“One Brother in Military Industry” Feng Fuzhang: 19 Years of Military Industry Performance Has Advantageous Investment Opportunities
The weak performance of the military industry over the past three years has repeatedly disappointed the market.
The military industry index has continued to plummet, and the average annual decline has ranked among the top in various industries.
However, at the beginning of this year, the performance of the military industry has begun to rise, and the year-to-date growth has surpassed the broader market.
Has the military industry already come to Thailand?
How many investment opportunities does the military industry have in 2019?
Compared with the previous glory days, what changes have occurred in the investment logic of the military industry?
Are there any lessons learned from the research and analysis of the military industry?
Along with these issues, Wall Street had an in-depth dialogue with Feng Fuzhang, the Deputy Director of Anxin Securities and Chief Analyst of the Military Industry.
As a former star analyst, Feng Fuzhang believes that the reason for the decline in the military industry in the past few years, the performance frequently exceeded expectations, mainly because the previous market expectations were too high and not rational enough.
Judging from historical data, military industry is a steadily growing industry, and the growth rate is “stable and slightly faster.”
However, market expectations are always too optimistic, and they are always looking for explosive growth, restructuring and asset injection.
This mentality has often led to a “weaker-than-expected” situation in the industry.
But that has changed.
Feng Fuzhang believes that after continuous adjustments over the past three years, coupled with the introduction of policies such as the crackdown on flickering reorganizations by regulatory authorities, the suspension of the regulatory system, and the decline in the quantity and quality of assets to be injected by military enterprises.
The logic of military investment has gradually changed from speculation to reorganization, and Bo’s expected thinking has shifted to changing the performance of the military industry itself.
This process will provide solid military research with development potential.
Looking forward to this year, Feng Fuzhang expects that the profit growth rate of the military industry in 2019 will be about 20%.
This is a steady increase over last year.
In the context of the expected general slowdown in major industries during the year, the military industry has certain comparative advantages.
He compared the investment opportunities in the military sector this year with “yang and qi qi”.
Fengzhang Feng, entered the securities industry in 2007, 2014?
In 2017, it won the first place in the military industry for the fourth consecutive year.
In December 2018, Feng Fuzhang’s team saw the sponsor’s “Dianjinshi” Best Analyst on Wall Street and won the first place in the military industry’s best analyst.
The following is a record of the dialogue between Feng Fuzhang, the “Best Goldstone Military Industry Analyst,” and Wall Street News: Wall Street News: In the performance forecast of listed companies at the end of January, the expected losses of listed companies in the military industry and their performance expectations are expected. How do you view this phenomenon?
Feng Fuzhang: The performance is lower than expected, mainly because the market’s previous expectations were too high. Although there are also problems with military enterprises themselves, the former is the main reason.
In the past, the market’s focus on military industry was not on performance, so the tolerance for lower than expected performance was also higher.
Instead, once every two years, everyone starts to pay attention to the fundamentals of performance. When the performance of listed companies is worse than expected, the market response will be more obvious.
Judging from the data of previous years, the consensus expectation of the military industrial enterprises is too high, leading to the gradually expected performance of military industrial enterprises is a high probability event.
Military industry itself is a steadily growing industry.
If we take a sample of a listed company whose military business income accounts for over 30%.
In the first three quarters of 2018, the industry’s revenue growth rate for this sample was 15 quarter-on-quarter.
2%, but the consensus expectation of the market is significantly higher than this, so it is a high probability event that exceeds expectations.
It is also because after that, in the reports of the past few years, we were called to be more cautious about market expectations.
In the 2016 strategy report, we proposed that the upward elasticity of some large market value targets of the military industry sector in that year will be significantly less than the downward elasticity.
In 2018, we proposed in the strategy report “Beginning of the Birth” that the overestimation of military industry stocks has limited rebound space.
In 2018, our team’s profit expectations for many companies are the most cautious in the industry, which is the result of this logic.
Wall Street News: Why do institutions have high expectations for military industry for a long time, and what are the reasons behind this?
Feng Fuzhang: In the past, the investment logic of the military industry was mainly speculation in asset reorganization.
