A-shareStrategy/ThematicReport,Thematic Report on A-share Market StrategySearch for the growth stocks that willpull through the transitional period7 Jan 2013,Investment HighlightsEconomic transformation means new core drivers for the ROEgrowth.Chinese economy is now in the midst
2、 of growth patterntransformation.The core factors previously underpinning ROE growthbecame unsustainable:on one hand,slowing investment and decliningexport are changing the supply-demand landscape and squeezing theprofit margins of most traditional sectors;on the other hand,due tooverall capacity su
3、rplus and shift of economic growth targets to“qualityand efficiency”,the efficiency and enthusiasm of enterprises to addoperating leverage both decline.Therefore,support of re-leveragingand tight supply-demand fundamentals to ROE growth is diminishing.Looking ahead,the growth stocks need to explore
4、for new drivers.Core driving force of ROE growth stems from innovation anddemand upgrading in the economic transitional period.Based onthe experience of the US,Japan and South Korea,ROE growth in theirtransitional periods were largely driven by two factors:1)in the contextof oversupply,enterprises s
5、trengthened their pricing power throughinnovation,thus boosting the increase of demand and raising the profitmargin,as it was in the electronic equipment and software sectors ofthe US during the informatization upsurge,the semiconductor,electronic communication,health care and consumer electronicsse
6、ctors of Japan,and the information 2)as the growth driver gradually changedfrom investment to consumption,from low-end products to high-endproducts,and from products to services,relevant sectors kept fastrevenue growth,as it was in the health care and consumer servicesectors of the US,the hotels,bio
7、pharmaceutical,tourism&leisure,andliquor sectors of Japan,and the real estate services,commercialservices,education,culture and entertainment sectors of the SouthKorea.Innovation:technology and business model are two major focalpoints.Chinese economy is transitioning from“investment-led”to,CITIC Sec
8、urities ResearchChangqing MaoTel:010-60838226Email:Practicing certificate no.:S1010510120004Haobo LiuTel:0755-23835395Email:Practicing certificate no.:S1010510120038Peijing QinTel:021-68768323Email:Practicing certificate no.:S1010512050004Qun ZhangTel:010-60838299Email:Practicing certificate no.:S10
9、10511090003Xin YangTel:010-60836755Email:Practicing certificate no.:S1010512060002Contact:Fang LiuTel:010-60836736Email:,“innovation-led”,during which competitive edges arising fromproduction factors will decline,and enterprises need to promoteindustrial upgrading through innovation and thus upgrade
10、 the product,production technology and business model.Core of technologicalinnovation lies in R and 2)newmaterials,mainly in the non-ferrous metals and chemicals sectors.Interms of innovation of the business model,we recommend monitoringsectors such as modern agriculture,service-oriented manufacturi
11、ngand e-commerce etc.Please read the disclaimer at the end of the report,A-share Market Strategy Thematic Report,Demand upgrade:consumption upgrading and structural expansion of investment.Consumptionhas the greatest potential in Chinese economy in the long term.According to forecast of the National
12、Bureau of Statistics,consumption as a percentage of Chinas GDP will rise to 66%,investment/GDPratio will decline to 34%,and foreign trade will only make trivial contribution to GDP growth by 2030E.Consumption upgrading will guide a transition from consumption of“clothing,food,housing and travel”to c
13、onsumptions oriented at“development and entertainment”.Trends of consumer goods andconsumer services reveal that,theres immense consumption upgrading potential in the buildingdecoration 3)“informatization”,as thegovernment will keep fast growth of spending in informazation of the health care and sma
14、rttransportation fields and that the enterprises will boost informatization in the longer term to replaceimported products and ease the rising labor cost.,Based on the above analysis and from the perspective of innovation and demand upgrading,wesuggest focusing on the following sectors from four dim
15、ensions:1)high-end equipmentmanufacturing and new materials driven by technological innovation;2)modern agriculture,service-oriented manufacturing and e-commerce that are driven by business model innovation;3)infrastructure,environmental protection and computer driven by structural investment expans
16、ion;and 4)new media,tourism,financial services,health care,high-end or upgraded consumer products,mobileinformation devices/services,housing decoration&furniture that are driven by consumption upgrade.,Please read the disclaimer at the end of the report,A-share Market Strategy Thematic Report,Conten
17、ts,Growth drivers on track to undergo some changes in the transitional period.1Economic restructuring means a shift in the core driving force behind ROE growth.1Drivers behind growth from the perspective of ROE breakdown.3International comparison:two growth drivers during the transitional period.4US
