材料-從順風(fēng)到逆風(fēng)

1、Global Research19 August 2020EquitiesEM Sector KeysBasic MaterialsEmerging MarketsMaterials From tailwinds to headwinds; UnderweightChinas credit expansion is peaking; supply disruptions may not be sustained The re-opening of economies and unprecedented monetary stimulus since the height of the Covi

2、d-19 crisis have propelled EM Materials stocks sharply higher. Prices of some commodities, such as copper and iron ore, have exceeded their pre-Covid-19 peaks, but this has been partly driven by supply disruptions, not just a demand recovery. Chinas credit expansion has been key, but easing momentum

3、 may have peaked.Structural changes: Clean energy, recycling, changing mobility patternsA shift from Material to Intellectual is one of the Seven Megatrends that we see as being accelerated by the Covid-19 pandemic. Underneath that, we anticipate three major structural changes: (1) clean energy is s

4、et to reduce demand for thermal coal after its peak expected in the next three to five years; (2) recycling of metals by 2030, scrap steel may account for over 40% of overall steel supply in China vs 20-25% currently; and (3) changing mobility patterns rising penetration of 5G networks and electric

5、vehicle sales should benefit lithium, cobalt, nickel, copper and aluminium. That said, the outlook for battery makers is clearly positive, in our view, as we forecast the share of new energy vehicles (NEVs) in total auto sales to quadruple to 16.6% by 2025, with the five largest global battery maker

6、s capturing c84% of the market. In contrast, we are structurally bearish on iron ore medium-term, with Brazilian supply expected to recover and with the iron ore price well above the cost curve.ESG: Early days; a long way away from achieving carbon neutralityRecent incidents, such as Norilsk Nickels

7、 fuel spill and Vales tailings dam spill, have heightened investor concerns. While we see some progress by EM Materials companies on the ESG front, we think it is still early days in the ESG improvement journey for EM Materials stocks and that the pathway to achieving carbon neutrality is unclear.St

8、rategy: Underweight Materials as dissipating tailwinds priced as persistent Chinas credit expansion and a weaker USD have helped EM Cyclicals, such as Materials stocks. Historically, the impact of the former factor lasted for several months HYPERLINK l _bookmark0 (Figure 1). This time, however, we d

9、o not expect this template to hold, as we believe all tailwinds have already been priced as if they are set to persist significantly longer than we think they will. HYPERLINK l _bookmark1 Figure 2 below shows UBS analysts top stock picks.MSCI EM Materials Index New TSF ex equity (3mma)/quarterly GDP

10、 (RHS, advanced 7 months)555020202020EStockRatingPTP/EEPSBloomberggrowthCorrel: 47%45ExxaroBuyZAR1655.321%EXX SJ40Glencore plcBuyZAR61.019-30%GLN SJ35Polymetal IntBuy22.01475%POLY LNFigure 1: Chinas new TSF ex equity vs EM MaterialsFigure 2: Most favoured stocks800700600PolyusBuy$13020-16%PLZL LIJul

11、-12Jul-13Jul-14Jul-15Jul-16Jul-17500Philip Finch Strategist HYPERLINK mailto:philip.finch philip.finch+44-20-7568 3456Alexey OstapchukStrategist HYPERLINK mailto:alexey.ostapchuk alexey.ostapchuk+44-20-7567 0239Bhanu BawejaStrategist HYPERLINK mailto:bhanu.baweja bhanu.baweja+44-20-7568 6833Daniel M

12、ajorAnalyst HYPERLINK mailto:daniel.major daniel.major+44-20-7568 3472James KanAnalyst HYPERLINK mailto:james.kan james.kan+852-2971 6334Andreas BokkenheuserAnalyst HYPERLINK mailto:andreas.bokkenheuser andreas.bokkenheuser+1-212-713 9516Yong-Suk Son, CFAAnalyst HYPERLINK mailto:yongsuk.son yongsuk.

13、son+82-2-3702 8804Tim BushAnalyst HYPERLINK mailto:tim-d.bush tim-d.bush+852-2971 6113Shilan ModiAnalyst HYPERLINK mailto:shilan.modi shilan.modi+27-11-322 7302400300Jul-08Jul-09Jul-10Jul-112003025Southern CopperBuy$49.032-24%SCCO US20POSCOBuy270,00024-62%005490 KS15Zijin Mining (A)BuyCNY7.6338.9%60

14、1899 CHJul-18Jul-19Jul-2010ValeBuyR$13.06.625%VALE3 BZSource: Macrobond, MSCI, Datastream, UBSSource: Reuters, UBS estimates HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 29. UBS do