From 2006 to 2015, the investment of many military stocks was not driven by fundamentals and performance.
The internal logic here is that at that time, many assets in the military industry were outside of listed companies.
The scale of external assets is relatively large, and profits are relatively good. Several large military groups also intend to increase the asset securitization rate.
And the worse the performance stocks, the stronger the motivation for shareholders to inject assets.
This factor gave birth to a series of asset-injected military industrial bull stocks, and also stimulated the market’s speculative reorganization of military investment at the time. Bo news, poor speculation methods prevailed.
However, since 2016, a series of policies at the supervisory level have been introduced: opposition to flickering reorganization, strict restrictions on the suspension period, etc.
The policy space for military stock speculation is getting smaller and smaller.
In the following three years, the military stocks fell all the way, squeezing the estimated bubble in this sector.
In addition, after more than 10 years of asset securitization, the scale of excellent external assets of listed companies is no longer huge.
The investment logic of military restructuring is gradually coming to an end.
Only in the past two years have we started to pay attention to the fundamentals of military performance.
I believe that in the future, the investment of military stocks will increasingly highlight the fundamentals, and the level of grasp of the company’s performance will determine its future investment performance.
Wall Street heard: Just now that military industry is a steadily growing industry, is it a good time to focus on military stocks?
Feng Fuzhang: The timing of investment in military stocks is selective.
Generally speaking, in the first half of this year, military industry stocks have better investment opportunities.
We used to think that we must be cautious about military stocks in the fourth quarter of each year.
In the last weekly report at the end of September 2018, we also clearly reminded the risks of military investment in the fourth quarter, and we recommend that you invest cautiously in military stocks.
The reason is that the performance of military stocks is usually realized at the end of the year.
Therefore, the end of the third quarter is usually the last moment when the market’s over-expected expectations within one year are “falsified.”
After entering the fourth quarter, each company faces the test of performance.
The trend of military industrial enterprises can be affected.
Back in 2019, the average dynamic price-earnings ratio of the military industry is now about 35 times, which means that it has fallen significantly by 110 times in early 2017.
The estimated level of military industry has now reached a relatively low position.
The expected growth of industry revenue in 2019 mentioned above is about 20%. With the overall P / E ratio unchanged, this performance increase will be mostly reflected in cash.
Historically, in the first quarter, liquidity was relatively loose, and market risk expectations were higher. There may be some opportunities.
Wall Street News: Many people think that the biology of military research is relatively high, and it is difficult to obtain and verify information. How do you overcome this problem?
Feng Fuzhang: The biggest source of information in the military industry is that this industry has a certain degree of confidentiality. The acquisition of many business data is indeed not so easy compared to other industries.
But did this feature prevent our research?
I don’t think so.
Not all data is confidential, and investment-related data. If you want to know, through hard work and mastering certain methods, there are still many channels available.
For example, the collection and organization of public information.
Too many listed companies and his shareholders may not have much public announcement information.
But on other occasions, some internal journals, company meetings, and news interviews have a lot of public information. Through accumulation and sorting out, it can be based on the strategies, decisions, and business progress of related industries, groups, and enterprises.
When I first started in the industry, I was soaked in the Beijing Library on Saturdays and Sundays, and now I think of it, and I have benefited a lot.
Another method is to “find intensive reading” of the financial data of listed companies.
There is a correlation between the data.
If you understand the business characteristics of military enterprises, you also have a certain financial foundation.
Through careful study of the company’s financial statements, a lot of information is obtained.
The military industry is an order-driven industry that sells orders.
If a military enterprise has a business order, it will first be reflected on his balance sheet. Initially, it may be the growth of advance receipts, and then the increase in inventory, followed by a series of related subject data changes.
There is a context and logic in the middle.
In addition, it is also important to go deep into the industry, to repeatedly research on the front line, and to communicate with the previous.
Cross-analysis and mutual verification of the information and data collected from various channels can deepen the research of military 成都桑拿网 industry.
Wall Street News: Military research has a large workload and high biology. Are you interested in finding relevant backgrounds or military fans to do military research when selecting candidates?
