Investment Rating - The investment rating for the steel industry is "Positive" [2] Core Viewpoints - The steel market is currently facing a supply-demand imbalance, but with the implementation of various "stabilization growth" policies, overall steel demand is expected to remain stable or slightly increase [5][12] - The report highlights that the steel industry is likely to benefit from structural investment opportunities, particularly in high-margin special steel companies and leading steel enterprises with strong cost control [5][12] Market Performance - The steel sector experienced a decline of 2.00% this week, underperforming the broader market, while the Shanghai and Shenzhen 300 index rose by 2.37% [12] - Among the steel sub-sectors, special steel fell by 0.92%, long products by 1.44%, and flat products by 3.15% [12] Supply Data - As of August 15, the average daily pig iron production was 2.4066 million tons, a week-on-week increase of 0.34 million tons [25] - The capacity utilization rate for blast furnaces was 90.2%, up by 0.13 percentage points week-on-week [25] - The total production of five major steel products reached 7.601 million tons, an increase of 0.27% week-on-week [25] Demand Data - The consumption of five major steel products was 8.31 million tons, a decrease of 1.74% week-on-week [36] - The transaction volume of construction steel among mainstream traders was 102,000 tons, down by 1.08% week-on-week [36] Inventory Data - Social inventory of five major steel products increased to 9.908 million tons, a week-on-week rise of 2.94% [44] - Factory inventory of five major steel products reached 4.251 million tons, up by 2.97% week-on-week [44] Price Data - The comprehensive index for ordinary steel was 3,566.4 yuan/ton, with a week-on-week increase of 0.10% [50] - The comprehensive index for special steel was 6,638.7 yuan/ton, with a slight week-on-week increase of 0.01% [50] Profitability - The profit per ton for rebar was 121 yuan, down by 23.42% week-on-week [59] - The profit per ton for electric arc furnace construction steel was -68 yuan, a significant decrease of 58.14% week-on-week [59] Raw Material Prices - The spot price index for Australian iron ore (62% Fe) was 774 yuan/ton, with a week-on-week increase of 0.13% [72] - The price of primary metallurgical coke was 1,770 yuan/ton, remaining stable week-on-week [72]

1. Report Industry Investment Rating No information about the industry investment rating is provided in the report. 2. Core View of the Report - Credit bonds adjusted following interest rates, with medium - to long - term high - grade bonds having a larger upward amplitude. Credit spreads mostly declined, with medium - to long - end low - grade varieties having a larger compression amplitude [2][5]. - Urban investment bond spreads had limited changes, with spreads of external rating AAA and AA+ platforms generally up 1BP compared to last week, and AA - rated platforms remaining flat [2][9]. - Industrial bond spreads slightly declined overall, and the spreads of mixed - ownership real estate bonds significantly decreased. Central and state - owned enterprise real estate bond spreads remained flat, while mixed - ownership real estate bond spreads dropped 15BP and private real estate bond spreads rose 7BP [2][17]. - Perpetual and secondary capital (Two - Yong) bonds performed weakly with rising spreads, and the yields of 3 - 5 - year high - grade varieties significantly increased [2][29]. - The excess spreads of industrial perpetual bonds increased, while those of urban investment perpetual bonds narrowed [2][31]. 3. Summary by Relevant Catalog 3.1 Credit Bonds Adjusted Following Interest Rates, with Medium - to Long - Term High - Grade Bonds Having a Larger Upward Amplitude - Affected by the rising equity market and policies such as discount interest and state - owned enterprise purchases, interest - rate bonds weakened significantly this week. The yields of 1Y, 3Y, 5Y, 7Y, and 10Y China Development Bank bonds increased by 3BP, 4BP, 8BP, 7BP, and 8BP respectively [5]. - Credit bond yields also increased, with medium - to long - term high - grade varieties having a larger upward amplitude. For example, the yield of 1Y AAA - rated credit bonds increased by 2BP, and the yields of other grades increased by 3BP [5]. - Credit spreads mostly declined, with medium - to long - end low - grade varieties having a larger compression amplitude. Rating spreads and term spreads showed differentiation [5]. 