15、es and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment

16、decision.EM MaterialsUBS Research THESIS MAP MOST FAVOUREDLEAST FAVOUREDExxaro, Glencore, Polymetal, Polyus, POSCO, Southern Copper, Vale, Zijin MiningChina Shenhua Energy, Ganfeng Lithium, Maanshan Iron & SteelPIVOTAL QUESTIONSQ: How strong has the recent recovery in materials markets been?We are s

17、eeing a robust China-driven recovery virtually across the board. Our virtual China trip has pointed to 10% y/y growth in infrastructure FAI in H2 2020, and Chinese property investment is set to achieve full-year growth of 7% in 2020. In Korea and Taiwan, steel producers have begun hiking their price

18、s, with POSCO raising export prices by 20-30% from July. Copper and iron ore prices have rallied above pre-Covid-19 levels, but this has been partly driven by supply disruptions, not just a demand recovery. In contrast, thermal coal has lagged the commodity rebound, partly attributable to concerns a

19、bout Indias growth prospects. We still expect 50% growth in NEV sales this year, supported by positive surprises in the Q2 results of the major battery makers in Korea.Q: What is the longer-term structural outlook for EM Materials?A shift from Material to Intellectual is one of the Seven Megatrends

20、that we see as being accelerated by the Covid-19 pandemic. Underneath that, we anticipate three major structural changes: (1) clean energy, (2) recycling of metals, and (3) changing mobility patterns. On #1, clean energy is set to reduce demand for thermal coal after peaking in the next three to fiv

21、e years. On #2, by 2030, scrap steel may account for over 40% of overall steel supply in China vs 20-25% currently. We also expect more recycling in aluminium, copper, and even cobalt and lithium. #3 is driven by the rising penetration of 5G networks and electric vehicle sales, which should benefit

22、lithium, cobalt, nickel, copper and aluminium. That said, we think the outlook for battery makers is clearly positive, as we forecast the share of NEVs in total auto sales to quadruple to 16.6% by 2025, with the five largest global battery makers capturing c84% of the market. In contrast, we are str

23、ucturally bearish on iron ore medium term, with Brazilian supply expected to recover and the price well above the cost curve.Q: What is happening on the ESG front?ESG considerations have long been a key headwind to the commodity sectors, but recent incidents, such as Norilsk Nickels fuel spill in la

24、te May and Vales tailings dam spill last year have heightened investor concerns. While we see some progress by EM Materials companies on the ESG front, we think it is still early days in the ESG improvement journey for EM Materials stocks and that the pathway to achieving carbon neutrality is unclea

25、r.UBS VIEWWe remain Underweight EM Materials. The correlation between Chinas new total social financing ex equity and EM Materials index is maximised with a seven-month lag. This time, however, we do not expect this template to hold, as we believe all tailwinds have already been priced as if they ar

26、e set to persist significantly longer than we think they will.EVIDENCEMSCI EM Materials 2020E EPS growth and its sub-sector drivers105%33%2020E EPS growth (y/y)2019 earnings-based weight (RHS)-23%-26%-26%-9.4% -11%-6.0%243%155%-1.0%14%40%30%20%10%0%-10%-20%-30%GoldPrec Met & MinrlChemicalsConstr Mat

27、EM MaterialsMetals & MiningCopperSteelAluminum-40%70%60%50%40%30%20%10%Ppr & Frst Prod0%Div Met & MiningCont & PkgSource: IBES, MSCI, Datastream, UBS. Note: Light brown bars indicate GICS industries and yellow bars indicate GICS sub-industries.ContentsTOC o 1-1 h z u HYPERLINK l _TOC_250005 Part 1:

28、Sector overview 4 HYPERLINK l _TOC_250004 Part 2: Demand recovery, supply constraints and risks 11 HYPERLINK l _TOC_250003 Part 3: Long-term structural outlook 18 HYPERLINK l _TOC_250002 Part 4: Signs of ESG improvements 22 HYPERLINK l _TOC_250001 Part 5: Sector stance and top picks 23 HYPERLINK l _

29、TOC_250000 Part 6: Q&A 25We would like to thank Sagarika Asrani and Sonam Jagga, our research support service professionals, for their assistance in preparing this research report.Part 1: Sector overviewFigure 3: Performance of MSCI EM and its sectors since the 2020 EM trough77%65% 65% 63% 60% 60%52

30、%45% 41% 39% 39%36%26% 24% 24%80%70%60%50%40%30%20%10%Metals & MinMaterialsHealth CareChemicalsInfo TechCons DiscEnergyEMIndustrialsConstr MatComm SvsCons StaplesReal EstateUtilitiesFinancials0%A shift from Material to Intellectual is one of the Seven Megatrends that we see as being accelerated by t

31、he Covid-19 pandemic. However, EM Materials have recorded stronger post-bear- market returns than their new economy peers, with the EM Metals & Mining industry beating Health Care, and Chemicals outperforming Tech and Consumer Discretionary.Source: MSCI, Datastream, UBS. Note: 23 March, 2020 was the

