Industry Investment Rating - The outlook for the Chinese air transport industry is maintained as stable, with no significant changes expected in the overall credit quality over the next 12-18 months [4][40] Core Views - The domestic passenger market has transitioned to normalized growth post-recovery, while the international passenger market has rapidly recovered to 80% of pre-pandemic levels, and cargo has seen unexpected growth, leading the industry to turn profitable [4][5] - The industry is expected to maintain growth in 2025, albeit at a slower pace for both passenger and cargo segments [5][7] - The supply growth for domestic passenger services is expected to slow, while international passenger services still have room for recovery, and the gap between cargo supply and demand growth is expected to narrow [5][16] - The industry's financial leverage is expected to decrease slightly as profitability improves, and financing channels remain open, supporting debt repayment capabilities [5][30] Industry Fundamentals - The air transport industry has seen steady and rapid growth in 2024, with domestic passenger demand transitioning to normalized growth and international passenger demand recovering to 80% of pre-pandemic levels [7][9] - The total turnover of civil aviation transport reached 1,360.90 billion ton-kilometers from January to November 2024, a 23.10% year-on-year increase and 14.87% higher than the same period in 2019 [7] - Passenger load factor and cargo load factor have fully recovered to 83.40% and 72.00%, respectively, matching 2019 levels [7] Financial Performance - In the first three quarters of 2024, all sampled airlines achieved profitability, with net profits turning positive, and financial leverage decreased while debt repayment indicators improved significantly [30][31] - Operating cash flow for the sampled airlines remained strong, with most exceeding 2019 levels, and capital expenditures continued to grow, driven by aircraft procurement needs [34][36] - The weighted financing cost for newly issued bonds by major airlines decreased by 18 basis points to 1.97%, reflecting lower financing costs [34] Supply and Demand Dynamics - The introduction of new aircraft has slowed, with the industry's fleet growing by only 2.52% in 2023, and the net growth rate for 2024-2026 is expected to be around 3-4% [16][20] - Domestic passenger supply growth is expected to slow in 2025, while international passenger supply still has room for recovery, particularly in East Asia and Southeast Asia [20][21] - Cargo supply and demand growth differences are expected to narrow, with international cargo supply increasing significantly due to the recovery of international passenger flights [21] External Competition - Air transport has a slight edge over railways in domestic passenger growth, and air cargo growth has outpaced both water and rail transport [24][25] - The expansion of aviation infrastructure and the promotion of air-rail intermodal products are expected to further enhance the growth potential of civil aviation passenger transport [24] Cost and Capital Expenditure - Crude oil price fluctuations have reduced operating costs for airlines, but the rapid appreciation of the USD against the CNY in Q4 2024 increased financial expenses [26][29] - Major airlines' capital expenditures are expected to remain high, driven by aircraft procurement needs, with annual expenditures exceeding 20 billion CNY for 2024-2025 [26]

Investment Rating - The report maintains a stable outlook for the Chinese civil airport industry for the next 12 to 18 months, indicating no significant changes in overall credit quality [5][40]. Core Insights - The airport business volume is expected to continue growing in 2025, although the growth rate will slow down compared to previous years. Domestic passenger traffic has returned to a normalized growth pattern, while international passenger traffic has rapidly recovered to about 90% of pre-2019 levels [6][12]. - The report highlights that the financial performance of the airport industry is improving, with reasonable financial leverage and enhanced debt repayment indicators. The industry is expected to maintain a good level of debt repayment capacity due to ongoing government and civil aviation authority support [5][39]. Summary by Sections Analysis Approach - The report analyzes the civil airport industry's demand, operational characteristics of different regional and airport types, supply capacity, and external competition, focusing on the recovery of the civil aviation sector since 2024 [7]. Industry Fundamentals - The airport business volume has shown steady growth, surpassing 2019 levels, with significant increases in passenger and cargo throughput. The report notes that from January to November 2024, passenger throughput increased by 108.2% compared to the same period in 2019 [8][10]. - The report emphasizes the strong correlation between the airport industry's performance and national economic development, with a notable recovery in international routes driven by global economic recovery and improved cooperation with "Belt and Road" countries [8][12]. Financial Performance - The sample companies' net profits have significantly reduced losses, and their operational cash flow has improved. The financial leverage remains at a reasonable level, with a favorable debt structure and improved repayment indicators [28][39]. - The report indicates that the total revenue of the sample companies decreased by 0.92% to 73.376 billion yuan in the first three quarters of 2024, primarily due to declines in non-airport-related business revenues [29]. Conclusion - The civil airport industry is expected to see continued investment and capacity enhancement, with a stable growth outlook for passenger and cargo traffic. The report concludes that while the growth rate may slow, the overall performance of the industry remains positive [40].