3.2 Urban Investment Bond Spreads Had Narrow Fluctuations - The spreads of external rating AAA and AA+ urban investment platforms generally increased by 1BP compared to last week, and AA - rated platforms remained flat. Most platform spreads changed within 1BP [9]. - By administrative level, the credit spreads of provincial and municipal platforms generally remained flat, while the credit spreads of district - county platforms increased by 1BP [14]. 3.3 Industrial Bond Spreads Slightly Declined, and the Spreads of Mixed - Ownership Real Estate Bonds Significantly Decreased - Industrial bond spreads slightly declined overall. Central and state - owned enterprise real estate bond spreads remained flat, mixed - ownership real estate bond spreads dropped 15BP due to events such as state - owned enterprise purchases, and private real estate bond spreads rose 7BP [17]. - The spreads of AAA and AA+ coal bonds decreased by 1BP respectively, and the spreads of AA - rated coal bonds remained flat. The spreads of AAA - rated steel bonds remained flat, and the spreads of AA+ - rated steel bonds decreased by 1BP. The spreads of all grades of chemical bonds decreased by 1BP [17]. 3.4 Two - Yong Bonds Performed Weakly with Rising Spreads, and the Yields of 3 - 5 - Year High - Grade Varieties Significantly Increased - This week, Two - Yong bonds performed weakly with rising spreads, and overall they performed worse than ordinary credit bond varieties. The yields of 3 - 5 - year high - grade varieties significantly increased [29]. - For 1Y bonds, the yields of all grades of secondary capital bonds increased by 2 - 3BP, and the spreads compressed by 0 - 1BP; the yields of all grades of perpetual bonds increased by 4BP, and the spreads increased by 1BP [29]. 3.5 The Excess Spreads of Industrial Perpetual Bonds Increased, and the Excess Spreads of Urban Investment Perpetual Bonds Narrowed - This week, the excess spreads of industrial AAA - rated 3Y perpetual bonds increased by 2.76BP to 10.17BP, at the 15.70% quantile since 2015. The excess spreads of industrial AAA - rated 5Y perpetual bonds increased by 0.01BP to 11.83BP, at the 23.40% quantile since 2015 [31]. - The excess spreads of urban investment AAA 3Y perpetual bonds decreased by 1.82BP to 3.34BP, at the 0.29% quantile; the excess spreads of urban investment AAA 5Y perpetual bonds decreased by 3.40BP to 7.51BP, at the 3.67% quantile [31]. 3.6 Credit Spread Database Compilation Instructions - The overall market credit spreads, commercial bank Two - Yong spreads, and urban investment/industrial perpetual bond credit spreads are calculated based on ChinaBond medium - and short - term bill and ChinaBond perpetual bond data. The historical quantiles are since the beginning of 2015 [38]. - The credit spreads of industrial and urban investment individual bonds are calculated by subtracting the yield to maturity of the same - term China Development Bank bonds (calculated by linear interpolation) from the ChinaBond valuation (exercise) of individual bonds, and then the industry or regional urban investment credit spreads are obtained by the arithmetic average method [38].

Quantitative Models and Construction Methods 1. Model Name: Continuous Hedging Strategy - **Model Construction Idea**: This strategy is based on the analysis of basis convergence factors and optimization strategies, as detailed in the "Cinda Financial Engineering Derivatives Research Report Series III"[44] - **Model Construction Process**: - **Backtesting Period**: From July 22, 2022, to August 15, 2025[45] - **Spot Side**: Hold the total return index of the corresponding underlying index[45] - **Futures Side**: Use 70% of the funds for the spot side and allocate the same nominal principal amount to short futures contracts of CSI 500, CSI 300, SSE 50, and CSI 1000 indices, occupying the remaining 30% of the funds[45] - **Rebalancing Rules**: Continuously hold quarterly/monthly contracts until the remaining time to maturity is less than 2 days, then close the position at the closing price and simultaneously short the next quarterly/monthly contract at the closing price[45] - **Assumptions**: Equal allocation of principal between spot and futures sides, excluding transaction fees, impact costs, and the indivisibility of futures contracts[45] 2. Model Name: Minimum Basis Strategy - **Model Construction Idea**: This strategy selects contracts with the smallest annualized basis discount to optimize hedging