18、:the information revolution and the great development of the emerging modern serviceindustry.5Japan:know-how resources and technological upgrading paved the way for industrialrestructuring.8South Korea:innovations and demand upgrading gave rise to new growth drivers.10Innovations:technology or busin
19、ess model.12Technology innovation:focus on high-end equipment manufacturing and new materialsfrom the R&D spending perspective.12Innovations in production and management models:focus on modern agriculture,service-oriented manufacturing and e-commerce.15Demand:focus on consumption while keeping an ey
20、e on investment.18Room and cues for consumption upgrading.18Structural investment opportunities.20Growth stocks map and pool.23Grasp longer-term opportunities tied to growth stocks.23Recommended stock pool.24,Please read the disclaimer at the end of the report,A-share Market Strategy Thematic Report
21、,Figures,Fig.1:Chinas marginal product of capital has been in a downtrend.1Fig.2:Share of global merchandise exports of selected countries(%).1Fig.3:Rising leverage ratio helps to uplift the bottom of ROE.3Fig.4:The corporate sectors leverage ratios are high in emerging market countries(%).3Fig.5:Pr
22、ofit margins of traditional industrial sectors have been in a down trend-ferrousmetals.3Fig.6:Profit margins of traditional industrial sectors have been in a down trend-non-ferrous metals.3Fig.7:Listed non-financial companies asset turnover ratio.4Fig.8:Listed coal and nonferrous metal companies ass
23、et turnover ratios.4Fig.9:Growth drivers from the perspective of ROE breakdown.4Fig.10:Constant price GNP per capita in 2005(US$,measured in PPP).5Fig.11:Consumption to GDP ratio has risen steadily in the US.6Fig.12:Changes in investment structure in the US(%).6Fig.13:Various sectors shares of GDP i
24、n the US.6Fig.14:Sectoral market capitalization structure of the US stock market.7Fig.15:Sectoral composition of the Nifty 50.7Fig.16:Pfizers ROE breakdown(%).7Fig.17:Changes in Pfizers gross margin and revenue growth.7Fig.18:McDonalds ROE breakdown(%).8Fig.19:McDonalds ROA breakdown(%).8Fig.20:Japa
25、n attaches great emphasis to higher education spending.8Fig.21:Growth rate in corporate R&D spending in Japan saw a sharp increase in early1970s.8Fig.22:High consumption rate in Japan.9Fig.23:Japans hotel industry ushered in a rapid growth phase in the early 1970s.9Fig.24:Top gaining sub-sectors in
26、Japan during 1975-1985.10Fig.25:Changes in each sectors value-added as%GDP in South Korea.10Fig.26:Top gaining sub-sectors in South Korea during 1992-1996.11Fig.27:Four stages of economic development from the perspective of national competitiveadvantage.12Fig.28:Investment in R&D relatively lagged b
27、ehind in the past.13Fig.29:The relationship between R&D and TFP in high-tech sectors.13Fig.30:A two-dimensional comparison of R&D spending in various sectors.14Fig.31:The path for investment in agricultural modernization.16Fig.32:IBMs revenue breakdown.17,Please read the disclaimer at the end of the
28、 report,A-share Market Strategy Thematic Report,Fig.33:Gross margins of IBMs each business.17Fig.34:E-commerce channel innovations VS traditional retail channel model.18Fig.35:Changes in marginal propensity to consume reflect the future trend of consumptionupgrading.20Fig.36:Railways per unit area i
29、n BRIC countries.21Fig.37:The proportion of high-quality highways is relatively low(%).21Fig.38:Improvement of hygienic conditions is undesirable(%).21Fig.39:A comparison of Internet users per hundred residents(per 100 people).21Fig.40:Treasure map for the environmental protection sector.22Fig.42:Ma
30、p of growth stocks.24,Please read the disclaimer at the end of the report,A-share Market Strategy Thematic Report,Tables,Table 1:Major sectors profit margins have peaked off.2Table 2:Knowledge-and technology-intensive sectors including semiconductor,electroniccommunications,health care and entertain
31、ment&leisure in Japan gained globalcompetitiveness.9Table 3:Five major sectors that dominated growth in South Korea in different periods(Manufacturing sectors).11Table 4:Long-term outlook on Chinas economic growth.18Table 5:Growth sub-sectors driven by consumption upgrading.19Table 6:Changes in the
32、consumption of different services in Japan in relation to the Engelcoefficient(shaded areas indicate strong growth).19Table 7:Recommended growth stock pool.25,Please read the disclaimer at the end of the report,1948,1952,1956,1960,1964,1968,1972,1976,1980,1984,1988,1992,1996,2000,2004,2008,1978,1980
33、,1982,1984,1986,1988,1990,1992,1994,1996,1998,2000,2002,2004,2006,2008,2010,China,德国,Japan,US,demographic,dividend upon,收获人口红利,8,6,4,2,advantages and,demographic dividend at the,Further reap,WTO accession,1,A-share Market Strategy Thematic ReportGrowth drivers on track to undergo some changesin the
