China Technology SectorOutlook 2022: Prefer NEV and Metaverse beneficiariesTechnology | ThemeA comprehensive analysis of NEV/Metaverse implications for HK/China tech coverage.Figure 1: Automotive electrification, as a major theme, driving more tech contentSource: Audi, Credit Suisse NEV and Metaverse lead upgrade trends. NEV is an inevitable megatrend with rising electrification and information technology. The CS Global Autos team forecasts the global NEV (PHEV+EV) sales volume to see a 31% CAGR over 2020-30 to reach 44.7 mn units in 2030, and China NEV sales volume to see a 29% CAGR to 16.0 mn units over 2020-30 and reach a 66% penetration rate, accounting for 36% of global NEV sales. We have identified seven segments that benefit from this mega trend, including (1) auto display panel, (2/3) ADAS (camera/LiDAR), (4) connectivity, (5) glass enhancement, (6) semiconductor, and (7) PCB, totaling potential TAMs of US$140 bn/US$53 bn globally/in China. The second key theme is Metaverse which drives AR/VR demand, and we forecast AR/VR headset to grow at a 48% CAGR from 2020 to reach 42 mn units by 2025. Apple's MR/AR could be released in 2H22 or 1H23 as well as Sony Gen2 PSVR as positive drivers on top of Meta Oculus.Risk-reward in A-share tech amid macro/regulatory risks. We see A-share tech coverage trading at the historical average of 27.5x F12M consensus P/E vs H-share tech trading at a +1 SD historical average of 21.0x (led by Sunny Optical likely), suggestingattractive risk-reward valuation in A-share tech, given structural growth opportunities.Our top picks. These include Will Semi (auto, chip tightness) for semis; Sunny Optical(iOS/auto/ARVR), Luxshare (iOS content gain/MR), GoerTek (upgrade to an OUTPERFROM on better ARVR outlook), and Lens Tech (auto/iOS content gain) for hardware/components; BOE (foldable, auto, mini-LED) for display; Inspur (server) and ZTE (5G) for infrastructure; and Yonyou (SaaS) behind the Digital China push. We also upgrade O-film to NEUTRAL on the auto rerate, and downgrade both SCC and Tianmato NEUTRAL on valuation and share loss, respectively.3 January 2022Equity ResearchAsia Pacific | ChinaDISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does 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 decision. Research AnalystsKyna Wong852 2101 6950kyna.wong@credit-suisse.comChaolien Tseng852 2101 6795chaolien.tseng@credit-suisse.comClive Cheung852 2101 7069clive.cheung@credit-suisse.comTimothy Chau852 2101 6833timothy.chau@credit-suisse.com
3 January...