performance[46] - **Model Construction Process**: - **Backtesting Period**: From July 22, 2022, to August 15, 2025[46] - **Spot Side**: Hold the total return index of the corresponding underlying index[46] - **Futures Side**: Use 70% of the funds for the spot side and allocate the same nominal principal amount to short futures contracts of CSI 500, CSI 300, SSE 50, and CSI 1000 indices, occupying the remaining 30% of the funds[46] - **Rebalancing Rules**: Calculate the annualized basis for all tradable futures contracts on the day of rebalancing and select the contract with the smallest basis discount for opening positions. Hold the same contract for 8 trading days or until the remaining time to maturity is less than 8 days before selecting a new contract[46] - **Assumptions**: Equal allocation of principal between spot and futures sides, excluding transaction fees, impact costs, and the indivisibility of futures contracts[46] --- Model Backtesting Results 1. Continuous Hedging Strategy - **CSI 500**: - Annualized Return: -3.00% (monthly), -2.17% (quarterly)[48] - Volatility: 3.82% (monthly), 4.71% (quarterly)[48] - Maximum Drawdown: -9.01% (monthly), -8.34% (quarterly)[48] - Net Value: 0.9112 (monthly), 0.9351 (quarterly)[48] - Annual Turnover: 12 (monthly), 4 (quarterly)[48] - 2025 YTD Return: -4.34% (monthly), -1.89% (quarterly)[48] - **CSI 300**: - Annualized Return: 0.42% (monthly), 0.57% (quarterly)[51] - Volatility: 2.97% (monthly), 3.32% (quarterly)[51] - Maximum Drawdown: -3.95% (monthly), -4.03% (quarterly)[51] - Net Value: 1.0128 (monthly), 1.0174 (quarterly)[51] - Annual Turnover: 12 (monthly), 4 (quarterly)[51] - 2025 YTD Return: -1.06% (monthly), -0.24% (quarterly)[51] - **SSE 50**: - Annualized Return: 0.98% (monthly), 1.87% (quarterly)[56] - Volatility: 3.08% (monthly), 3.50% (quarterly)[56] - Maximum Drawdown: -4.22% (monthly), -3.76% (quarterly)[56] - Net Value: 1.0301 (monthly), 1.0583 (quarterly)[56] - Annual Turnover: 12 (monthly), 4 (quarterly)[56] - 2025 YTD Return: -0.08% (monthly), 0.89% (quarterly)[56] - **CSI 1000**: - Annualized Return: -6.19% (monthly), -4.65% (quarterly)[60] - Volatility: 4.71% (monthly), 5.76% (quarterly)[60] - Maximum Drawdown: -14.01% (monthly), -12.63% (quarterly)[60] - Net Value: 0.8362 (monthly), 0.8654 (quarterly)[60] - Annual Turnover: 12 (monthly), 4 (quarterly)[60] - 2025 YTD Return: -10.21% (monthly), -5.84% (quarterly)[60] 2. Minimum Basis Strategy - **CSI 500**: - Annualized Return: -1.32%[48] - Volatility: 4.60%[48] - Maximum Drawdown: -7.97%[48] - Net Value: 0.9603[48] - Annual Turnover: 17.36[48] - 2025 YTD Return: -1.85%[48] - **CSI 300**: - Annualized Return: 1.22%[51] - Volatility: 3.10%[51] - Maximum Drawdown: -4.06%[51] - Net Value: 1.0378[51] - Annual Turnover: 15.39[51] - 2025 YTD Return: 0.41%[51] - **SSE 50**: - Annualized Return: 1.64%[56] - Volatility: 3.10%[56] - Maximum Drawdown: -3.91%[56] - Net Value: 1.0509[56] - Annual Turnover: 16.05[56] - 2025 YTD Return: 0.97%[56] - **CSI 1000**: - Annualized Return: -4.02%[60] - Volatility: 5.56%[60] - Maximum Drawdown: -11.11%[60] - Net Value: 0.8720[60] - Annual Turnover: 15.97[60] - 2025 YTD Return: -5.09%[60] --- Quantitative Factors and Construction Methods 1. Factor Name: Cinda-VIX - **Factor Construction Idea**: Reflects investors' expectations of future volatility in the options market, with a term structure to capture expectations over different time horizons[62] - **Factor Construction Process**: Adjusted based on overseas methodologies and tailored to China's options market[62] - **Factor Evaluation**: Provides insights into market volatility expectations and serves as a valuable tool for risk management[62] 2. Factor Name: Cinda-SKEW - **Factor Construction Idea**: Measures the skewness of implied volatility across different strike prices, capturing market expectations of tail risks[69] - **Factor Construction Process**: Analyzes the slope of implied volatility to assess market sentiment towards extreme events[69] - **Factor Evaluation**: Useful for identifying market concerns about potential large-scale risks, often referred to as the "Black Swan Index"[70] --- Factor Backtesting Results 1. Cinda-VIX - **30-Day VIX Values**: - SSE 50: 24.25[62] - CSI 300: 24.25[62] - CSI 500: 28.09[62] - CSI 1000: 27.87[62] 2. Cinda-SKEW - **SKEW Values**: - SSE 50: 100.82[70] - CSI 300: 105.10[70] - CSI 500: 99.01[70] - CSI 1000: 109.56[70]

