The industries affected by the epidemic can be generally divided into three categories:

The epidemic has a great impact on the demand side of optional consumer goods in the short term. During the Spring Festival, the sales area of real estate decreased by 86.19% year-on-year. It is estimated that the sales of automobiles will decrease by more than 15% in the first quarter, the sales of mobile phones will decrease by 21-31% in the first quarter, and the box office of movies will be only 21 million (last year's Spring Festival box office was 5.8 billion).

the epidemic situation is the main factor leading to the decline. At present, the epidemic situation has not been completely controlled, and the impact on these industries in the medium and long term is still difficult to judge. In accordance with the principle of prudence, we have basically lowered the annual forecasts for these industries, generally by 5±3pct, with the largest decline in movie box office, reaching 11pct.

according to these phenomena, catering, tourism, hotels and other industries that we have not tracked but are closely related to optional consumption will be obviously affected.

This influence can be divided into two aspects: transportation capacity and production capacity. As Hubei is located in the hinterland of the Central Plains, the impact on transportation capacity will be greater than the production capacity.

transportation capacity bears the brunt of the negative impact on express delivery enterprises. Secondly, the building materials industry in Hubei province has also been greatly affected; In terms of production capacity, if the epidemic can be controlled as soon as possible, the overall recovery of national production capacity will be delayed by 21 days to one month, but the recovery time of industries with relatively high production capacity in Hubei or with great influence of Hubei enterprises may be further delayed, including PCB manufacturing (Hubei production capacity accounts for 11-15%), automobile manufacturing (Hubei production capacity accounts for 8-9%) and some high-end manufacturing industries.

it is worth pointing out that the impact on the production capacity of the optical communication equipment industry, which is a prominent enterprise in Hubei, is not obvious, mainly because the relevant enterprises have sufficient inventory (1-3 months) in order to stock up 5G in the early stage, and the relative impact is relatively small.

Medical supplies, online videos, games, online medical care, fresh e-commerce, online education, online office, online medical care, online education, third-party IDC, etc. will all benefit from this.

In the short term, the demand for medicines and medical materials related to the epidemic has increased substantially, while the demand for non-epidemic medicines has been suppressed. We believe that the epidemic has little long-term impact on the pharmaceutical industry.

benefiting from the obvious increase in online consumption, it is estimated that the data traffic of the whole network during the Spring Festival this year will change the downward trend of the previous Spring Festival period, with a growth rate of about 51%. During the Spring Festival, the average daily active users of the glory of the king and Peace Elite online games increased by 61-111%. Lost in Russia changed from cinema premiere to online premiere, laying a foundation for short video companies to open up new business areas.

After the holiday, the demand for online education and online office has increased greatly, which may be as high as dozens of times because of the low monthly living before, and it is conducive to changing users' long-term consumption habits.

Short-term impact

1) For epidemic-related products, the sales volume in January increased significantly compared with previous years;

2) For unrelated products, the order volume declined due to the delay of hospital purchase plan and patients trying to avoid going to the hospital during the epidemic period;

3) The overall impact needs to be further evaluated according to the development of the epidemic situation. At the initial stage, the diagnosis and treatment products, pharmacies, consultation platforms, medical circulation and medical information sectors will benefit relatively.

Medium-and long-term impact

1) During the epidemic period, the sales of some equipment, consumables and medicines increased rapidly, but the shortage of goods made enterprises increase their investment in overtime labor and raw materials. In addition, the number of other medical institutions decreased in stages, and the impact of traffic control and logistics restrictions on product sales required comprehensive consideration.

2) In the long run, the domestic pharmaceutical industry will continue to develop under the guidance of policies such as medical insurance cost control and graded diagnosis and treatment.

business opportunities

1) In the short term, due to the impact of the epidemic, the funding gap of various enterprises has increased, so we can pay attention to the short-term financing of epidemic-related products enterprises and the demand for project loans;

2) In the medium and long term, the overall development logic of the industry will remain unchanged after the end of the epidemic, focusing on cooperation opportunities such as innovation, CXO, specialty chain, medical information enterprise funds and mergers and acquisitions;

3) in the long run, the progress of graded diagnosis and treatment may be accelerated, and attention should be paid to the potential cooperation opportunities in the necessary links of medical resources sinking, such as distributors and remote consultations.