32、 market trough date.Figure 4: Relative performance of EM Materials and its major industries vs MSCI EM EM Materials vs EM EM Chemicals vs EMEM Metals & Mining vs EMEM Construction Materials vs EM11010510095908580757065Jan-19Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20 Source: MSCI, Datastream, UBS. Note: Re

33、based to 100 on 31 December, 2018.Figure 5: YTD return decomposition of EM and DM natural resourcesP/EDividendsCurrencyEarningsTotal return (USD)80%60%40%20%0%-20%-40%DM Metals & MinDM MaterialsDM ChemicalsDMEM Constr MatEM Metals & MinEM MaterialsEMEM ChemicalsDM Constr MatEM EnergyDM Energy-60%Sou

34、rce: MSCI, Datastream, UBSHowever, from a longer-term 1.5- year perspective, EM Materials has lagged the MSCI EM benchmark by more than 10%. Looking at the components within the sector, (1) EM Chemicals stands out as the largest underperformer, (2) Construction Materials has been the most resilient,

35、 although it lagged on the recent recovery, while (3) Metals & Mining has been the most volatile through the Covid-19 shock.This chart shows the drivers of the YTD performance of several sub-sectors within the EM and DM natural resource space. Both in EM and DM, Materials has held up better than Ene

36、rgy as the latters earnings contraction has been more pronounced. Valuation re-rating has been the key support for share prices everywhere, with the exception of Construction Materials, whose earnings, however, have been the most resilient, both in EM and DM.Figure 6: Weighting of Materials sector i

37、n MSCI EM and MSCI World (DM)EMDM16%14%12%10%8%6%4%20102011201220132014201520162017201820192020Materials makes up a larger proportion of the MSCI EM benchmark than it does of the MSCI World (DM). In both cases, the weighting of Materials troughed in early 2016, which coincided with the low for the o

38、verall market. Since then, the sector has been largely unable to rebuild its index weighting in either EM or DM, hovering at around half of its respective post- GFC peaks.Source: MSCI, Datastream, UBSFigure 7: Weighting of industries within MSCI EM MaterialsWithin the EM Materials sector, Metals & M

39、ining has always been,16%14%12%10%8%6%4%2%0%EM Containers & PackagingEM Paper & Forest Products EM Construction MaterialsEM ChemicalsEM Metals & Miningand still is, the dominant industry. However, the underperformance of the EM Metals & Mining names since the crisis has reduced the industrys weighti

40、ng by around two-thirds. Other industries within the EM Materials space have largely maintained their index weightings.Vale, LG Chemical and Anhui20102011201220132014201520162017201820192020Source: MSCI, Datastream, UBSFigure 8: Largest EM Metals & Mining, Chemicals and Construction Materials stocks

41、Conch Cement represent about 20% of the EM Metals & Mining, Chemicals and Construction Materials industries, respectively.Others 15%CRC 5.1%CNBM 8.9%UltraTech 9.3%Siam Cement 14%Conch 17%FCFC 5.7%FPC 7.0%NYP 7.4%SABIC 14%LG Chem 19%Others 39%Vale 19%Others 31%Norilsk Nickel 7.9%POSCO 5.9%Anglogold 5

42、.5%GFI 5.0%Grupo Mexico 3.7%Polyus 3.7%China Steel 3.6%Implats3.5%Sibanye3.2%Asian Paints 4.6%Saudi Arab Fert 3.0%Sasol, 2.9% Yanbu Natl PetrochemEM Metals & Mining 2.4% Soquimich 2.4%EMChemicalsTaiwan Cement 11%CEMEX Local 8.0%Asia Cement 4.7%Shree Cement 3.7%Grasim Industries 3.7%EMConstruction Ma

43、terials0%10%20%30%40%50%60%70%80%90%100%Source: MSCI, Datastream, UBS. Note: Weight of LG Chem is the sum of its ordinary and preference shares; weight of Conch is the sum of its A-shares and H-shares.Figure 9: MSCI EM Materials vs EM: 12m forward EPS growth 60%MSCI EM MaterialsMSCI EM50%40%30%20%10

44、%0%-10%-20%86%ile68%ileConsensus expects EM Materials to post 33% EPS growth in the next 12 months. While we expect 2021 EM EPS forecasts to be revised down, it is important to note that such expectations for EM Materials are highly elevated in a historical context it is in the top quintile of the l

45、ong-term distribution of the 12-month forward EPS growth estimates for the sector. A significantly00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20Source: IBES, MSCI, Datastream, UBSstronger pace of economic recovery is needed for such forecasts to crystallise, we think.Figure 10: MSCI

