Market Overview - Global markets experienced a broad decline, with different reasons for adjustments in overseas and domestic markets[4] - In July, the U.S. non-farm employment increased by only 73,000, contributing to market concerns[4] - The Federal Reserve maintained interest rates without cuts, signaling a hawkish stance, which affected market sentiment[4] Domestic Market Insights - The adjustment in the Chinese market is seen as temporary, with no significant downward pressure expected[5] - The market reached a peak of 3636 points recently, facing resistance at previous highs[4] Investment Strategy - Strong recommendation to focus on the technology sector, particularly artificial intelligence, during the adjustment period[6] - The technology sector is expected to outperform, with the top three performing industries being pharmaceuticals, communications, and media[7] Artificial Intelligence Focus - Anticipated significant changes in the AI industry over the next 1-2 months, driven by new models and government support[8] - The recent approval of the "Artificial Intelligence+" initiative is expected to boost AI commercialization and application[8] Sector-Specific Opportunities - Positive outlook on domestic computing power, AI applications, and robotics within the AI sector[9] - Domestic computing power is viewed as a cornerstone for future development, with government support likely to continue[9] Risk Considerations - Potential for market performance to fall short of optimistic expectations due to various economic and geopolitical risks[29] - Technology sector faces risks related to technological iterations and commercialization progress not meeting expectations[11]

Group 1 - Global markets are experiencing a downturn, but the reasons for adjustments differ between domestic and international markets. The primary causes for the overseas market decline include lower-than-expected US non-farm payrolls, hawkish signals from the Federal Reserve, and the implementation of global tariffs ranging from 10% to 41% [2][14] - The domestic market's adjustment is attributed to the correction of expectations following important meetings, fluctuations in US-China relations, and technical adjustments. The market reached a peak of 3636 points and is facing resistance at previous highs [2][14][15] Group 2 - The Chinese market is expected to show resilience, with the current adjustment providing a layout opportunity. The factors causing the market adjustment are considered short-term, and there is no significant motivation for a large-scale decline [3][15] - There is a strong recommendation to focus on the technology sector, particularly artificial intelligence, as the main investment theme during this adjustment period [4][16] Group 3 - The market has shifted its focus to the technology sector, with the top-performing industries being pharmaceuticals, communications, and media, while coal, non-ferrous metals, and real estate have seen declines. The relative advantage of the technology sector is expected to strengthen further [5][17] - The outlook for artificial intelligence remains positive, with significant changes anticipated in the next 1-2 months. The approval of the "Artificial Intelligence+" action plan by the State Council is expected to drive the commercialization and application of AI [6][18] Group 4 - Within the artificial intelligence sector, there is a favorable outlook for domestic computing power, AI applications, and robotics. Domestic computing power is seen as a cornerstone for future development, supported by government policies and major technology projects [7][19] - AI applications are expected to gain momentum as new models are released, and the integration of AI into various aspects of life is anticipated to accelerate. Robotics, as a key application area of AI, is also expected to follow the upward trend of the AI sector [7][19]

Investment Rating - The report maintains a "Buy" rating for Geely Automobile [4][7] Core Views - The company is expected to benefit from marketing reforms and new vehicle launches, which will enhance sales market share [2][11] - The forecasted EPS for 2025-2027 is 1.50, 1.76, and 2.13 RMB respectively, with a target price set at 22.50 RMB or 24.70 HKD [4][7] Financial Performance Summary - Revenue projections for 2023A to 2027E are 179,204 million, 240,194 million, 319,444 million, 381,363 million, and 442,685 million RMB, reflecting growth rates of 21.1%, 34.0%, 33.0%, 19.4%, and 16.1% respectively [6][12] - Operating profit is expected to grow from 3,806 million RMB in 2023A to 20,314 million RMB in 2027E, with a significant increase of 100.8% in 2024A [6][12] - Net profit attributable to the parent company is projected to be 5,308 million RMB in 2023A, increasing to 21,451 million RMB by 2027E, with a notable growth of 213.3% in 2024A [6][12] - The gross margin is expected to improve from 15.3% in 2023A to 16.7% in 2027E, while the net margin is projected to stabilize around 4.7% to 4.8% during the same period [6][12] Market Position and Sales Performance - In July, Geely's total sales reached 237,700 units, a year-on-year increase of 57.7%, with new energy vehicle sales growing by 120.4% [11] - The company's market share is expected to continue rising, with a reported market share of approximately 11% in the first half of 2025, an increase of nearly 3 percentage points year-on-year [11] - The Galaxy series is showing strong sales performance, with July sales of 95,000 units, a year-on-year increase of 469.0% [11]

