Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - June core CPI rose 0.23% month-over-month, slightly below consensus expectations, with a year-over-year rate of 2.93% [1][2] - Lower hotel prices and used car prices negatively impacted the core CPI, while increases in household furnishings, recreation commodities, apparel, and auto parts prices provided a positive boost [1][2] - The Empire manufacturing index increased significantly in July, indicating stronger-than-expected growth in employment, new orders, and shipments [1][6] Summary by Relevant Sections Core CPI Analysis - The month-over-month core CPI increase of 0.23% was below the median forecast of 0.3%, while the year-over-year rate reached 2.93% [2] - Declines in lodging prices (-2.9%), used car prices (-0.7%), and new car prices (-0.3%) weighed on the core CPI [2][4] - Positive contributions came from household furnishings (+1.0%), video and audio prices (+1.1%), and medical care services (+0.6%) [4] PCE Price Index Estimation - The core PCE price index is estimated to have risen 0.29% in June, with a year-over-year rate of +2.75% [1][5] - The headline PCE price index is expected to have increased by 0.32% in June, corresponding to a year-over-year increase of 2.55% [5] Empire Manufacturing Index - The Empire manufacturing index rose by 21.5 points to 5.5 in July, surpassing consensus expectations [6] - Key components such as employment, new orders, and shipments all showed significant increases, indicating robust manufacturing activity [6]

Investment Rating - The report indicates a positive outlook for Hong Kong's IPO market, suggesting potential investment opportunities in newly listed companies and sectors with high demand [2][3]. Core Insights - Hong Kong's IPO market has seen a resurgence with 51 companies listed year-to-date, raising HK$124 billion, compared to 77 listings raising HK$88 billion in 2024 [3][4]. - The increase in IPO activity is attributed to a robust market rally, a slowdown in A-share IPOs, and more accommodating listing rules by HKEX [2][4]. - Cornerstone investors contributed 42% of the capital raised in IPOs, with two-thirds coming from foreign investors, indicating strong international interest [42][43]. - Newly listed companies in 2024/25 have shown significantly higher post-IPO returns compared to previous years, driven by substantial cornerstone investor ownership and growth potential [52][53]. Summary by Sections 1. IPO Market Activity - The resurgence in Hong Kong's IPO market is driven by improved market performance, with HSI and HSTECH gaining 20% and 17% year-to-date [4][26]. - The IPO pipeline remains strong, with over 200 companies in the application process [3][4]. 2. Dual Listings - A-share companies are pursuing dual listings in Hong Kong to access overseas financing and mitigate delisting risks, with regulatory support encouraging this trend [8][10]. - Approximately 80% of US institutional investors in ADRs already have exposure to the Hong Kong market, facilitating smoother transitions for companies [10][12]. 3. Investor Participation - The participation of cornerstone investors has been significant, with their ownership ranging from under 10% to over 80% in recent IPOs [42][43]. - Retail interest in IPOs has reached a multi-year high, reflecting improved risk appetite among investors [47][49]. 4. Post-IPO Performance - Newly listed companies in 2024/25 have delivered an average return of 10% on the first trading day and 41% within the first three months [52][56]. - Companies with cornerstone investor ownership between 30% and 50% tend to outperform, highlighting the importance of investor confidence [53][57]. 5. Spillover Effects - Active IPOs in Hong Kong positively influence A-share market performance, with sectors experiencing new listings generally seeing their peers outperform [63][64]. - The correlation between robust IPO activity and favorable performance in A-share markets suggests a beneficial spillover effect [63][64]. 6. Index Inclusion and Liquidity - New listings that meet specific criteria are eligible for fast-track index inclusion, potentially attracting significant passive investment [66][67]. - Southbound inclusion allows Hong Kong-listed companies to access onshore liquidity, enhancing their market appeal [67][72].

Investment Rating - The report assigns a "Buy" rating for Innolight with an updated 12-month target price (TP) of Rmb182, increased from Rmb160 [1][4]. Core Insights - Innolight's net profit for Q2 reached Rmb2.4 billion, marking a 79% year-over-year increase and a 53% quarter-over-quarter increase, indicating a re-acceleration in growth [1]. - The company anticipates strong demand for its products, particularly in the 800G and 1.6T segments, driven by cloud service providers and AI applications [2][11]. - Margin expansion is attributed to a better product mix and improved yields, contributing significantly to the strong Q2 performance [3][10]. Summary by Sections Financial Performance - Revenue estimates for 2025E-2027E have been revised up by 6% to 12%, and net profit estimates have been increased by 12% to 22% following better-than-expected Q2 results [4][8]. - The gross margin is projected to improve to 40.1% in 2025E, up from a previous estimate of 38.5% [8]. Demand Outlook - The company has reaffirmed a strong demand outlook from US cloud service providers for 800G products heading into the second half of 2025 and 2026, with some customers increasing orders to support AI applications [2][11]. - Innolight plans to expand its production capacity in Thailand to meet the anticipated demand [2]. Margin Improvement - The report highlights that margin improvement is driven by a shift towards higher-margin products such as 800G/1.6T optical transceivers and silicon photonics modules [3][10]. - The company is experiencing better yields, which further supports margin expansion [3]. Competitive Position - Innolight is positioned as a leading supplier in the optical transceiver market, particularly benefiting from the growth in AI and data center expansions [10][11]. - The company's strong execution in ramping up capacity and developing new products is seen as a key competitive advantage [11][13].