Investment Rating - The investment rating for the utility sector is "Positive" [2] Core Insights - The report highlights that the domestic power sector is expected to see profit improvement and value reassessment following multiple rounds of power supply-demand tensions. The ongoing market reforms are likely to lead to a slight increase in electricity prices, benefiting coal power enterprises [5][6] - In the natural gas sector, the report indicates that with the decline in upstream gas prices and the recovery of domestic gas consumption, the city gas business is expected to stabilize its gross margin and achieve high sales growth [5][6] Summary by Sections Market Performance - As of August 15, the utility sector declined by 0.5%, underperforming the broader market, while the electricity sector fell by 0.78% and the gas sector rose by 1.75% [4][12][14] Electricity Industry Data Tracking - The price of Qinhuangdao port thermal coal (Q5500) increased by 17 CNY/ton week-on-week, reaching 695 CNY/ton as of August 15. The inventory at Qinhuangdao port rose by 200,000 tons to 5.67 million tons [4][22][32] - The daily coal consumption in inland provinces decreased by 12.61% week-on-week, with available days increasing to 23.9 days [4][34] Natural Gas Industry Data Tracking - As of August 15, the LNG ex-factory price index in China was 4,172 CNY/ton, down 15.60% year-on-year and 1.14% month-on-month. The domestic natural gas production in July was 21.6 billion cubic meters, up 7.8% year-on-year [5][58] - The EU's natural gas supply in week 29 of 2025 was 6.08 billion cubic meters, a year-on-year increase of 4.2% but a week-on-week decrease of 2.8% [5][65] Key Industry News - In July, the national industrial electricity generation was 926.7 billion kWh, a year-on-year increase of 3.1%. The natural gas production in July was 21.6 billion cubic meters, reflecting a growth of 7.4% year-on-year [5][6] Investment Recommendations - For the electricity sector, it is recommended to focus on leading coal power companies such as Guodian Power, Huaneng International, and Huadian International, as well as hydropower operators like Yangtze Power and State Power Investment Corporation [5][6] - In the natural gas sector, companies with low-cost long-term gas sources and receiving station assets are expected to benefit from market conditions, with recommended stocks including Xin'ao Co. and Guanghui Energy [5][6]

Domestic Developments - The Shanghai Stock Exchange has further optimized ESG disclosure standards, aiming to enhance corporate ESG performance and promote sustainable development in line with the "Two Mountains" concept[11] - Guangdong has introduced the first systematic judicial guarantee document for carbon emission quota pledge financing in China, providing a framework for dispute resolution and supervision[14] ESG Financial Products Tracking - As of August 16, 2025, China has issued 3,640 ESG bonds with a total outstanding amount of 5.58 trillion RMB, of which green bonds account for 61.79%[27] - In the past month, 52 ESG bonds were issued, raising 27.8 billion RMB, while in the last year, a total of 1,053 ESG bonds were issued, amounting to 1.24 trillion RMB[27] - The market currently has 911 ESG products with a total net asset value of 1,022.116 billion RMB, with ESG strategy products making up 50.33% of the total[33] - There are 1,051 ESG bank wealth management products, with pure ESG products representing 54.52% of the total[38] Index Performance - As of August 15, 2025, major ESG indices have shown positive performance, with the Wind All A Sustainable ESG index increasing by 3.21% and the CSI 300 ESG index rising by 0.91%[39] - Over the past year, the Wind All A Sustainable ESG index has surged by 27.68%, while the CSI 300 ESG index has increased by 20.24%[39] Expert Insights - Liu Feng, Chief Economist at the Central University of Finance and Economics, emphasizes that ESG disclosure is becoming a key variable influencing bank valuation and sustainable value creation, urging state-owned banks to view ESG reporting as a catalyst for risk management and business innovation[40] Risk Factors - Potential risks include slower-than-expected ESG development, delays in the dual carbon strategy implementation, and insufficient policy advancement[40]