Investment Rating - The outlook for the tourism industry is maintained as "stable" with expectations that the overall credit quality will not undergo significant changes in the next 12 to 18 months [4][5]. Core Insights - The domestic tourism market has shown steady revenue growth since 2024, with inbound tourism recovering well due to favorable policies. However, uncertainties in macroeconomic growth and consumer recovery pose challenges for further growth in the tourism sector [5][6]. - The tourism industry has entered a normalization phase, with diverse leisure travel methods emerging and a steady increase in domestic tourism revenue. The overall development of the tourism industry is expected to remain supported despite economic headwinds [4][6]. - The hotel industry is facing pressure with declining occupancy rates and average room prices, while the integration and brand consolidation within the industry are expected to continue [5][27]. Summary by Sections Industry Fundamentals - Since 2024, the tourism industry has transitioned into a normalization phase, with domestic tourism revenue surpassing 2019 levels. Inbound tourism has also benefited from supportive policies, although challenges remain due to low consumer confidence and economic recovery [7][8]. - The tourism sector includes transportation (OTA and offline travel agencies), attractions, and accommodation, with significant growth potential driven by the large population and rising income levels [7][8]. Financial Performance - In the first three quarters of 2024, the tourism industry has shifted from rapid recovery to stable growth, with varying recovery rates across different sub-sectors. The overall profitability and cash flow of tourism enterprises have improved, although debt levels have slightly increased [40][43]. - The sample of tourism enterprises shows that revenue growth is more pronounced in medium-sized enterprises, while some scenic area operators have experienced slight declines in revenue due to reduced visitor numbers [43]. Policy Environment - Recent policies have significantly boosted the tourism industry, with a focus on enhancing tourism product quality and promoting innovative tourism experiences. The government has introduced various measures to facilitate tourism development, including the "Smart Tourism Innovation Development Action Plan" [16][17]. - The emphasis on integrating tourism with other sectors, such as culture and sports, aims to create new consumption scenarios and stimulate growth in the tourism market [16][17]. Scenic Area Operations - Scenic areas have seen increased visitor numbers, but face challenges such as intense competition and low conversion rates of individual visitors. Many scenic areas are implementing ticket discounts to attract visitors and stimulate secondary consumption [22][26]. - The quality of scenic areas is a critical factor influencing their operations, with a noticeable differentiation in market influence among various scenic spots [22][23]. Hotel Industry - The hotel industry is under pressure due to increased supply and declining average room rates and occupancy rates. High-end and chain hotels are better positioned to withstand these challenges [27][32]. - The hotel market is experiencing significant regional disparities, with a growing trend towards brand consolidation and increased chain hotel rates [28][32]. OTA and Travel Agencies - The OTA sector has shown strong growth, benefiting from the overall recovery of the tourism market and the revitalization of inbound and outbound tourism. The performance of offline travel agencies has lagged behind due to changing consumer habits [33][39]. - The online travel market has rapidly expanded, with significant growth in domestic travel agency numbers and a strong recovery in travel volumes compared to pre-pandemic levels [34][39].