46、EM Materials 2020E EPS growth and its sub-sector drivers105% 33%2020E EPS growth (y/y)2019 earnings-based weight (RHS)14%-1.0%-6.0% -9.4% -11%-155% -243%-23% -26% -26%40%30%20%10%0%-10%-20%-30%GoldPrec Met & MinrlChemicalsConstr MatEM MaterialsMetals & MiningCopperSteelAluminumDiv Met & MiningCont &

47、 PkgPpr & Frst Prod-40%70%60%50%40%30%20%10%0%In 2020, the Gold and Precious Metals & Minerals sub-industries stand out as the oases of strong growth amidst sharp earnings contraction expected this year almost everywhere else within the EM Materials space. Chemicals is another exception, with a 14%

48、y/y consensus EPS growth projection.Source: IBES, MSCI, Datastream, UBS. Note: Light brown bars indicate GICS industries and yellow bars indicate GICS sub-industries.Figure 11: YTD performance of key commodity prices52%38%29%11% 8.3% 6.7% 4.1% 4.1%2.4%-0.9% -2.8% -4.4%-15%-31% -32%60%50%40%30%20%10%

49、0%-10%-20%-30%SilverIron OreGoldPalladiumH-HubZincCopperNickelLeadPlatinum-40%Remarkably, the prices of most major commodities are now up YTD. We find it surprising, if not alarming, given still-subpar levels of economic activity, new waves of Covid-19, potentially peaking monetary and fiscal stimul

50、i, trade uncertainty and Chinas transition from an investment- to a consumption-driven economy.AluminiumAluminaThermal CoalOil - WTIOil - BrentSource: Bloomberg, UBSFigure 12: 12-month forward P/E premium/discount vs MSCI EM: Major industries within MSCI EM MaterialsMSCI EM Chemicals 12m fwd P/E pre

51、mium/discount to EM Average (Chemicals)MSCI EM Construction Materials 12m fwd P/E premium/discount to EMGiven its superior earnings outlook, EM Chemicals are trading at the highest P/E valuation premium vs MSCI EM100%80%60%40%20%0%-20%-40%Average (Construction Materials)MSCI EM Metals & Mining 12m f

52、wd P/E premium/discount to EM Average (Metals & Mining)091011121314151617181920since the GFC. In contrast, EM Metals & Mining and Construction Materials are hovering around the widest post-GFC P/E discounts vs the EM benchmark.Source: MSCI, Datastream, UBSFigure 13: Trailing P/BV premium/discount vs

53、 MSCI EM: Major industries within MSCI EM MaterialsMSCI EM Chemicals P/BV premium/discount to EM Average (Chemicals)MSCI EM Construction Materials P/BV premium/discount to EM Average (Construction Materials)MSCI EM Metals & Mining P/BV premium/discount to EM Average (Metals & Mining)60%40%20%0%-20%-

54、40%-60%091011121314151617181920Source: MSCI, Datastream, UBSFigure 14: MSCI EM Materials 12m trailing EPS level vs Bloomberg Commodity IndexA P/BV valuation comparison reveals a different picture than the one based on P/Es above. Of the three major industries within EM Materials, Chemicals appear th

55、e least discounted vs MSCI EM based on P/BV, but this compares with a historical average premium of 8.1%. EM Construction Materials trade at an only slightly wider than average P/BV discount to the broad EM Index, while Metals & Minings P/BV discount is actually smaller than average.EM Materials 12-

56、month trailing EPS has retreated 71% from its6050403020100-1000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20240Bloomberg Commodity Index (RHS) MSCI EM Materials 12m trailing EPS-71%Correl: 62%2202001801601401201008060all-time peak. The 2011-16 sector earnings decline coincided with a

57、persistent downtrend in commodity prices. The subsequent rebound in EPS took place against a background of largely stalling commodity prices. It is now being reversed, and we expect this trend to continue in the coming months.Source: MSCI, Datastream, Bloomberg, UBSFigure 15: Chinas New TSF ex equit

58、y vs EM MaterialsMSCI EM Materials IndexNew TSF ex equity (3mma)/quarterly GDP (RHS, advanced 7 months)Correl: 47%800700600500400300Jul-08Jul-09Jul-10Jul-11Jul-12Jul-13Jul-14Jul-15Jul-16Jul-17200Source: Macrobond, MSCI, Datastream, UBSFigure 16: Mobility trends in major EM and DM marketsTaiwanCurren

59、t % change from baseline (7-day average)Chinas credit expansion and a weaker USD have helped EM55Cyclicals, such as Materials stocks.50Historically, the impact of the45former factor lasted for several40months, as evidenced by the35correlation between Chinas new30total social financing ex equity25and

60、theEMMaterialsIndex20maximising with a seven-month15lag. This time, however, we doJul-18Jul-19Jul-2010 not expect this template to hold, as we believe all tailwinds have already been priced as if they are set to persist significantly longer than we think they will.Mobility in both EM and DM remains