Investment Rating - The industry investment rating is maintained as "Positive" [4] Core Viewpoints - The impact of the restoration of VAT on bond interest income on bank profits is limited, with a focus on changes in asset allocation [2][19] - The external environment is increasingly uncertain, and a continuation of loose monetary policy is expected, leading to a long-term downward trend in overall expected returns [29] - The expected improvement in the banking sector's fundamentals in Q2 2025 compared to Q1 2025 is primarily due to alleviated pressure on other non-interest income growth [29] Summary by Sections Tax Rate Changes - The restoration of VAT on interest income from government bonds, local government bonds, and financial bonds will take effect from August 8, 2025, with a VAT rate of 6% for self-operated institutions [7][8] - Existing bonds issued before August 8, 2025, will continue to be exempt from VAT until maturity [8][9] Impact on Banking Sector - The restoration of VAT is expected to lead to a marginal decline in the adjusted yields of affected bonds by approximately 8-13 basis points [15][17] - The overall negative impact on commercial banks' net profits is estimated at about 3.6% from a stock perspective and only 0.15% from a new bond perspective [19][20] - State-owned banks are expected to be more adversely affected compared to rural commercial banks [19][23] Investment Recommendations - Focus on two main investment themes: 1. High-dividend stocks based on the reduction of insurance preset interest rates, with recommendations including China Construction Bank, Industrial and Commercial Bank of China, and China Merchants Bank [30] 2. Well-established small and medium-sized banks, with recommendations including Industrial Bank, CITIC Bank, Nanjing Bank (Buy), Jiangsu Bank (Buy), and Hangzhou Bank (Buy) [30]

Investment Rating - The report maintains a neutral investment rating for the automotive and parts industry [5] Core Insights - July saw a seasonal decline in automotive sales, with a mixed performance among manufacturers. The report highlights the importance of focusing on strong alpha vehicle manufacturers and the robotics supply chain [1][11] - The report anticipates that competitive domestic brands and new forces in intelligent driving technology will continue to gain market share by 2025. It also expects some state-owned enterprises to reverse their difficulties through reforms and enhanced cooperation [14] - The report suggests continued attention to certain automotive state-owned enterprises and companies within the humanoid robotics chain, Huawei's supply chain, Xiaomi's supply chain, T chain, and intelligent driving industry chain [2][14] Summary by Sections Sales Tracking - In July, domestic narrow passenger vehicle retail sales were approximately 1.85 million units, a year-on-year increase of 7.6% but a month-on-month decline of 11.2%. New energy vehicle retail sales were estimated at about 1.01 million units, with a year-on-year growth of 15.0% and a month-on-month decline of 9.1% [8][11] - The report notes that July is traditionally a slow season for the industry, influenced by manufacturers' efforts to meet half-year sales targets in June and high temperatures in July. Overall market performance was subdued, but the second half of the year is expected to see stable growth due to consumer promotion policies and new vehicle launches [11][12] Company Performance - Among the domestic brands, only Geely reported a month-on-month sales increase in July, while other major brands like BYD, Chery, Changan, and Great Wall experienced declines. New force brands such as Hongmeng Zhixing, Leap Motor, and Xpeng saw significant sales growth, with Xpeng achieving a record monthly delivery of 36,717 units, a year-on-year increase of 229% [12][19] - The report emphasizes that in a weak overall market, companies with strong capabilities in technology, brand building, cost control, and marketing channels are likely to gain more market share [12][19] Robotics Industry - Zhiyuan Robotics received strategic investment from international groups, indicating a positive outlook for the robotics supply chain. The company is expanding into overseas markets and has begun commercializing humanoid robots in China [13][14] - The report suggests that the robotics sector is poised for a turning point, with multiple favorable developments in orders and capital, and recommends continued attention to companies in the robotics supply chain [13][14] Investment Recommendations - The report recommends focusing on companies such as SAIC Motor, JAC Motors, BYD, Seres, Changan Automobile, China National Heavy Duty Truck Group, and Yutong Bus, as well as various parts suppliers like New Spring, Silver Wheel, and others [2][15][16]

