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    Firm "dragon first" configuration "Golden chemical"

    In the context of the internationalization of A-shares, we attach importance to the international comparison of the valuation of leading stocks
    Are A-share leading shares expensive in the end? We believe that under the trend of A-share internationalization, more and more attention should be paid to the international comparison of A-share valuation. At present, A-shares are in an expendable game pattern, the volatility is down, the number of natural person accounts continues to decline year-on-year, and the land-stock northbound funds have become an important marginal trading force for A-shares, affecting the "dragon led" style of A-shares. Should stand in the global comparative perspective to evaluate the valuation of A-share leading stocks, as one of the references to study and judge the trend of leading stocks. Our comparison framework includes: individual stock valuation benchmark, industry valuation benchmark, excluding industry valuation water level difference to investigate the discount premium degree difference of leading stocks.

    A-share leading stock PE benchmark overseas: PE premium, PEG advantage is significant

    We choose the leading stocks in major developed markets (US/UK/Japan/Germany) and emerging markets in Asia (Hong Kong/Taiwan/South Korea) as the benchmark; PE(rolling + dynamic +PEG) was used as the horizontal comparison index. We found that although most of the A-share leading stocks rolling PE and dynamic PE have been slightly higher than overseas (developed + emerging), the PEG is generally significantly lower than that of developed markets (except for some leading stocks of brewers, automobile manufacturers and other industries). At the same time, some A-share leading stocks are scarce in emerging markets (such as home decor, trading companies and distributors, winemakers and vintners, leisure facilities, healthcare equipment, etc.).

    A-share industry valuation is generally higher than overseas, industry ecology, game factors and other differences contribute to the water level difference

    The above cross-market stock valuation premium comparison results are partly contributed by the cross-market valuation water level difference in the same industry. Most of the A-share consumer, financial and TMT industry PE are higher than overseas markets (emerging + developed). Industry ecology (industry concentration/industry life cycle, etc.), game factors (market system/investor structure) and interest rate environment jointly lead to the cross-market valuation water level difference, which is embodied in: the overall valuation premium, and the small bill valuation premium and the large bill valuation discount. Under the trend of A-share internationalization and economic globalization, the cross-market valuation gap will narrow, the overall valuation of A-shares will face downward revision, and the discount of big ticket valuation will continue to be repaired. However, the cross-market valuation level difference is difficult to completely eliminate, and should be removed from the current valuation comparison results of individual stocks.

    Under the international benchmark, the A-share leading stocks are more significantly discounted than the industry

    We divide the cross-market "individual premium multiple" by the "industry premium multiple" to get the "true premium multiple of individual stocks" to measure the difference in the degree of valuation premium given to leading stocks by different markets. Due to the exclusion of the contribution of cross-market valuation water level differences, the "true premium multiple of individual stocks" can more accurately measure the valuation of A-share leading stocks. Whether relatively emerging or developed markets, the "true premium multiple" of A-share leading stocks is basically less than 1(except for some leading stocks in pharmaceutical, biotechnology, investment banking and brokerage industries). Compared with overseas, A-share leading stocks are more significantly discounted than the industry.

    Industry concentration rises, continue to firmly "dragon first"

    A-share leading stocks not only enjoy the advantage of discounted valuation, but also benefit from the double rise of market share and profitability under the trend of increasing industry concentration. In our August 21 cross-industry 100-page in-depth report "Industry Concentration: Reshaping the pattern, led by the Dragon", we proposed that the leading edge of the private sector will continue to benefit from the improvement of industry concentration and mid-cycle profit repair, and benefit from leverage redistribution. Continue to configure the "golden chemical" industry (bank/nonferrous metal/chemical raw materials/construction machinery) leading (Aluminum of China/Northern Rare Earth/Wanhua Chemical/Liugong).

    Risk warning: Individual stock valuation is only a cross-market valuation research sample, and does not constitute individual stock valuation evaluation and operational recommendations.


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