Investment Rating - The report rates the environmental operation industry as stable, with specific segments rated as follows: waste incineration power generation is stable, hazardous waste disposal is negative, and agricultural and forestry biomass power generation is stable but weakening [7]. Core Insights - The solid waste treatment industry is a crucial part of the environmental sector, focusing on urban household waste, hazardous waste, and agricultural biomass disposal. The industry is expected to achieve more efficient, environmentally friendly, and sustainable development due to increasing governmental emphasis on environmental protection and continuous innovation in waste treatment technologies [6][10]. - The growth of urban household waste treatment is uneven across regions, with significant potential for growth in underdeveloped areas. The waste incineration sector is entering a post-operation era, focusing on improving operational capabilities and expanding into new markets, including overseas [8][11]. - The hazardous waste disposal sector is experiencing overcapacity and ongoing price wars, with a return to normalcy expected to take time. The agricultural and forestry biomass power generation sector faces challenges due to policy rollbacks and business model issues, necessitating government support for sustainable development [6][25]. Summary by Sections Industry Fundamentals - The urban household waste treatment rate in China is high, with nearly 100% of waste being treated harmlessly. However, growth is concentrated in the less developed central and western regions. The total urban household waste collection volume reached 25.407 million tons in 2023, with an annual growth rate of 2.19% [11][12]. - The waste incineration method has become increasingly dominant, accounting for 82.49% of total waste treatment in 2023. The "waste-free city" initiative has seen significant investment, with over 3,200 projects planned, totaling over 1 trillion yuan [12][13]. Financial Performance - Waste incineration companies have seen improvements in profitability and cash flow, while hazardous waste disposal companies face a divided profitability landscape, with some experiencing losses. Agricultural biomass power generation companies often rely on debt for daily operations, making it difficult to reduce financial leverage [8][10]. - The hazardous waste disposal market is characterized by a large number of small players, leading to intense competition and price wars. The average disposal fee for hazardous waste has significantly decreased, with some regions seeing prices drop by over 50% [25][29]. Conclusion - The report emphasizes that the waste incineration sector is maturing, with a focus on resource integration and operational efficiency rather than merely acquiring new projects. The leading companies are increasingly engaging in mergers and acquisitions to strengthen their market positions [24][33]. - The hazardous waste disposal industry is expected to see a gradual return to normalcy, but overcapacity and price competition remain significant challenges. The agricultural biomass power generation sector requires policy support to reduce reliance on subsidies and achieve self-sustaining growth [34][35].

Investment Rating - The outlook for the Chinese guarantee industry is stable, reflecting the expected basic credit status over the next 12 to 18 months [5][41]. Core Insights - The direct financing guarantee business balance is expected to face growth pressure in 2025, with a shift towards a more diverse range of guarantee bond types and entities, although state-owned enterprises will remain the primary clients in the short term [5][15]. - The overall compensation scale of guarantee companies may increase due to the expansion of policy-based guarantee business and the rising risk-sharing ratio of original guarantee institutions, while the cumulative compensation rate is expected to remain relatively stable [5][27]. - The capital strength of guarantee companies is continuously improving, leading to a stable overall credit level in the guarantee industry [5][41]. Summary by Sections Analysis Approach - The credit analysis of the guarantee industry is primarily influenced by policy trends and industry dynamics, assessing the future business environment for guarantee companies [8]. Industry Policy - Since 2024, central policies supporting small and micro enterprises and agriculture have remained unchanged, with local policies being tailored to enhance specificity and precision [9][10]. Industry Development Status - The number of financing guarantee institutions has been declining for 11 consecutive years, with state-owned institutions accounting for 61.5% of the total [12][13]. - The balance of guarantee business has shown growth, but the growth rate has slowed significantly due to structural adjustments [13][15]. Industry Financial Performance - The capital strength of guarantee companies is crucial for determining their compensation limits, with ongoing enhancements expected as they focus on their primary responsibilities [34][36]. - The overall liquidity risk of guarantee companies is low, although some companies may face liquidity shocks due to high investment asset scales [27][40].

