Investment Rating - The report maintains a "Buy" rating for Wiwynn Corporation with a target price of TWD3,400, implying approximately 32.8% upside from the current price of TWD2,560 [4][21][22]. Core Insights - The report highlights stronger growth in ASIC servers compared to GPU servers, with expectations for continued momentum into the second half of 2025 [2][7]. - Major PC ODMs experienced a significant pull-in in notebook shipments in June 2025, with a 22% month-over-month increase and an 11% quarter-over-quarter rise, exceeding previous guidance [1][3]. - The overall outlook for notebook shipments in the second half of 2025 remains cautious due to unclear consumer demand, with a forecasted year-over-year growth of only 3% [3][4]. Summary by Sections ASIC Server Outlook - The demand for ASIC servers is expected to strengthen in the second half of 2025, particularly driven by AWS's Trainium 2 servers, with a forecast of sequential double-digit growth in rack shipments [2][4]. - The yield rate for GB200 server rack assembly is anticipated to improve from below 50% in the second quarter of 2025 to 60-70% in the second half of 2025 [2]. Notebook Market Analysis - The early pull-in of notebook shipments is largely completed, with a muted growth outlook for the second half of 2025 due to ongoing consumer demand uncertainty [3][4]. - The report estimates a 1% quarter-over-quarter increase in notebook shipments for the third quarter of 2025, which is below seasonal norms [3]. Stock Recommendations - Wiwynn is favored due to its strong revenue outlook supported by accelerating ASIC server shipments, with Oracle expected to contribute 7% to Wiwynn's revenue in 2025 [4][7]. - The report emphasizes the potential for additional upside from Oracle beyond 2025, driven by market share shifts and an expanding addressable market [4].

Investment Rating - JCET: Buy, Target Price RMB 46.80, implying 39% upside from current share price [4][6][36] - Tongfu: Hold, Target Price RMB 27.30, implying 8% upside from current share price [5][6][58] Core Insights - The revenue growth of China's OSAT companies is expected to slow in 2Q25 due to order shifts to Taiwanese peers and seasonal factors, but is anticipated to accelerate in 3Q25 driven by recovering consumer electronics demand and government subsidies [3][9] - JCET's revenue growth is projected to be 19% year-on-year in 2Q25, slowing from 36% in 1Q25, but expected to rebound to 24% in 3Q25 [4][28] - Tongfu's non-AMD business is expected to grow faster than its AMD business, with a projected 16% increase in 2025 compared to 9% for the AMD segment [5][51] Summary by Sections JCET - JCET's Apple business is gaining attention with potential upside for SiP modules due to design changes for foldable phones [4] - The company plans a historic high capex of RMB 8.5 billion in 2025 to support growth in advanced packaging and automotive sectors [16][36] - Revenue estimates for JCET have been adjusted, with total revenue expected to be RMB 41.285 billion in 2025, reflecting a 2% decrease from previous estimates [32][33] Tongfu - Tongfu's revenue guidance for 2025 is an 11% increase, with adjustments reflecting a 6% decrease in total revenue estimates [5][54] - The acquisition of a 26% stake in King Long Suzhou is expected to contribute RMB 150-200 million in investment gains from 2025 to 2027 [5][49] - Revenue from Tongfu's non-AMD segment is projected to grow at 16% in 2025, benefiting from foreign customers adopting a "China-for-China" strategy [5][51] Financial Metrics - JCET's net profit CAGR for 2025-27 is estimated at 33%, down from 41% previously, with a target price reduction from RMB 50.00 to RMB 46.80 [4][37] - Tongfu's net profit estimates for 2025 and 2026 have been lowered by 16% and 13% respectively, reflecting challenges in the AMD segment [56][58] - JCET's current valuation is attractive compared to its peers, trading at a 21.5x 2026e PE multiple, below the sector average [36][37]

Investment Rating - The report indicates growing expectations for a second round of supply-side reform in China, driven by government calls to address cutthroat competition and industrial overcapacity risks [2][8]. Core Insights - The current economic environment suggests that the challenges of excess capacity are broader than those faced during the initial supply-side reforms in 2015, affecting both upstream and downstream sectors [3][4]. - The report highlights that leading industries are already taking steps to mitigate "involutionary competition," with significant production cuts announced in the photovoltaic glass sector [5]. Summary by Sections Supply-Side Reform - The Central Commission for Financial and Economic Affairs and the Ministry of Industry and Information Technology have emphasized the need to combat fierce price wars and overcapacity risks [2]. - The previous supply-side reforms initiated in 2015 focused on five major tasks, which successfully led to a recovery in the Producer Price Index (PPI) [3]. Economic Conditions - China is experiencing its longest streak of contraction in the GDP deflator, with pressures now affecting a wider range of industries, including equipment manufacturing and consumer goods [4]. - The report notes that the property sector's weakness and overinvestment in new industries contribute to the current economic challenges [4]. Industry Responses - Domestic photovoltaic glass companies have collectively announced a 30% reduction in production to address overcapacity [5]. - Other industries, such as cement and steel, are also planning structural adjustments to optimize their operations [5]. Government Policies - The central government is expected to introduce measures to improve the price environment, including higher industry standards and demand-side measures to stabilize the labor and property markets [9]. - Childcare subsidies and work relief programs are being introduced to support employment and boost consumption [14][15].

