Shulou(Shulou.com)11/24 Report--

As 2024 approaches, major securities firms and public offerings have focused on investment opportunities for next year and issued 2024 annual strategy reports one after another. According to this year's market, 2023 is a big year of science and technology. AI, 5G, Internet of Things, big data and other technologies are becoming more and more mature, which promotes the vigorous development of China's digital economy, but also makes the science and technology plate with AI track as the core highly sought after by funds. Looking ahead to 2024, where are the new investment opportunities? Which stocks deserve attention? Will AI and its derived tech stocks continue?

Looking for certainty in uncertainty

Since the beginning of this year, China's economic situation has continued to recover, showing a good trend of recovery, but reflected in the investment level, the overall market situation is weak shock state, but, the science and technology industry market is against the trend to good, widely favored by funds. For example, the Wandeguang Module Index rose about 134% from the beginning of the year to the close of November 9, the AI calculation index rose about 64%, the server index rose more than 55%, and the digital twin index rose 40%. In addition, from the Hong Kong stock market, mainly consumer electronics industry performance is strong, terminal equipment each segment plate rose first. Data show that year-to-date, Hong Kong stock smart terminal index rose nearly 50%, smart wear index rose 38%.

On the whole, the capital mainly focuses on the opportunities in the technology industry, especially AI and electronics, which attract a large amount of capital inflow. In fact, with the outbreak of emerging technologies represented by AI technology, the market is generally optimistic about the prospects brought about by AI-related technology changes, especially the accelerated development of AI large model wave, which makes the AI computing power demand of core power grow exponentially, and then drives the computing power plate to continue to be active.

The main line of consumer electronics reflects the consensus formed by the market on the expectation of recovery of upstream and downstream industrial chain of consumer electronics. On the one hand, this consensus benefited from the policy level actively promoting the expansion of domestic demand, promoting consumption and boosting the consumer electronics industry upward. On the other hand, under the catalysis of new technologies such as AI, consumer electronic products will enter into the consumption upgrading from "having" to "excellent," thus stimulating consumers 'demand for upgrading consumer electronic products.

Looking ahead to 2024 opportunities, will the technology industry continue? In this regard, Everbright Securities, Open Source Securities and other securities investment banks in 2024 investment strategy focus on Hong Kong stock market, think next year's opportunity still mainly grasp consumer electronics recovery and AI two main lines.

According to the investment thinking of major investment banks, the opportunity in 2024 is mainly to find certainty from uncertainty. First of all, from the perspective of capital, as far as the Hong Kong stock market is concerned, since the beginning of this year, the mainland southward capital has continued to flow into the Hong Kong stock market. By the beginning of 2023, the accumulated net inflow has reached HK $290.6 billion, and the turnover of southward capital participating in Hong Kong stocks has accounted for nearly 30%. From the perspective of capital layout, the industry ranked first in the market value of Hong Kong stocks held by southward funds is science and technology industry, reflecting the preference of funds for scientific and technological growth track.

In addition, Hong Kong stocks as an international market, its liquidity is not only affected by mainland funds, but also by international capital flows, with the recent trade environment to improve, and overseas suspension of interest rate hikes and other trends, international funds are expected to continue to flow in, promote Hong Kong stock liquidity improvement.

From the valuation level, the current valuation of Hong Kong shares is at a historical low. By the end of October 2023, Hang Seng Index and Hang Seng Technology Index PE (TTM) are 8.2x and 21.6x respectively, which are located at 1.9% and 0.7% water levels in recent five years/since their establishment, respectively, with configuration cost performance.

Based on the above background, Everbright Securities believes that the "policy bottom" of the current Hong Kong stock market has appeared, and the "market bottom" gradually evolves. With the injection of liquidity from internal and external funds, the subsequent waiting for the external capital pressure to gradually ease + the internal economic fundamentals to stabilize and recover, the Hong Kong stock market is expected to bottom out and pick up.