34、transitional periodEconomic restructuring means a shift in the core driving forcebehind ROE growthThe rapid growth in investment and the made-in-China model are hard tobe sustained in the long termThe last round of economic growth cycle was mainly driven by two factors:1)rapid growthin investment fu
35、elled by swift urbanization and a booming housing market;and 2)sinceChinas accession to the WTO,a confluence of institutional dividend,demographicdividend and upbeat overseas economic conditions led to rapid expansion inthe worldwide presence of products made in China.In terms of investment,marginal
36、 product of capital has declined.Marginal product ofcapital has continued to decline in China amid growing capital stock.As Chinas accessionto the WTO broadened potential demand,combined with scale effects of acceleratedurbanization and reform dividends at the beginning of the cycle,the decline in c
37、apitalefficiency was eased at one point.Nonetheless,after such dividends diminished since2008,the downward trend of MPK has become noticeable again.On the exports front,there is limited room for improvement in Chinas share ofglobal exports.From a long-term perspective,Chinas share of global exports
38、has alreadybeen very high.The countrys export growth has moved into a downtrend since 2010.Anddouble-digit growth in Chinese exports can no longer be maintained from 2012.Lookingahead,we predict that there is only limited room for improvement in Chinas share ofglobal merchandise exports.,Fig.1:China
39、s marginal product of capital hasbeen in a downtrend,Fig.2:Share of global merchandise exports ofselected countries(%),0.5,中国,Germany,日本,美国,0.40.30.20.1,Leverage comparative改革初期，reap发挥比较优势、early stage of reforms,加入WTO，进一步收获人口红利,141210,Chinas accession to中国加入WTO,0Source:The Trap of Chinas Comparative
40、 Advantagespublished on Caijing magazine issue No.12 in 2012,CITIC Securities ResearchPlease read the disclaimer at the end of the report,0Source:CEIC,CITIC Securities Research,2,A-share Market Strategy Thematic ReportProfitability and leverage ratio under pressure amid a reversal of themarket suppl
41、y and demand patternProfit margins under downward pressures amid a reversal of supply and demandpattern.Rapid growth in investment is hard to be sustained in the long term,which pointsto a reversal in the supply-demand fundamentals for sectors leveraged to Chinasinfrastructure spending programs,such
42、 as steel,non-ferrous metals,chemicals,coal,petroleum processing and non-metallic mineral products.These sectors profit marginsreached their historical peaks in succession during the period of 2003-07 before easing off.Looking ahead,these sectors are expected to reach maturity or even slip into decl
43、ines asthe process of industrialization nears an end.As a result,these sectors profit margins willbe under downward pressures.Table 1:Major sectors profit margins have peaked off,Industrial sector,The year when profit marginpeaked,Changes in sales margin band2000 peak year Peak year-2011,Non-metalli
44、c mineral productsFerrous metal smelting&rollingNon-ferrous metal smelting&rollingMining of ferrous metal ores,2003200320032004,0.07%1.57%0.22%7.94%,-0.32%-6.35%-1.71%-7.08%,Raw chemical materials&,chemical,products,2004,2.08%,-2.55%,manufacturing,Oil&natural gas exploitationMining of non-metallic m
45、ineralsMining of non-ferrous mineralsCoal mining,washing andselectionOil processing,coking andnuclear fuel processingChemical fiber manufacturingMetal productsProduction and supply of gasPlastic productsInstruments and cultural andoffice equipment manufacturing,20052005200620082009201020102010201120
46、11,9.44%2.24%8.43%2.98%10.57%1.23%0.06%13.48%0.47%0.14%,-6.32%-3.96%-6.20%-4.90%-7.69%-1.57%-0.15%-3.17%0.00%0.00%,Source:Wind,CITIC Securities ResearchAgainst the backdrop of overall excess capacity across sectors,both the motivationand efficiency in re-leveraging have been weakening.The main drivi
47、ng force behindthe expansion of non-financial A-share companies ROE over the past decade has beenenhanced leverage ratios.Demand arising from industrialization has experienced rapidgrowth amid a tight balance between supply and demand,which has led to continuedrollout of new production capacity and
48、rising leverage levels.As a result,ROE of listednon-financial companies has risen along with rising leverage ratios,though there hasntbeen any spike in cyclical fluctuations of ROA or overall ROA itself.And given overallsurplus production capacity and a shift in economic growth target towards“qualit
49、y andefficiency”,companies efficiency and motivation in re-leveraging will both be weakened.Please read the disclaimer at the end of the report,1Q2003,3Q2003,1Q2004,3Q2004,1Q2005,3Q2005,1Q2006,3Q2006,1Q2007,3Q2007,1Q2008,3Q2008,1Q2009,3Q2009,1Q2010,3Q2010,1Q2011,3Q2011,1Q2012,3Q2012,1999,2000,2001,2
50、002,2003,2004,2005,2006,2007,2008,2009,2010,2011,2012,1999,2000,2001,2002,2003,2004,2005,2006,2007,2008,2009,2010,2011,2012,20050901,20060201,20060701,20061201,20070501,20071001,20080301,20080801,20090101,20090601,20091101,20100401,20100901,20110201,20110701,20111201,20120501,杠杆率,ROE(滚动四个季度，右轴),Chin
