Private equity firms shift their March research focus, optimistic about the "abundance of opportunities and many players" in the science and technology innovation sector

Private equity research directions are quietly changing. The latest statistics from Privately Placed Funds Rank (Privately Placed Funds Rank) show that in March, 871 private equity firms participated in A-share research activities, with a total number of research visits of more than 2,700 times. Judging by industry distribution, the electronics sector has replaced power equipment as the sector with the highest number of private equity research visits, followed closely by the biopharmaceutical sector. At the same time, large-ticket private equity firms such as Victory Asset and Fountain Investments, both of which are at the billion-level, also appear to be especially fond of the electronics and biopharmaceutical sectors in March.

In the view of industry insiders, against a backdrop in which geopolitical conflicts in the Middle East have increased market volatility, technology innovation-related targets with high fundamental certainty and the ability to deliver steady growth will become a better choice for dealing with market uncertainties.

March’s private equity research frequency increased significantly

“Recently, fund managers and research analysts have been busy doing research, and the only sounds left in the office are from the colleagues in the sales and marketing department giving presentations.” A remark from a person in the market of a leading discretionary strategy private equity firm is a real snapshot of what private equity is currently doing—“turning over stones.”

The statistics show that in March, 871 private equity firms participated in A-share research activities, covering 343 companies across 27 first-level Shenwan industries, with a total research frequency of 2,752 times—up significantly from 704 times in February. Among them, as many as 54 billion-scale private equity firms participated in the research activities, with a total research frequency of 354 times.

A private equity founder in Shanghai, when interviewed by a reporter from the Shanghai Securities News, said that March is a month in which market volatility increases under intensified Middle East geopolitical conflict, but it is also a month when A-share financial reports are disclosed one after another. After many targets experience short-term disruptions, the investment value-for-money of these companies becomes even more prominent. Therefore, the company has recently stepped up its research efforts, hoping to seize an entry opportunity in which certain high-quality companies are “wrongly sold off” by market sentiment.

Electronics and biopharmaceutical sectors are favored

In terms of research focus, private equity firms are homing in on the electronics and biopharmaceutical industries at the same time.

According to Privately Placed Funds Rank statistics, in March the electronics sector became the most concentrated area for private equity research, with as many as 58 electronics companies receiving private equity research visits, totaling 592 research visits. Among them, multiple companies—including Assem-SM Shanghai, Biwe Storage, Jinhong Gas, Jucen Shares, and Anyang/Science & Testing?—received private equity research visits more than 10 times. The biopharmaceutical sector comes next; in March, private equity research in that industry totaled 420 times.

In addition, from the research paths of leading private equity firms, Victory Asset, Fountain Investments, and Panjing Investment ranked near the top in terms of research frequency in March. Specifically: Victory Asset favored the biopharmaceutical and electronics sectors in March, with the number of companies researched in the two industries being 10 and 7, respectively; in the same period Fountain Investments also favored the electronics and biopharmaceutical industries, with the number of companies researched in the two industries being 12 and 8, respectively; and in March Panjing Investment researched 12 electronics companies and 7 biopharmaceutical companies.

Finding certainty amid uncertainty

In the view of industry insiders, amid disruptions caused by uncertainty from Middle East geopolitical conflict, targets in technology innovation areas—such as AI and innovative drugs—having certainty in earnings are worth focusing on.

A person from Fountain Investments told reporters that in the AI technology field, opportunities for companies that are in supply-shortage segments—including leading companies in sub-segments of the semiconductor industry chain—are further emerging in terms of investment value. Specifically, the relevant companies may either participate deeply in global AI industry chains and possess non-substitutable competitive advantages, or they may demonstrate good earnings growth room, which could provide support for navigating market volatility. Therefore, the company will continue to closely track changes in fundamental trends, combine the earnings reporting window of the first quarter, actively seek high-quality companies in industries with solid industrial logic and positive fundamental changes, and be prepared for a new round of market opportunity deployment.

A manager of a leading private equity fund, when interviewed by a reporter, also said that domestically developed large-scale models are developing rapidly and have gradually acquired engineering and commercialization capabilities. The rapid development of domestic AI will also drive investment in relevant industry chains, and the extent to which it can stimulate the domestic economy is expected to become increasingly evident step by step. In addition, innovative drugs have shown a stable and positive trend in areas such as BD progress and commercialization earnings; the CXO sector has also shown signs of improvement in fundamentals. After the sector’s overall adjustment in the earlier period, there are structural opportunities. In short, industries in the technology innovation space with stronger earnings realization capabilities are an important direction for the next round of deployment.

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