China Cloud/Data Centers: Improved chip availability to better capture AI demand What happened On July 15, Nvidia (NVDA, Buy, Covered by James Schneider, Ph.D.) announced that licenses to sell H20, AI GPU tailored for China, will be granted by the US government and it hopes to start deliveries soon. Additionally, the company plans to release a new, fully compliant RTX Pro GPU for China which is "ideal for digital twin AI for smart factories and logistics". The announcement was made during its founder and CE ...

On July 14th, Nvidia published a blog post (here) stating that Nvidia has received assurance from the U.S. government that it will provide the company with the required licenses to sell Hopper (H20) GPUs in China, reversing a previous ban. For more context, recall that Nvidia had announced a $4.5bn charge associated with H20 inventory write-downs and purchase obligations, and a $2.5bn revenue impact in its FY1Q'26 CFO commentary (here) as the U.S. government effectively banned the shipment of H20 into China ...

Investment Rating - The investment rating for Baidu.com Inc. (BIDU) is "Buy" with a 12-month price target of $96.00, indicating an upside potential of 11.8% from the current price of $85.87 [10][18][22]. Core Insights - Baidu's partnership with Uber marks a significant step in the global expansion of its Apollo Go autonomous vehicle service, with initial rollouts planned for Asia and the Middle East later this year [1][3]. - The Apollo Go service currently operates in 15 cities, including Dubai and Abu Dhabi, with a fleet of 1,000 fully driverless cars and over 11 million completed rides [2][3]. - The valuation of Baidu's Robotaxi business is estimated at $3.9 billion, with expectations for rapid fleet expansion over the next 1-2 years as commercial operations increase [5][10]. Summary by Sections Global Expansion - Baidu is committed to expanding its autonomous vehicle service internationally, with recent expansions into Hong Kong, Singapore, and the Middle East, and plans to enter Europe by the end of the year [4][3]. - The user experience, safety, and adaptability of Robotaxi services to different regulatory environments are critical factors for successful overseas expansion [4]. Financial Projections - Revenue projections for the Apollo Self-Driving segment show significant growth, with expected gross transaction values increasing from RMB 161 million in 2024 to RMB 3.080 billion by 2027, reflecting a year-on-year growth rate of 350% in 2024 [9]. - The number of trips is projected to rise from 6.6 million in 2024 to 136.9 million by 2027, with the fleet size expected to grow from 1,000 vehicles to 15,000 during the same period [9]. Valuation Metrics - The valuation analysis indicates a strong upside risk if Baidu successfully accelerates its global market expansion, with a focus on improving unit economics in favorable pricing areas [5][10]. - The SOTP (Sum of the Parts) valuation reflects a significant contribution from the Robotaxi segment, which is projected to enhance Baidu's overall market valuation [10].

Investment Rating - The report indicates a modest property easing expectation for the second half of the year and beyond, aligning with incremental policy support rather than a large-scale stimulus similar to the 2015-2018 period [1][2][8]. Core Insights - The Central Urban Work Conference (CUWC) outlined key policy priorities for urban development, including urbanization facilitation, innovation encouragement, urban village renovation, a new real estate development model, improved urban infrastructure, and a green transition [1][2]. - The report suggests that the previous cash-backed shantytown redevelopment program is unlikely to be repeated due to reduced fiscal easing space, recognition of past housing boom costs, and persistently low urban housing demand [3][8]. Summary by Sections Policy Priorities - The CUWC emphasized urbanization, innovation, urban village renovation, a new real estate model, enhanced urban infrastructure, and green transition as critical areas for future development [1][2]. Property Market Outlook - The report anticipates modest property easing, with expectations for further mortgage rate reductions and targeted policy support for urban infrastructure and housing inventory purchases [8]. - It is projected that urban housing demand may remain below 5 million units per year for the foreseeable future, influenced by demographic trends and previous market speculation [7][14]. Economic Context - With H1 real GDP growth averaging 5.3% year-on-year, there is no immediate need for broad-based stimulus, leading to expectations of targeted easing measures to address property market downturns and labor market pressures [8].