In Hong Kong stocks rebound trend, Everbright Securities suggested to pay attention to AI and consumer electronics recovery. Among them, AI main line will continue to increase with the popularization of AIGC application, and the rising trend of computing power demand will not decrease, and the heat of computing power plate will continue. In addition, as an infrastructure providing computing power, servers will drive the structural growth of AI servers, among which server manufacturers represented by Lenovo Group will have higher profitability due to their high proportion of enterprise-level customers and driven by scale effect. Open source securities said, AI plate short-term focus on computing demand driven hardware-related demand, long-term focus on edge AI intelligent interaction upgrade, such as AI PC, AIoT and so on.

Consumer electronics mainly focuses on the demand for mobile phones and PC upgrades, and the recovery prospect in 2024 is bright. In terms of mobile phones, the opportunities are mainly due to the upgrading of new products by major mobile phone manufacturers, the improvement of penetration rate of smart and 5G mobile phones in Southeast Asia, Africa and other regions, and the enabling of AI to mobile phone ecosystem.

In terms of PC market, according to IDC data, although the PC market has not fully recovered at present, the shipment volume in the first three quarters of this year has rebounded sharply, and the recovery trend is obvious. AI PC-level innovation is expected to bring broad opportunities for PCs, with Canalys predicting that 60% of PCs will be AI-compatible by 2027. Debang Securities believes that because PC already has a mature consumer market, AI PC market development time will be greatly shortened, growth explosive will be very strong.

It is worth mentioning that in the field of AI PC, Lenovo Group is leading the industry reform. At present, its AI PC has a clear product concept, which can fully meet the new generative AI workload demand. In addition, Lenovo Group's mobile phones, tablets, workstations and other intelligent terminals supporting personal large models are also ready to launch, thus helping Lenovo Group to start a new journey.

Intelligent strategy takes advantage of AI opportunity, Lenovo Group's resilience growth can be expected

At present, AI technology is still improving, and competition for large model tracks at home and abroad is also intensifying, pushing AI applications into deep water areas. The technology enterprises represented by Lenovo Group not only take computing power as the starting point to walk in the forefront of AI acceleration landing, but also under the general trend of consumer electronics recovery, intelligent innovation through brand-new AI PC can be expected in the future.

Benefiting from this, Lenovo Group has become one of the hot stocks in southward capital allocation since this year. Data show, South capital nearly 60 trading days continued to buy Lenovo Group net, As of November 9, South capital holds Lenovo Group 457 million shares, Shareholding ratio reached 3.78%.

Behind the continued optimism of the market is Lenovo Group, as a technology enterprise that has grown for more than 30 years, with the ability to adapt to the development cycle, find certainty from uncertainty and create value, as well as the ability to cross fluctuations and maintain resilient growth under complex challenges.

In recent years, based on the forward-looking judgment of technology development trends, Lenovo Group has anchored AI and computing direction, continuously transformed to service-oriented transformation and technology-driven innovation strategy, and created a new IT architecture covering all elements of "end-edge-cloud-network-intelligence" in this process, successfully completed the layout of 3S (intelligent equipment, intelligent infrastructure, solutions and services) products, solutions and services, and can provide customers with all-round full-cycle services.

On the way to AI development, Lenovo Group has now formed a new engine of diversified growth. According to Lenovo Group's first-quarter results report this year, the proportion of diversified businesses outside PC to overall revenue has further increased to more than 40%. Among them, ISG infrastructure solution business with AI and computing power as the core has strong growth in core products, such as AI hardware infrastructure-related business with year-on-year growth of 139%, ranking third in the world.

With the progress of AI technology, Lenovo Group's strategy is updated and upgraded accordingly. By cultivating AI PC and other AI embedded intelligent terminals, AI server and other AI-oriented infrastructure as well as AI native solution services, a new AI ecosystem is formed in an all-round and multi-dimensional manner, and the strategy of "AI for All" is launched to consolidate the background of its own growth and help more enterprises realize intelligent transformation.

As the core target of AI and consumer electronics industry, Lenovo Group is expected to achieve a higher level of performance in 2024 under the trend of consumer electronics recovery and AI accelerated application. In response, CITIC Lyon Securities, a big international bank, recently raised its target price from HK $10.1 to HK $11, leaving more than 17% room to rise from HK $9.08 closed the day before yesterday.

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