Investment Rating - The investment rating for the environmental industry is "Positive" [2] Core Viewpoints - The environmental industry has seen a surge in bond issuance in the first half of 2025, exceeding 30 billion yuan, primarily for cash replenishment and debt repayment [14][24] - The industry is characterized by a dual focus on "green" and "technological innovation" as reflected in the types of bonds issued [14] - The report highlights the ongoing market performance of the environmental sector, which has outperformed the broader market, with specific sub-sectors showing varied performance [3][6] Summary by Sections Market Performance - As of August 15, 2025, the environmental sector index rose by 1.72%, outperforming the Shanghai Composite Index, which increased by 1.70% [3][6] - The top-performing sub-sectors include solid waste management, which saw a 12.44% increase, while water governance experienced a decline of 0.96% [9][12] Industry Dynamics - Various provinces have issued and planned special bonds totaling 153.98 billion yuan to repay overdue corporate debts, showcasing proactive measures to address financial obligations [24] - The Ministry of Natural Resources released a report indicating that the existing seawater desalination projects in China will increase to 158, with a total capacity of 2.856 million tons per day, marking a 33,300 tons per day increase from 2023 [25] Company Announcements - Zhongke Environmental reported a revenue of 848.20 million yuan in the first half of 2025, a year-on-year increase of 4.48%, with a net profit of 196.26 million yuan, up 19.83% [37] - Chengfa Environment achieved a revenue of 3.216 billion yuan, with an environmental business revenue of 2.454 billion yuan, reflecting a 14.58% increase year-on-year [37] Investment Recommendations - The report suggests maintaining a positive outlook on the environmental sector, particularly in energy conservation and resource recycling, which are expected to sustain high growth [42] - Recommended companies include Hanlan Environment, Xingrong Environment, and Hongcheng Environment, with additional attention to Wangneng Environment and Junxin Co., Ltd. [42]

Group 1: Report Summary - In July 2025, urban investment bonds turned to net financing, with a net financing scale of 26.2 billion yuan, a month - on - month increase of 69.8 billion yuan compared to June but still at the lowest level in recent years. The net financing of exchange - issued urban investment bonds was 29.9 billion yuan, while bonds issued by the association had a net repayment of 3.7 billion yuan. 14 provinces and cities had positive net financing, and 15 had net repayments [4]. - The actual early repayment scale of urban investment bonds in July decreased by 200 million yuan to 9.4 billion yuan compared to June. The number and scale of terminated approvals on the exchange increased month - on - month [4]. - There were 34 first - time bond - issuing entities in July, 4 more than in June. Most of these entities issued bonds through exchange private placement bonds, and only one issued PPN. The funds raised were mainly for new projects, such as project construction, equity investment, etc. [4]. - The proportion of urban investment bonds issued for debt roll - over in July decreased by 0.7pct to 82.0%. The proportion of debt repayment also decreased, while the proportion of supplementary working capital, project construction, and equity investment increased [4]. - In July, 20 entities issued 28 association products with a total scale of 29.37 billion yuan. 47 entities issued 60 exchange products with a total scale of 36.75 billion yuan. The number of new financing entities on the exchange was higher than that of the association [4]. - As of the end of July, 433 urban investment entities declared themselves as "market - oriented operating entities". In July, 30 new entities made such declarations, and 2 entities no longer declared and achieved new financing from the association [4]. Group 2: July Urban Investment Bonds Turned to Net Financing, and the Number of First - Time Bond - Issuing Entities Continued to Rise - In July, urban investment bonds had a net financing of 26.2 billion yuan, a month - on - month increase of 69.8 billion yuan. Exchange products changed from a net repayment of 6.8 billion yuan to a net financing of 29.9 billion yuan, and the association's products had a net repayment of 3.7 billion yuan, with the net repayment scale decreasing by 3.3 billion yuan month - on - month [8]. - Regionally, 14 provinces and cities such as Henan and Hubei had positive net financing, and 15 provinces and cities such as Jiangsu and Heilongjiang had net repayments. In the past year, most provinces' net financing of