Feng Fuzhang: When we select talents, we mainly consider the business qualities of responsibility, hard work, and professional ability.
Military fans and people with a military-related background are not our priority.
Investment requires objective spirit.
If it is because of a “mystery” of a certain technology or product, in the research and analysis, there are too many “substitutions” of emotions, which leads to impersonal judgment, it is precisely what we must be alert to.
In my opinion, whether a person can do a good job of research is first of all because of his strong sense of responsibility and hard work.
The quality of the research results mainly comes from the hard work of the team, not from any background.
Wall Street News: Since the beginning of this year, foreign influx into A shares has been fierce.
However, from the perspective of different industries, the military industry always seems to be under-equipped. What are the reasons why foreign countries do not buy military industries?
Feng Fuzhang: We also have a lot of exchanges with foreign institutions.
As far as I know, foreign investment in A shares mainly depends on fundamental indicators such as the company’s assessment and the ability to distribute dividends.
Historically, the military stocks are estimated to be high, and the dividend rate is relatively low, which may not meet the foreign “appetite”.
In addition, foreign countries also observe the long-term financial performance of a company.
In particular, it evaluates financial indicators such as ROE and net profit growth of superior companies.
But in the past 10 years, there have been too few individual stocks in the military industry that qualify for foreign screening.
Of course, foreign countries have bought too many qualified stocks.
We should also see that this is a past phenomenon.
From the data in early 2019, it is estimated that the stocks of the military industry have fallen a lot, and the market investment orientation is increasingly looking at the fundamentals.
It is believed that the proportion of foreign intervention in military stocks will increase in the future.
Wall Street News: What kind of team is Anxin ‘s military research team? How do they usually do research? When you recruit people and manage them in peacetime, do you pay more attention to their quality?
Feng Fuzhang: We are committed to building a team with gradients. Currently, there are 6?
Seven people, in addition to me, we have “One Help”, some analysts who look at industry segments, and interns.
When choosing people, my first consideration is reliability and hard work.
Reliability means having a sense of responsibility and being responsible for what you say and the report you write.
Responsibility also requires hard work.
The financial industry is a high-intensity industry. To maintain our industry position, we need to work hard.
In our team, there are many people working 15 or 16 hours a day.
Of course, professional attitude is also important for research talents.
Professionalism is not only reflected in financial knowledge, but also in the details of the report, font size, fonts, and whether there are typos.
Including speech materials, PPT, etc., must be carefully considered.
Wall Street News: The routine of conventional research is-“say good or not bad.”
But you don’t seem to have this taboo?
One year you also won a prize for publishing the view that the military industry has no investment opportunities this year.
Will you be stressed?
Would you worry that the listed company is “blocked”?
Feng Fuzhang: This will always have some impact on me personally.
However, in the long run, objective opinions will also be respected by listed companies, and also recognized by the market, it is still worthwhile.
In addition, I am a person with this characteristic and have never been afraid to offend people.
If I don’t tell the truth, I will feel wronged.
In 2017, we made it clear at that time that there was no investment opportunity for military industries.
Because of this sharp view, too many people were offended.
But some time later, some of them became friends again.
Because, he found that what you said is right, and after hearing from you, he may lose less.
The tolerance of the market and industry for the truth is beyond our imagination.
Wall Street News: Recently, the science and technology innovation board is very hot, and the scientific research strength of military research institutes basically represents the top level in China. Will these batches of enterprises go to science and technology innovation board in large numbers?
Feng Fuzhang: Before discussing whether the military research institutes will be on the science and technology board, the first thing to focus on is that the progress of the reform of scientific research institutes is still relatively slow.
Only one of the first batch of 41 companies was completed, and these 41 companies are just pilots.
The back is spread out a lot, and the time is still late.
In terms of institutional factors, military scientific research institutes are public institutions, and the requirements for the listing of science and technology boards must be enterprises.
Unless it is said that there are already some enterprise-like assets under these scientific research institutes, it is still necessary to go through the system reform first.
We believe that the injection of corresponding assets into corresponding listed companies by military scientific research institutes is still the main method of securitization of military assets in the future.
Wall Street News