Quantitative Factors and Models Summary Quantitative Factors and Their Construction - **Factor Name**: Standardized Unexpected Revenue (SUR) - **Construction Idea**: Measures the deviation of actual revenue from analysts' expectations, standardized by the standard deviation of expected revenue[20][27][31] - **Construction Process**: $ SUR = \frac{Actual\ Revenue - Expected\ Revenue}{Standard\ Deviation\ of\ Expected\ Revenue} $ - The numerator represents the difference between actual and expected revenue - The denominator is the standard deviation of expected revenue, ensuring comparability across stocks[20][27][31] - **Evaluation**: Demonstrated strong performance across multiple indices, indicating its effectiveness in capturing unexpected revenue trends[8][27][31] - **Factor Name**: Delta ROA - **Construction Idea**: Tracks the year-over-year change in Return on Assets (ROA) to capture profitability trends[20][31][39] - **Construction Process**: $ \Delta ROA = ROA_{Current\ Quarter} - ROA_{Same\ Quarter\ Last\ Year} $ - ROA is calculated as $ \frac{Net\ Income}{Total\ Assets} $ - The factor highlights improvements or deteriorations in asset efficiency[20][31][39] - **Evaluation**: Consistently strong performance, particularly in small-cap indices like the CSI 1000 and CSI 2000, suggesting its relevance in growth-oriented stocks[8][39][43] - **Factor Name**: Standardized Unexpected Earnings (SUE) - **Construction Idea**: Similar to SUR, measures the deviation of actual earnings from analysts' expectations, standardized by the standard deviation of expected earnings[20][31][39] - **Construction Process**: $ SUE = \frac{Actual\ Earnings - Expected\ Earnings}{Standard\ Deviation\ of\ Expected\ Earnings} $ - The numerator captures the earnings surprise - The denominator ensures standardization for comparability[20][31][39] - **Evaluation**: Strong performance in indices like CSI 500 and CSI 800, indicating its ability to capture earnings surprises effectively[8][27][31] - **Factor Name**: Delta ROE - **Construction Idea**: Measures the year-over-year change in Return on Equity (ROE) to identify shifts in shareholder profitability[20][31][39] - **Construction Process**: $ \Delta ROE = ROE_{Current\ Quarter} - ROE_{Same\ Quarter\ Last\ Year} $ - ROE is calculated as $ \frac{Net\ Income}{Shareholders'\ Equity} $ - Highlights changes in equity efficiency over time[20][31][39] - **Evaluation**: Demonstrated strong performance in growth-oriented indices, particularly the CSI 1000 and Growth Enterprise Market (GEM) indices[8][39][43] Factor Backtesting Results - **Standardized Unexpected Revenue (SUR)** - CSI 500: Weekly return 1.43%, monthly return 1.66%, annualized return 12.83%[27] - CSI 800: Weekly return 1.36%, monthly return 2.61%, annualized return 4.26%[31] - CSI All Share: Weekly return 1.37%, monthly return 1.95%, annualized return 6.91%[47] - **Delta ROA** - CSI 1000: Weekly return 0.56%, monthly return 1.67%, annualized return 11.51%[35] - CSI 2000: Weekly return 1.90%, monthly return 1.90%, annualized return 27.67%[39] - CSI All Share: Weekly return 1.10%, monthly return 2.33%, annualized return 7.78%[47] - **Standardized Unexpected Earnings (SUE)** - CSI 500: Weekly return 1.39%, monthly return 2.75%, annualized return 7.19%[27] - CSI 800: Weekly return 0.52%, monthly return 1.33%, annualized return 3.04%[31] - CSI All Share: Weekly return 1.09%, monthly return 2.46%, annualized return 0.72%[47] - **Delta ROE** - CSI 1000: Weekly return 0.30%, monthly return 1.59%, annualized return 8.89%[35] - CSI 2000: Weekly return 1.24%, monthly return 1.21%, annualized return 90.84%[39] - GEM: Weekly return 1.03%, monthly return 2.76%, annualized return 21.85%[43] Quantitative Model Construction - **Model Name**: Maximized Factor Exposure (MFE) Portfolio - **Construction Idea**: Constructs portfolios that maximize exposure to a single factor while controlling for industry, style, and stock-specific constraints[62][63][66] - **Construction Process**: $ \begin{array}{ll} max & f^{T}w \\ s.t. & s_{l} \leq X(w-w_{b}) \leq s_{h} \\ & h_{l} \leq H(w-w_{b}) \leq h_{h} \\ & w_{l} \leq w-w_{b} \leq w_{h} \\ & b_{l} \leq B_{b}w \leq b_{h} \\ & 0 \leq w \leq l \\ & 1^{T}w = 1 \\ & \Sigma|w-w_{0}| \leq to_{h} \end{array} $ - Maximizes factor exposure $ f^{T}w $ - Constraints include style, industry, stock-specific deviations, and turnover limits[62][63][66] - **Evaluation**: Effective in isolating factor performance under realistic portfolio constraints, widely used in index enhancement strategies[62][63][66] Model Backtesting Results - **MFE Portfolio** - CSI 300: Weekly excess return max 1.67%, min -0.65%, median 0.21%[54] - CSI 500: Weekly excess return max 1.13%, min -0.76%, median 0.24%[57] - CSI 1000: Weekly excess return max 1.11%, min -0.52%, median 0.24%[61]

