Have you boarded the new energy train?

From the end of April to the present, the new energy sector has been the vanguard of the rebound. Data shows that from April 27th to June 30th, the new energy vehicle index rose by nearly 70%, the photovoltaic inverter index increased by over 90%, and the energy storage index also rose by more than 70%.

Missing out on this rebound feels like missing out on the whole world. However, with the new energy sector having rebounded so much in the first half of the year, is it still possible to get on board now?

01 New energy still has tremendous development opportunities.

In terms of the essence of the sector, the new energy sector is still quite growth-oriented. Under the clear guidance of dual carbon goals, it is highly likely that the new energy sector will continue to flourish in the next 5-10 years.

Is the new energy sector expensive now?

On one hand, the rise since the end of April is mainly a rebound after the previous significant decline, which is a valuation repair.

At the beginning of the year, the market's risk aversion decreased, and high valuation growth sectors generally went through a round of selling off; not long after, risks such as the Russia-Ukraine conflict, Federal Reserve rate hikes, and sudden domestic outbreaks emerged, causing doubts about the growth expectations of new energy sector-related companies, leading to another round of selling off. During that period, the entire sector's decline was close to 50%.

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In this light, the recent rise is merely filling the gap left by the previous decline.

On the other hand, the new energy sector remains a policy beneficiary sector with promising development prospects.New energy is a vast sector that encompasses several burgeoning fields such as wind power, energy storage, photovoltaics, and new energy vehicles, each with robust vitality and policy support. It is highly likely that new energy will be one of the most exciting industrial directions in the next decade.

Take new energy vehicles as an example. The domestic "New Energy Vehicle Industry Development Plan (2021-2035)" has set a clear development goal: by 2025, the sales volume of new energy vehicles should reach around 20% of the total sales volume of new cars. In 2021, this figure had just surpassed 13%, indicating that there is still significant room for growth.

In addition, the authorities have spared no effort in providing purchase subsidies and tax exemptions for new energy vehicles. On May 31st, a new round of the new energy vehicle campaign in rural areas was officially launched.

It is worth mentioning that BYD, a representative of new energy vehicles, has shown a fierce development momentum. In the first half of 2022, its new energy vehicle sales volume surpassed Tesla, capturing the sales championship.

High growth potential can digest high valuations. Compared to the development potential of the new energy sector, its valuation becomes acceptable and understandable.

02 The growth path of emerging sectors is certainly not smooth sailing.

Currently, after this year's valuation correction and rebound, the price-to-earnings ratio of the new energy sector has reached a level of 41.50 times, very close to the historical median. From a valuation perspective, the sector is not cheap.

Of course, the industrial trend of the new energy sector remains positive, and the risk of a systemic decline is not high. However, at the current valuation level, the future profit margin will undoubtedly be difficult to exceed that of the past two years, and everyone should lower their return expectations.

Moreover, the development of the new energy sector will inevitably be tortuous and fluctuating, which is reflected in the high volatility characteristic of the sector. Therefore, when allocating funds with a new energy theme, it is essential to do so based on one's risk tolerance and use idle money for investment. Attention should also be paid to building a fund portfolio to enhance the flexibility of fund holdings.

Overall, the new energy sector is worth investing in. However, considering the current situation where it has rebounded by more than 50%, investors should balance risk and return and are advised to opt for fund regular investment plans.On one hand, fixed investment has less dependence on timing and lower operational requirements, making it a relatively optimal solution for practicing long-termism. On the other hand, the high growth and high volatility characteristics of thematic funds can also better leverage the role of fixed investment in averaging costs.