Economic Overview - In 2024, China's GDP growth is projected to reach 5%, with quarterly growth rates of 5.3%, 4.7%, 4.6%, and 5.4% respectively, indicating a "U" shaped recovery[3][16]. - The nominal GDP growth rate for 2024 is estimated at 4.2%, remaining stable compared to 2023, but still below the actual growth due to a negative GDP deflator of -0.8%[16][36]. Structural Characteristics - The contribution of the primary, secondary, and tertiary industries to GDP growth in 2024 is 5.2%, 38.6%, and 56.2% respectively, with the tertiary sector continuing to dominate[20]. - Final consumption's contribution to GDP growth has decreased from 85.6% in 2023 to 44.5% in 2024, reflecting weak domestic demand[20]. Investment Trends - Fixed asset investment growth is projected at 3.2% in 2024, with manufacturing investment increasing by 9.2%, while real estate investment is expected to decline by 10.6%[31]. - Infrastructure investment (excluding electricity) is expected to grow by 4.4%, showing signs of marginal improvement in the fourth quarter[31]. External Trade - Exports are anticipated to grow by 5.9% in 2024, significantly contributing to economic growth, with a notable increase in exports to ASEAN and Belt and Road countries[34]. - The trade surplus is projected to remain robust, with a focus on maintaining export competitiveness despite external pressures[34]. Price Levels and Inflation - The Consumer Price Index (CPI) is expected to grow by 0.2% in 2024, while the Producer Price Index (PPI) remains in negative territory at -2.2%[36]. - Industrial profits are projected to decline by 4.7%, indicating ongoing pressure from low price levels on corporate earnings[36]. Employment and Demographics - The urban unemployment rate is expected to improve slightly to 5.12% in 2024, with a rebound in birth rates observed for the first time since 2017[41]. - These demographic trends are seen as positive indicators for long-term economic stability and growth potential[41]. Policy Recommendations - The economic growth target for 2025 is suggested to be around 5%, with a focus on maintaining consistency between macroeconomic and non-economic policies[8]. - Emphasis on counter-cyclical adjustments and structural reforms is crucial to support economic recovery and growth in the coming years[8].

Investment Rating - The report rates the environmental operation industry as stable for the next 12-18 months, with specific segments rated as follows: waste incineration power generation is stable, hazardous waste disposal is negative, and agricultural and forestry biomass power generation is stable but weakening [8]. Core Insights - The solid waste treatment industry is a crucial part of the environmental sector, focusing on urban household waste, hazardous waste, and agricultural biomass disposal. The industry is expected to achieve more efficient, environmentally friendly, and sustainable development due to increasing governmental emphasis on environmental protection and continuous innovation in waste treatment technologies [9][11]. - The growth of urban household waste treatment is uneven across regions, with significant potential for growth in underdeveloped areas. The waste incineration sector is entering a post-operation era, focusing on improving operational capabilities and expanding into new markets, including overseas [9][12]. - The hazardous waste disposal sector is experiencing overcapacity and ongoing price wars, with a return to normalcy expected to take time. The agricultural biomass power generation sector faces challenges due to policy rollbacks and business model issues, necessitating government support for sustainable development [9][26]. Summary by Sections Industry Fundamentals - The urban household waste treatment rate in China is high, nearing 100% in 2023, but regional disparities exist. The treatment volume reached 25,401.70 million tons in 2023, with a compound annual growth rate of 2.19% over the past decade [12][14]. - Waste incineration has become the dominant treatment method, accounting for 82.49% of total waste treatment in 2023. The "waste-free city" initiative has seen significant investment and project implementation across various regions [13][14]. Financial Performance - Waste incineration companies have seen improvements in profitability and cash flow, while hazardous waste disposal companies face a divided profitability landscape, with some experiencing losses [9][11]. - The agricultural biomass power generation sector is struggling financially, with many companies relying on debt for daily operations, making it difficult to reduce financial leverage [9][35]. Conclusion - The report emphasizes that the environmental operation industry is at a critical juncture, with the need for companies to enhance operational efficiency and explore new markets. The trend of mergers and acquisitions among leading companies is expected to continue, driven by the need for resource integration and operational synergy [9][25].

Investment Rating - The report maintains a stable outlook for the Chinese urban gas industry, indicating that the overall credit quality of the industry is not expected to undergo significant changes in the next 12-18 months [2][36]. Core Viewpoints - The global natural gas market is expected to remain in a state of overall balance, with international natural gas prices stabilizing at relatively low levels. The recovery of imported gas and the continued role of domestic gas as a stabilizing factor are anticipated to support the profitability of domestic urban gas companies [2][36]. - The demand for natural gas in China is projected to grow significantly, driven by industrial use and urban gas consumption, with total natural gas consumption expected to reach between 4,300 billion cubic meters and 4,500 billion cubic meters by 2025 [11][36]. - The industry is characterized by a stable upstream, midstream, and downstream structure, with ongoing adjustments in pricing policies and a trend towards resource optimization and standardized operations [21][36]. Summary by Sections Analysis Approach - The report analyzes the impact of global natural gas supply and demand changes on China's gas imports, summarizing domestic supply patterns, demand changes, and the construction of gas pipeline and storage facilities [5]. Industry Fundamentals - The global natural gas market is expected to remain balanced in 2024, with stable international prices. The demand in Asia is recovering, leading to a projected 2.3% increase in global natural gas demand in 2025 [6][10]. - Domestic natural gas consumption is expected to return to a high growth trajectory, with a 9.9% year-on-year increase in consumption from January to September 2024 [11][36]. Industry Financial Performance - The profitability of urban gas companies is expected to improve further in 2024, supported by the implementation of pricing policies and a recovery in demand. The overall financial leverage of the industry remains stable [26][36]. - In 2023, sample companies in the urban gas sector saw a slight increase in net profit by 10.77%, despite challenges in connection business volumes [28][36]. Conclusion - The report concludes that the urban gas industry in China is expected to maintain a stable outlook, with a balanced supply-demand relationship and improved profitability for urban gas companies in the coming years [36].