Group 1: Trade Environment and Risks - The current international trade demand is under significant downward pressure, with the U.S. imposing higher tariffs on various countries, limiting trade agreements' effectiveness[7] - The uncertainty surrounding U.S. tariff policies remains high, with potential impacts on global economic growth difficult to estimate[44] - The risk of indirect economic ties breaking due to U.S. pressure on countries to limit supply chain connections with China is present[44] Group 2: Capital Goods and Investment - A decrease in uncertainty can significantly boost investment willingness in the real economy, with historical data showing that fixed asset formation growth often outpaces overall GDP growth during such periods[28] - The "Tariff 2.0" policy is expected to catalyze a new wave of industrial migration, with China positioned favorably in this transition[33] - U.S. manufacturers and service providers have borne 80% and 88.2% of tariff costs, respectively, which will gradually impact U.S. economic growth and public sentiment[19] Group 3: China's Manufacturing Position - China is likely to play a more critical role in the global manufacturing landscape as the industrial chain is reshaped, gaining export share and improving national confidence[4] - The new industrial migration wave will not only involve China but also other countries, driven by varying tariff rates and the creation of new "cost basins"[33] - The number of countries with greater bilateral trade volumes with China than with the U.S. has significantly increased, indicating a shift in global trade dynamics[43]

Investment Rating - The industry investment rating is maintained as "Positive" [5] Core Viewpoints - The report emphasizes the importance of AI applications and the Meta logic, highlighting the potential for revenue growth and valuation restructuring in the AI sector [8] - Domestic companies are expected to excel in multimodal development, particularly in B-end scenarios like AI image editing and video generation, with significant commercial performance [2] - The report anticipates a resonance in AI product commercialization between China and the US, especially in strong application areas in China [3] Summary by Sections Investment Logic - Focus on multimodal companies, especially those with overseas expansion [2] - Domestic products are competitive with international counterparts, achieving earlier commercialization [2] - Notable growth in AI video generation revenue, with a specific example of a company achieving over 100 million yuan monthly revenue [2] Investment Recommendations and Targets - Emphasis on AI application investment opportunities in the second half of the year and the trend of AI expansion overseas [3] - Recommended stocks include Kuaishou-W (01024, Buy), Meitu Inc. (01357, Not Rated), BOSS Zhipin-W (02076, Buy), and Alibaba-W (09988, Buy) [3] - Attention to Meta logic developments and their impact on revenue and valuation, with recommendations for Alibaba-W and Tencent Holdings (00700, Buy) [3] Industry Trends - Continuous acceleration in cloud revenue and capital expenditure (CAPEX) among major overseas cloud service providers [8] - Significant growth in annual recurring revenue (ARR) for AI applications, with OpenAI's ARR reaching 12 billion USD, marking a 20% increase [8] - The implementation of "Artificial Intelligence+" policies in China is expected to enhance AI application commercialization [8]