urban investment bonds declined significantly, with 18 provinces having net repayments [11]. - The actual early repayment scale of urban investment bonds in July decreased by 200 million yuan to 9.4 billion yuan compared to June. The number of bonds with early repayment decreased by 6 to 26, and the cumulative repayment amount decreased by 220 million yuan. The number of bonds with proposed early repayment announced in bondholder meetings increased by 6 to 25, but the proposed repayment amount decreased by 840 million yuan [15]. - The number and scale of terminated approvals on the exchange in July increased month - on - month. There were 19 terminated approvals, 2 more than in June, and the proposed issuance scale increased by 2.939 billion yuan to 25.541 billion yuan [18]. - There were 34 first - time bond - issuing entities in July, 4 more than in June, with a total issuance scale of 19.825 billion yuan. Most of them issued through exchange private placement bonds, and only one issued an association product. The funds were mainly used for new projects, and 18 platforms could achieve new financing [23]. - Most of the first - time bond - issuing entities in July were relatively independent platforms with a shallow connection to local existing bond - issuing platforms in the equity structure and a more pure industrial "bloodline" [25]. Group 3: In July, the Number of New Financing Entities on the Exchange was Still Higher than that of the Association, and New Financing from the Association was Still Dominated by Transportation Infrastructure - The proportion of urban investment bonds issued for debt roll - over in July decreased by 0.7pct to 82.0%. The proportion of debt repayment decreased by 1.0pct, and the proportion of supplementary working capital, project construction, and equity investment increased by 1.7pct [27]. - Beijing, Guizhou, Tianjin, and Tibet still maintained a 100% debt roll - over ratio. The debt roll - over ratio increased in 4 provinces and cities such as Guangxi, Hebei, Fujian, and Jilin, and decreased in 16 provinces and cities such as Yunnan, Jiangsu, and Anhui [27]. - There was one case each on the exchange and the association where debt roll - over could cover interest, but the relevant entities could achieve new financing before, so the policy for entities that can only roll over debt may not have been adjusted [28]. - In July, the association issued 28 products involving 20 entities with a total scale of 29.37 billion yuan. Most of the new financing entities were transportation infrastructure entities, mainly distributed in Shandong, Guangdong, and Jiangsu. Two entities were on the Wind urban investment list [30]. - The exchange issued 60 products involving 47 entities with a total scale of 36.75 billion yuan. Three entities were on the Wind urban investment list. Twelve new financing infrastructure - building entities were not on the list, mainly distributed in Shandong, Henan, and Hubei [31]. Group 4: In July, 30 New Entities Declared Themselves as Market - Oriented Operating Entities, and 2 Entities No Longer Declared and Achieved New Financing from the Association - As of the end of July, 433 urban investment entities declared themselves as "market - oriented operating entities". Regionally, 11 provinces and cities including Zhejiang and Shandong accounted for 84.76% of the total. At the prefecture - level city level, Qingdao had 32 entities, and others had fewer. Most of the declared entities were AA+ [37]. - In July, 30 new entities made market - oriented operation declarations, including 19 from the association and 13 from the exchange, with 2 entities declaring in both. Among the 19 new association - declared entities, 14 had issued association public bonds after October 2023, and 7 had achieved new financing before the declaration. Among the 13 new exchange - declared entities, 11 were for debt roll - over, and 2 achieved new financing [5]. - Two entities that previously declared market - oriented operation in the association no longer declared and achieved new financing, which may be recognized as industrial entities by the association [5]. - As of July 31, the credit spreads of AA - rated market - oriented operating entities and non - declared entities both converged. The deviation between the two widened. The credit spreads of AA(2) - rated entities also showed a similar trend. Overall, the credit spreads of the two types of entities were not significantly differentiated [5].