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies within it Core Insights - Capital expenditure (Capex) for AI infrastructure is expected to remain strong, driven by tier-2 clouds and large enterprises diversifying their spending on data center equipment [2][3] - The transition to 800G networking is anticipated to dominate through 2026, with Ethernet potentially scaling up in networking opportunities [2][5] - Data center equipment spending is diversifying across more cloud players, with a forecasted growth rate of approximately 18% CAGR from 2024 to 2029, reaching around $925 billion [3] Summary by Sections Data Center Equipment Spending - Cloud Provider capex is projected to grow significantly, with more cloud players expected to spend over $5 billion annually, enhancing vendor customer base diversity [3] - Hyperscalers are likely to continue favoring best-of-breed networking providers, while tier-2 cloud providers will prefer full-stack solutions [3] Networking Trends - The transition to 800G is ongoing, with AI players at various stages, and the revenue recognition timeline for networking vendors has lengthened from 1-2 quarters to 2-4 quarters [5] - Vendor diversity for switching silicon is becoming increasingly important for AI workloads, with Cisco and Juniper expected to gain market share [5] Market Dynamics - The report highlights relative strength in Asia and Middle Eastern sovereign AI initiatives, indicating a robust market for data center equipment [3] - Concerns regarding data center switching market share, particularly for Arista, are viewed as somewhat exaggerated [2]

Investment Rating - The report maintains a "Buy" rating for Giant Biogene Holding (2367.HK) with a 12-month price target of HK$71.00, indicating a potential upside of 25.1% from the current price of HK$56.75 [1][15][34]. Core Insights - Giant Biogene is expected to achieve a year-on-year sales growth of 23% to RMB3,116 million and a net income growth of 20% to RMB1,183 million for 1H25, with an adjusted net profit of RMB1,205 million, reflecting a 17% increase year-on-year when excluding ESOP expenses [1][18][20]. - The company is positioned to benefit from the upcycle in China's functional skincare market, leveraging its strengths in recombinant collagen and expanding its online presence through key brands Comfy and Collgene [37][38]. Summary by Sections Financial Performance - Revenue forecasts for 2025-2027 have been revised upwards by 0-2% due to more resilient margins and faster sales recovery than previously estimated [15][34]. - The expected gross profit margin (GPM), operating profit margin (OPM), and net profit margin (NPM) for 1H25 are projected at 81.7%, 41.3%, and 38.0% respectively [25][26]. Market Trends - Online gross merchandise volume (GMV) has shown a recovery trajectory, increasing by 58% year-on-year on Douyin as of July, significantly outperforming peers [2][31]. - The report highlights a minimal contribution from KOL livestreaming, which accounted for approximately 10% of sales on Douyin in July, down from 20% in the same period last year [2]. Brand Performance - The Comfy brand is anticipated to deliver 21% growth in online sales and 16% growth in offline sales for 1H25, while the Collgene brand is expected to grow by 70% online but decline by 5% offline [23][28]. - The report emphasizes the company's strategies to revitalize brand momentum, particularly in preparation for the Double 11 shopping festival [2].

Investment Rating - The report maintains a "Buy" rating on GCE, EMC, and TUC, with target prices revised upwards to NT$420, NT$1,080, and NT$330 respectively, reflecting a 13-28% upward revision in earnings estimates for 2026-2027 [12][20][76]. Core Insights - The AI server CCL/PCB total addressable market (TAM) is projected to grow significantly, reaching US$2.3 billion for CCL and US$5.3 billion for PCB in 2025, and expanding to US$8 billion and US$17.4 billion by 2027, indicating a compound annual growth rate (CAGR) of 88% and 80% respectively from 2024 to 2027 [14][25][33]. - The demand for high-end technology is expected to increase, benefiting first-tier suppliers like GCE, EMC, and TUC, as they are likely to maintain high utilization rates and improve their product mix due to the inability of first-tier suppliers to meet solid client demand [2][32][40]. - The report anticipates that the market share of EMC and TUC in the ASIC AI server CCL market will rise from 42% in 2024 to 85% by 2027, driven by proactive capacity expansion and increasing M8 grade CCL penetration [3][37][40]. Summary by Sections AI Server Market Outlook - The overall AI server CCL TAM is expected to account for approximately 71% of EMC's total revenue in 2025, increasing to 230% by 2027, while for GCE, the AI server PCB TAM will represent 230% of its total revenue in 2025 and 500% in 2027 [2][32]. - The report highlights that the ASIC AI server CCL/PCB TAM is projected to reach US$3.8 billion and US$9.1 billion in 2027, with GCE and EMC expected to gain significant market share [37][46]. Pricing and Profitability - There is a favorable outlook for average selling price (ASP) expansion for Taiwan CCL/PCB suppliers, with expectations of ASP increases of 19%, 11%, and 10% for GCE, EMC, and TUC respectively from 2024 to 2027 [8][64]. - The gross margins (GM) for GCE, EMC, and TUC are projected to improve significantly, with ASIC AI server average GM expected to be over 45% compared to the companies' average levels [63][74]. Capacity and Supply Dynamics - The report notes that the high-end CCL industry is expected to grow at a CAGR of 40% from 2024 to 2027, driven by increasing demand for M7+ grade CCL, while capacity expansion for high-end CCL is only expected to increase by 21% during the same period, leading to a supply-demand gap [15][26][58]. - The tightening supply conditions for high-end CCL and high layer count PCB are anticipated to lead to longer lead times and potential pricing hikes, benefiting key players in the industry [54][57].