Investment Rating - The report upgrades SMIC's H/A shares to Buy/Buy from Reduce/Hold, with target prices raised to HKD64.00/RMB148.00 from HKD35.00/RMB92.00, implying upside of approximately 46%/73% [4][8]. Core Insights - SMIC is positioned to benefit from the localization trend in China, emerging as a key player in the semiconductor industry despite facing near-term ASP headwinds due to specific equipment yield issues [1][3]. - The company is expected to maintain margin stability in advanced nodes through a balance of pricing power and yield improvements, with an anticipated ASP premium of 57% under conservative yield assumptions [2][49]. - SMIC's market share in the China Foundry Total Addressable Market (TAM) is projected to grow from 25% in 2024, supported by a 13% capacity expansion from Q2 2024 to Q4 2024 [3][41]. Summary by Sections Financial Performance - Revenue projections for SMIC are estimated at USD 8,030 million for 2024, increasing to USD 13,210 million by 2027, reflecting a year-on-year growth of 27% in 2024 and 15% in 2025 [9][10]. - The net profit is expected to rise from USD 493 million in 2024 to USD 1,918 million in 2027, with EPS estimates increasing from USD 0.06 to USD 0.25 over the same period [9][10]. Valuation Metrics - The report raises the target price-to-book (P/B) multiples for SMIC to 2.9x/7.2x, reflecting a premium due to its strategic positioning and expansion into advanced nodes [4][64]. - The expected EV/sales ratio is projected to decrease from 5.9 in 2024 to 3.5 by 2027, indicating improving valuation as revenue grows [11]. Market Dynamics - The ongoing geopolitical tensions are expected to reinforce China's push for self-sufficiency, benefiting SMIC as it becomes the preferred foundry in China [21][39]. - The report highlights that despite short-term ASP declines, SMIC is likely to emerge as a major beneficiary of the localization trend, with expectations for improved ASP conditions in the second half of 2025 [38][41]. Capacity and Utilization - SMIC's capacity in advanced nodes is projected to reach 25K-30K wafers per month by the end of 2025, with utilization rates expected to improve from 86% in FY24 to 91% in FY25 [49][50]. - The company is anticipated to maintain a high utilization rate compared to peers, reaching full capacity by the first half of 2026 [22][41].

Investment Rating - The report maintains a "Buy" rating for Haid Group with a target price of RMB67.00, indicating a potential upside of 14.4% from the current price of RMB58.59 [5][9][32]. Core Insights - The hog weight reduction has had a limited impact on prices in 2025, with an increase in average hog weight observed in May 2025. This trend is driven by higher profits from larger hogs compared to smaller ones [3][10]. - Stable sow inventories are reported, with a slight month-on-month increase of 0.1% to 40.42 million heads as of the end of May 2025. This stability suggests an abundant hog supply, contributing to a downward trend in hog prices [4][13]. - The Hog Breeding Index has risen approximately 5% since the end of May 2025, indicating profitability in hog breeding during the first half of 2025, which is expected to maintain or increase sow inventories [4][13]. Summary by Sections Hog Weight and Prices - The average hog weight in China increased in May 2025, driven by profit motivations. Farmers are unlikely to comply with directives to reduce hog weight if larger hogs yield higher profits [3][10]. - A reduction in hog weight has led to increased supply in early June 2025, which may have pressured hog prices. However, early sales by large-scale farmers could help ease oversupply in July, potentially leading to price improvements [12][13]. Sow Inventories and Production Indicators - Sow inventories remained stable in the first half of 2025, with significant improvements in production indicators, including an 11% year-on-year increase in market pigs per sow and a 6% increase in piglets per sow [4][24]. - The report suggests that the hog price is on a downward trend for 2025-26, as stable sow inventories act as a leading indicator for supply [4][13]. Company Preferences - Haid Group is preferred due to expected improvements in feed sales volume in both domestic and international markets, with a likely increase in gross profit per ton in 2025 [5][9]. - Muyuan Foods and Wens Foodstuff Group are rated as "Hold," with target prices of RMB39.40 and RMB16.60, respectively, indicating potential downsides of 6.2% and 2.8% from current levels [6][32].

