2022-03-17-瑞士信贷集团-CS工业路演的主要议题_23页_1mb

U.S. Industrials Roadshow Summary

Core Content

This report outlines key investment themes and stock recommendations from the Credit Suisse Industrials Roadshow, focusing on the impact of geopolitical events (Russia/Ukraine conflict), prolonged inflation, increased defense spending, and the strengthening of global industrial metals. It also evaluates the exposure of various companies to European and Chinese markets and highlights valuation methodologies and associated risks.

Main Investment Themes

1. Increased Oil and Gas Cap Ex

• Market Context: Russia is the third-largest oil producer and a major natural gas exporter, supplying ~10% of global oil and gas demand. The U.S. is expected to increase oil and gas production due to global supply constraints.
• Stock Picks: GTLS, FLS, FLR, MTZ, EMR, CAT
• Key Points:
  • Rising oil and gas prices due to geopolitical tensions.
  • Increased capital expenditure in the sector.
  • Companies like GTLS and FLR benefit from the surge in LNG infrastructure demand.

2. Strengthening Global Industrials Metal

• Market Context: Russia produces ~4% of the world's copper, ~5% of aluminum, ~9% of nickel, and ~43% of palladium. Nickel and steel prices have surged due to supply concerns.
• Stock Picks: CAT, FLR, CMI
• Key Points:
  • Rising commodity prices are reshaping the medium-term outlook for the steel industry.
  • Companies with high exposure to mining and industrial metals are preferred due to their ability to benefit from price increases.

3. A Stronger For Longer AG Cycle

• Market Context: Russia and Ukraine account for 29% of global wheat exports and 14% of corn exports. Fertilizer and energy costs are rising, impacting farmer profitability.
• Stock Picks: DE, AGCO
• Key Points:
  • Continued elevated commodity prices and demand for Precision Ag technologies.
  • DE is a leader in farm equipment and has strong pricing power.
  • AGCO is a pure play on farm equipment with strong presence in South America and Europe.

4. Increased Defense Spending

• Market Context: The Russia/Ukraine conflict has led to increased defense spending globally, including the U.S., Germany, and Sweden.
• Stock Picks: KBR, J, HON, ETN, GE
• Key Points:
  • Companies with exposure to international defense and intelligence solutions are favored.
  • Increased spending on European infrastructure from U.S. and allies is expected.

5. Prolonged Inflation

• Market Context: The S&P GSCI Commodity Index has risen 25% YTD, with oil, palladium, and stainless steel seeing significant gains. Tight labor markets persist.
• Stock Picks: JCI, TT, CARR, LII, CAT, DE, PH, ROK
• Stock Risks: GTLS, FLS, MTW, TEX, OSK, XYL
• Key Points:
  • Companies with strong pricing power and cost pass-through capabilities are preferred.
  • HVAC and automation companies are likely to benefit from inflation-driven demand.
  • Risks include companies with limited ability to reprice backlog or high exposure to raw material costs.

6. Flight to Quality

• Market Context: Quality stocks are favored as investors seek safe haven assets amid geopolitical uncertainty. Quality names trade at a 94% premium to deep cyclicals, up from a 5-year average of 64%.
• Stock Picks: HON, PCAR, DE, ITW, FTV, OTIS
• Key Points:
  • Companies with strong balance sheets, margins, and returns are preferred.
  • These names are seen as more resilient during economic downturns.

7. European and China Exposed Names

• Market Context: Geopolitical tensions and China's lockdowns may impact supply chains. European markets are expected to slow due to high energy prices.
• Stock Picks: AGCO, FLS, OTIS, GTLS, IR, PCAR, ITW (Europe); CMI, DD, OTIS, FTV, EMR, GTES, CAT (China)
• Key Points:
  • Companies with significant exposure to Europe or China face both opportunities and risks.
  • Investors may prefer U.S.-centric companies to mitigate European and Chinese market risks.

Key Stock Highlights

Risks and Considerations

• Inflation Risks: Companies with limited ability to pass through costs or high exposure to raw materials face downside risks.
• Geopolitical Risks: European and Chinese market exposure introduces uncertainty due to energy prices and lockdowns.
• Execution Risks: Integration of M&A, project delays, and supply chain issues can affect performance.
• Market Volatility: Cyclical nature of some sectors may lead to performance fluctuations.
• Regulatory and Government Spending: Changes in regulations and government budgets can impact demand and margins.

Valuation Methodology

• Target Price and Rating are based on multiples of EBITDA, EPS, and sales, adjusted for growth expectations and risk profiles.
• Discounting is applied to future estimates to reflect current market conditions and long-term growth potential.
• Risks are evaluated alongside target prices to provide a balanced view of investment potential.

Conclusion

The Credit Suisse Industrials Roadshow identifies several key themes impacting the sector, including increased energy and mining investment, prolonged inflation, rising defense spending, and a flight to quality in uncertain times. The report highlights companies with strong exposure to these themes and evaluates their potential based on valuation, growth, and risk factors. Investors are advised to consider these factors in conjunction with broader macroeconomic trends and geopolitical developments.