Economic Growth and Policy Direction - China's GDP growth rate reached 5.3% in the first half of the year, leading to a more cautious market outlook regarding the July Politburo meeting[5] - The meeting signifies a shift towards more refined and long-term economic and industrial policies, emphasizing the transition from old to new growth drivers[5] Policy Implications - Traditional policy measures still have room for adjustment, allowing for potential monetary easing if unexpected risks arise in the second half of the year[5] - The meeting highlighted the importance of regulating chaotic competition among enterprises, moving beyond just price wars to encourage quality and service[5] Consumer and Investment Focus - Emphasis on "people's comprehensive development" and "common prosperity" suggests future policies will focus on enhancing consumer experience and service consumption[5] - The introduction of childcare subsidies and support measures indicates a shift towards investing in human capital, which may lead to further fiscal expansion[5] Strategic Outlook - The upcoming five-year plan is expected to enhance market expectations for the transition of growth drivers, especially in light of changing international dynamics[5] - Key areas for growth include self-sufficiency, resource security, and technological innovation, all linked to the new growth driver transition[5] Risks and Challenges - Risks associated with overextending export growth could impact macroeconomic policy space in the coming months[5] - Potential liquidity risks from the U.S. may also pose challenges for the domestic market[5]

Investment Rating - The report maintains a "Positive" investment rating for the electronic industry in China [4] Core Viewpoints - The demand for AI computing facilities is expected to drive the growth of SiC/GaN power devices, opening up new growth opportunities in the industry [2][24] - The report emphasizes that the application potential of SiC/GaN in AI computing facility power supply systems has not been fully explored, and future demand is likely to continue increasing [7][24] Summary by Sections Investment Recommendations and Targets - AI server and data center demand is anticipated to create growth opportunities for SiC/GaN power devices. Key companies to watch include: - GaN industry leader Innoscience - Major power device manufacturers such as Wingtech Technology, China Resources Microelectronics, New Clean Energy, Star Semiconductor, and Tianyue Advanced - Wafer foundry company Chipone Integrated Circuits focusing on SiC power devices - Passive component companies like Farah Electronics and Jianghai Co., Ltd. - Companies in the third-generation semiconductor equipment market like Zhongwei Company [2][29] Industry Dynamics - The report highlights that AI computing facilities will increase the demand for SiC/GaN devices, particularly in high-voltage direct current (HVDC) and power module applications [7][8] - The transition from traditional power supply architectures to higher voltage systems (800V DC) is expected to enhance power transmission efficiency, thus driving the adoption of SiC/GaN devices [10][14] - The report notes that the penetration rate of SiC in global power semiconductors is projected to reach 4.9% by 2024, while GaN's penetration is at 0.5% in 2023, indicating room for growth [21][22] Company Insights - Innoscience is recognized as the global leader in the GaN industry, with a revenue of 830 million yuan in 2024, reflecting a year-on-year growth of 39.8% [30][34] - Wingtech Technology is focusing on semiconductor business growth, with a revenue of 58.4 billion yuan in 2024, and is strategically transforming to enhance its position in the power semiconductor industry [40][44] - China Resources Microelectronics is experiencing steady revenue growth, achieving 10.12 billion yuan in 2024, with a focus on enhancing its SiC/GaN product capabilities [50][51]