Investment Rating - The report maintains a stable outlook for the Chinese water industry, reflecting the expectation that the overall credit quality will not undergo significant changes in the next 12 to 18 months [6][47]. Core Insights - The water industry in China is expected to see policy focus shift towards water conservation, sewage treatment, water pricing adjustments, and water conservancy construction in 2024. This is anticipated to improve the profitability of water companies as water prices are expected to rise [6][29]. - The report highlights that while the net profit levels of water companies may improve slightly in 2024, the collection period for payments has lengthened significantly, leading to weakened cash flow and debt repayment indicators [6][33]. - The report emphasizes the need for water price adjustments due to rising operational costs and the unsustainability of fiscal subsidies, with a broader implementation of price increases expected in 2025 [29][30]. Summary by Sections Industry Fundamentals - The total water resources in China have continued to decline, with a total of 25,782.5 billion cubic meters reported in 2023, which is 6.6% below the average [9]. - The per capita water resource amount is only 1,756.6 cubic meters, representing a decrease of 8.42% year-on-year, categorizing the country as moderately water-scarce [9][11]. - The government has introduced various policies to enhance water resource management and efficiency, including the first administrative regulations on water conservation expected to be published in 2024 [10]. Financial Performance - In 2024, water companies are expected to see a slight improvement in net profit levels, but the overall debt scale and financial leverage are projected to continue increasing due to prolonged payment collection periods [33][46]. - The average cash flow from operating activities for sample companies has shown a decline, indicating weakened cash generation capabilities [42]. - The report notes that the average asset-liability ratio for water companies is 62.94%, reflecting the capital-intensive nature of the industry [39]. Conclusion - The report concludes that the Chinese water industry is stable, with expectations for gradual improvements in profitability driven by policy changes and operational adjustments. However, challenges such as rising costs and payment collection issues remain [46][47].

Investment Rating - The outlook for the Chinese guarantee industry is stable, reflecting the expectation of stable credit quality over the next 12 to 18 months [5][41]. Core Insights - The direct financing guarantee business is expected to face growth pressure in 2025, with a shift towards a more diversified range of guarantee bond types and entities, although state-owned enterprises will remain the primary clients for the foreseeable future [5][15][41]. - The expansion of policy-based guarantee business and the increasing risk-sharing ratio of original guarantee institutions may lead to a rise in overall compensation scale, while the cumulative compensation rate is expected to remain relatively stable [5][23][27]. - The capital strength of guarantee companies is crucial for determining their compensation limits, and the overall liquidity risk in the guarantee industry is low due to strong shareholder backing and smooth financing channels [5][38][41]. Summary by Sections Analysis Approach - The credit analysis of the guarantee industry is primarily influenced by policy trends and industry dynamics, assessing the future business environment for guarantee companies [8]. Industry Policy - Since 2024, central policies supporting small and micro enterprises and agriculture have remained unchanged, with local policies tailored to enhance specificity and precision [9][10]. Industry Development Status - The number of financing guarantee institutions has been declining for 11 consecutive years, with state-owned institutions accounting for 61.5% of the total [12][13]. - The direct financing guarantee business has seen a slowdown in growth due to structural adjustments, while policy-based guarantee business continues to rise [12][15]. Industry Financial Performance - The capital strength of guarantee companies has been improving, primarily through shareholder capital increases and profit accumulation [34][36]. - The overall debt scale of guarantee companies is small, and liquidity risks are manageable, although some companies may face challenges due to high debt leverage [38][39].