Risk

1) After the epidemic, the performance of enterprises producing epidemic-related products will be adjusted back;

2) The epidemic lasted longer than expected, and the recovery of production and R&D of non-epidemic-related products enterprises was delayed, and the risk increased;

3) The recovery of routine hospital departments, the increase of enterprise capacity and orders are less than expected.

Short-term impact

1) Demand side: Mobile phones have certain optional consumption attributes. Under the current situation that offline channel sales are still dominant, the panic caused by the epidemic and the frequency of going out are reduced, which inhibits some consumers' demand for changing phones. The epidemic will lead to the economic downturn, which will lead to the decline of some consumers' income or even unemployment, and the decline of their spending power, which will further affect the consumption of mobile phones. We expect that the domestic mobile phone shipments in 2121Q1 may decline by 21-31%.

2) Supply side: The local mobile phone assembly capacity in Hubei is less, but the provinces around Hubei such as Henan, Jiangxi and Hunan have the main production bases of mobile phone industry chain companies such as Foxconn, Shenzhen O-film Tech Co.,lt and Lansi, and the provinces with the highest number of confirmed virus infections such as Guangdong and Zhejiang are also the main mobile phone industry chain bases. At the same time, the automation level of mobile phone industry chain companies is generally not high, and the number of employees is large. From the current epidemic situation, the return to work of many enterprises has been affected, which may have a significant impact on the global mobile phone industry chain. After Covid-19 is declared as a global emergency by WHO, whether it will have an adverse impact on exports will be followed up. At present, the transportation capacity of many places in China has been greatly affected, and the transportation time of some raw materials has been extended, which is worthy of attention.

3) The epidemic may also affect the release and shelf rhythm of major brands of 5G mobile phones. Xiaomi Group announced on the 4th that Xiaomi 11 mobile phone will be released online instead of offline. Attention should be paid to the release of major brand products of MWC at the end of February.

Medium-and long-term impact

Considering the impact of the epidemic, we lowered our previous forecast, and predicted that the domestic smartphone shipments will drop from about 1% year-on-year growth to 5% year-on-year decline in 2121. In the long run, the epidemic has little impact on the development of the mobile phone industry.

business opportunities

it is suggested to increase support for head mobile phone brands and mobile phone parts enterprises.

Risk

Pay attention to the business risks and financial risks caused by the epidemic in enterprises with high debt ratio and high capital expenditure, such as OEM/EMS.

Short-term impact

1) Demand side: offline entertainment such as movies has stagnated, while online entertainment such as games, online videos, short videos, live broadcasts and music has greatly increased. The epidemic has led to the closure of cinemas. The box office of the Spring Festival in 2121 is 21 million (vs. 5.8 billion in 2119), and the box office in February is expected to be 11 million (VS.2119 billion in February 2119). Considering that the epidemic situation has been suppressed in March, it is estimated that the box office of the whole year will be about 57 billion, down by 11 points year-on-year.

2) supply side: the production of content is stagnant, and the way of broadcasting movies and programs is innovative. The shutdown of the TV drama shooting crew led to the digestion and broadcasting of the "backlog drama" inventory in the previous two years; Individual movies are turned from offline cinema to online broadcasting; The recording of entertainment programs was suspended, and some TV stations tried to innovate by live connection.

medium and long-term impact

1) The closure of cinemas may accelerate the reshuffle of cinemas;

2) The medium-term broadcast pattern of large-scale movies will not be changed on the Lost in Russia file transfer line, and the main constraints of online cinemas are the terminal's ability to pay, and the limited effects presented by the network and terminal equipment;

3) The film and television crew stopped working, the supply side of TV series was further cleared, and the production and broadcasting mode of head production+binding online video platform became more universal;

4) Although the inventory of "overstocked dramas" has been digested in the short term, it is more noteworthy that in the medium term, high-quality content is more scarce.

business opportunities

1) It is suggested to closely follow the opportunities of cinema integration this year and next, and pay attention to the risks of cinema capital chain in low-tier cities;

2) In the context of the general shutdown of the crew, more financial support will be given to the clients of the head content production enterprises;

3) Offline entertainment is migrating to online, and it is suggested to increase business support for online head platforms, including online video, short video and live broadcast;

4) In the medium and long term, early software and hardware opportunities related to online and offline integration scenarios such as VR/AR can be laid out in advance.

Risk

The refinancing risk of related enterprises caused by long-term shutdown;

regulatory risks of content/platform, such as uncertain release of produced or purchased works.

To be continued ...

The copyright of this article belongs to the asset management department of China Merchants Bank.