Group 1 - The report outlines the characteristics of different stages of a bull market, including initial, mid, and late stages, with specific patterns in market performance and capital structure [4][7][10] - In the initial stage of a bull market, there is a brief rapid increase in the index (1-3 months) followed by a period of volatility (6 months to 1 year), with profits either declining or slightly improving, and a noticeable return of institutional and retail investors [7][10] - The mid-stage of a bull market is characterized by a sustained significant increase in the index (6 months to 1 year), strong profit realization, and substantial inflow of retail funds across most sectors [7][10] - In the late stage, the index continues to rise or increases slowly, with profit realization still occurring but at a reduced intensity, and sector differentiation reappears [7][10] Group 2 - The report identifies that the style of large and small caps tends to fluctuate significantly during the mid-stage of a bull market, with different styles dominating the first and second halves of this stage [14][18] - Historical patterns from 2005-2007, 2013-2015, and 2019-2021 show that the initial and late stages of bull markets often exhibit similar styles, while the mid-stage is more prone to style dispersion [14][18][25] Group 3 - The strongest styles and sectors during a bull market often do not perform as well in the mid-stage, with examples from previous bull markets indicating that the leading sectors in the initial and late stages may underperform in the mid-stage [29][30][32] - In the 2005-2007 bull market, the financial sector was the strongest overall, but in the mid-stage, the cyclical sector outperformed while financials lagged [29][30] - The 2013-2015 bull market saw growth as the strongest style overall, but financials led in the mid-stage, with growth underperforming [31][32]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company achieved a revenue of 7.899 billion yuan in H1 2025, representing a year-on-year increase of 10.10%, and a net profit attributable to shareholders of 799 million yuan, up 15.66% year-on-year [1] - In Q2 2025, the company reported a revenue of 4.105 billion yuan, a year-on-year increase of 11.19%, and a net profit attributable to shareholders of 429 million yuan, up 15.35% year-on-year [1] - The company is experiencing recovery in domestic business and continued high growth in overseas markets, with Q2 revenue from domestic and international markets at 2.305 billion yuan and 1.778 billion yuan, respectively, showing year-on-year growth of 4.3% and 22.3% [3] Financial Performance Summary - The company maintained a gross margin of 26.19% in Q2, an increase of 2.27 percentage points year-on-year, driven by an increase in overseas business proportion and a decrease in molasses prices [3] - The company’s Q2 non-recurring net profit reached 405 million yuan, a year-on-year increase of 34.39% [1][3] - The company’s revenue is projected to grow from 13.585 billion yuan in 2023 to 20.694 billion yuan in 2027, with a compound annual growth rate (CAGR) of approximately 10.4% [4] Earnings Forecast - The expected earnings per share (EPS) for 2025, 2026, and 2027 are 1.83 yuan, 2.12 yuan, and 2.46 yuan, respectively, corresponding to price-to-earnings (P/E) ratios of 21X, 18X, and 15X [3][4]

Investment Rating - The report assigns a "Buy" rating for the company, indicating that the stock price is expected to outperform the benchmark index by more than 15% [13]. Core Views - The company is benefiting from the favorable conditions in the peptide industry chain, with significant growth in both its active pharmaceutical ingredient (API) and Contract Development and Manufacturing Organization (CDMO) businesses [2][3]. - The company has achieved impressive financial results in the first half of 2025, with a revenue of 338 million yuan, a year-on-year increase of 69.69%, and a net profit attributable to shareholders of 89 million yuan, up 308.29% [1][2]. Summary by Sections Financial Performance - In H1 2025, the company reported a revenue of 338 million yuan, a net profit of 89 million yuan, and a net cash flow from operating activities of 82 million yuan, reflecting year-on-year growth rates of 69.69%, 308.29%, and 213.22% respectively [1]. - For Q2 2025, the company achieved a revenue of 153 million yuan and a net profit of 42 million yuan, with year-on-year growth rates of 61.50% and 687.09% respectively [1]. Business Segments - The API business generated 189 million yuan in revenue in H1 2025, marking a year-on-year increase of 232.38%, driven by increased exports of Semaglutide and Tirzepatide [2]. - The CDMO business reported revenue of 42 million yuan in H1 2025, a growth of 72.93%, primarily due to the advancement of a clinical project for a client [3]. Capacity Expansion - The company has successfully launched a new production line for peptide APIs with an annual capacity of 395 kg and has made significant progress in its CDMO and API industrialization projects [4][5]. - The company is expected to benefit from the completion of new production lines, alleviating previous capacity constraints and enhancing its growth potential in the peptide industry [5]. Earnings Forecast - The company is projected to achieve revenues of 751 million yuan, 990 million yuan, and 1.21 billion yuan for the years 2025, 2026, and 2027 respectively, with net profits of 191 million yuan, 273 million yuan, and 349 million yuan [7].