Automotive electronics, which has grown rapidly in recent years, may face challenges. Freescale, the global market leader in automotive semiconductors, grew just 0.5% in the second quarter. The downturn in the downstream of the electronic industry chain determines that the entire global electronic industry will still be under the shadow of the off-season.
Excess semiconductor inventories in the global electronics supply chain remained high in the first half of the year. According to iSuppli, semiconductor inventories rose sharply in the first quarter, traditionally a slow season for sales, to a high of $6 billion. Suppliers' inventory days (DOI) were nearly 44 days, up four days from the end of 2007; Inventories were flat in the second quarter as suppliers built up stocks for the second half of the year, when demand was relatively strong. However, downstream demand due to the deteriorating economic environment is a concern, and we believe that excessive inventory in the supply chain may drive down the average selling price of semiconductors, contributing to the market deterioration in the second half of the year.
The earnings of listed companies in the first half of the year were poor
In the first half of this year, listed companies in the electronic components sector achieved A total operating revenue of 25.976 billion yuan, up 22.52% over the same period last year, lower than the revenue growth rate of all A-shares (29.82%); Net profit reached 1.539 billion yuan, up 44.78% year on year, higher than the A-share market growth of 19.68%. However, if the LCD panel, which has turned a profit, is excluded, the net profit of the electronics sector in the first half of the year was only 888 million yuan, down 18.83 percent from 1.094 billion yuan last year.
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Half - year electronic plate net profit decline is mainly by the main business gross margin significant decline. This year, the domestic manufacturing industry is generally faced with the rising prices of raw materials and resources, rising labor costs and the appreciation of THE RMB and other factors, electronic companies' gross margin decline is the general trend. In addition, domestic enterprises are basically in the middle and low end of the technology pyramid, and only rely on labor cost advantage to occupy a place in the international market; In the macro background of global electronic industry entering the mature stage, the industry competition is increasingly fierce, the price of electronic products shows a sharp decline, and domestic manufacturers lack the right to speak in pricing.
At present, China's electronic industry is in the transition period of technological upgrading, and this year's macro environment is a difficult year for China's electronic enterprises. The global economy has entered recession, and the demand of various countries has further shrunk. Meanwhile, the appreciation of RMB has brought heavy pressure to the domestic electronics industry, which relies on 67% of exports. To fight inflation, the government has tightened monetary policy to keep the economy from overheating and reduced export tax rebates. In addition, operating costs and labor costs are still rising, and food, gas and electricity prices have not stopped rising. All kinds of factors above make the profit space of domestic electronic enterprises suffer serious squeeze.
Plate valuation is not advantageous
The overall P/E valuation level of the electronic components sector is higher than the average level of the A-share market. From the data analysis of the 2008 China Daily, the current 2008 dynamic price-earnings ratio of the A-share market is 13.1 times, while the electronic components sector is 18.82 times, 50% higher than the overall market level. This also reflects the decline in earnings expectations of listed companies in the electronics industry, making the overall valuation of the plate at a relatively overvalued level.
In the long run, the investment value of individual shares in the A-share electronic sector lies in the improvement of industry status and profitability brought by the upgrading of enterprises' products and technologies. In the short term, whether electronics companies can turn a corner depends on whether the export market can pick up and whether the prices of raw materials such as bulk commodities gradually fall to a reasonable level. Our judgment is that before the SUBPRIME crisis in the United States is over, before the economic recovery in the United States and other developed countries around the world, or in the consumer electronics or the Internet field does not produce a heavyweight new application demand, the electronic components industry will still be in a relatively low point. We maintain our "neutral" investment rating on the electronic components sector, given that there is no sign of improvement in the current adverse external development environment for the industry in the foreseeable fourth quarter.