Investment Rating - The report maintains a "Buy" rating for Hysan Development (14 HK), Link REIT (823 HK), and Wharf REIC (1997 HK) [5][32][32] Core Insights - Hong Kong's retail sales grew by 2.4% year-on-year in May 2025, marking the end of a 14-month decline, with expectations for a full-year decline of only 3% in 2025 [2][8] - The positive wealth effect from financial markets and an increase in visitor arrivals, which rose by 12% year-on-year to approximately 24 million in the first half of 2025, are expected to support domestic spending [2][4] - Retailers focusing on discretionary spending, such as CTF Jewellery and Sa Sa International, have shown improved sales, while mall operators like Link REIT are expected to face ongoing rental pressures despite some tenant sales resilience [3][4] Summary by Sections Retail Market Overview - Retail sales in Hong Kong turned positive in May 2025 after a prolonged decline, with a 2.4% year-on-year increase, reversing a 2.3% decline in April [2][8] - The retail market is anticipated to stabilize, with a projected narrowing of the sales decline in the second half of 2025 [2][8] Retail Performance by Category - The largest increase in retail spending was seen in Cosmetics, which rose by 8.7% year-on-year, followed by Other categories at 7.6% and Department Store Sales at 6.3% [9][13] - Certain categories, including Jewellery and Fuels, experienced declines, with Jewellery down 3.2% year-on-year [9][13] Company-Specific Insights - Hysan Development's mall portfolio is expected to benefit from the positive wealth effect, with a target price of HKD 18.60, implying a 28.3% upside from the current price [5][32] - Link REIT is projected to maintain a resilient distribution per unit (DPU) supported by lower borrowing costs and its diversified portfolio, with a target price of HKD 45.00, indicating a 6.6% upside [5][32] - Wharf REIC is also rated as a "Buy," with a target price of HKD 30.00, reflecting a 33.0% upside, driven by expected growth in tourist spending [5][32]

Investment Rating - The report maintains a positive stance on gold and copper, indicating potential investment opportunities in these sectors [7][10]. Core Insights - Copper is currently experiencing historical backwardation, with LME copper spot prices surpassing USD 10,000 per ton, driven by inventory depletion and redirection of shipments to the US [2]. - The Democratic Republic of Congo (DRC) has extended its cobalt export ban, which is expected to support cobalt prices in the near term [3][4]. - Aluminium output reached a new monthly high in May, supported by strong demand and improved smelter margins [5]. - Central banks are aggressively accumulating gold, with expectations for continued increases in official gold reserves over the next year [6]. Summary by Sections Copper - LME copper spot prices exceeded USD 10,000/t, with a backwardation of over USD 300/t for 3-month futures [2]. - Year-to-date inventory at LME has decreased by 180,000 tons, while COMEX inventory increased by 115,000 tons due to tariff concerns [2]. - Ivanhoe has reduced its 2025 copper production guidance by 28% [2]. Cobalt - DRC's cobalt export ban has been extended by three months, impacting supply and supporting price stability [3]. - Cobalt prices surged over 60% following the initial ban and are expected to remain strong due to continued restrictions [3]. Aluminium - Aluminium production in May rose approximately 5% year-on-year to 3.83 million tons, with a year-to-date increase of 4% [5]. - China's aluminium inventory dropped by around 400,000 tons over the past three months, indicating robust downstream demand [5]. Gold - Central banks have accumulated over 1,000 tons of gold annually, significantly higher than the average of 400-500 tons in the past decade [6]. - A survey indicates that 95% of central banks expect to continue increasing their gold reserves in the next 12 months [6]. Market Sentiment - Improved US-China trade talks have positively influenced market sentiment, particularly for base metals [10]. - Despite geopolitical uncertainties, the report suggests a preference for gold and copper investments among China materials [10].

Investment Rating - The report assigns a "Buy" rating to Sangfor, iFlytek, Shiji, Glodon, BOCHU, and Hundsun, indicating a positive outlook for these companies [10][32]. Core Insights - AI applications monetization is a key focus area, with investors showing increased interest in AI-related software despite a weak economy. Companies like Beisen, Yonyou, and Changet are gaining traction with their AI functionalities [4]. - Overseas expansion is another preferred theme among investors, particularly for BOCHU, which is working directly with local integrators [5]. - Investors have mixed views on turnaround stories, favoring growth potential over attractive valuations, with Glodon being highlighted for its cost control [6]. Summary by Sections AI Applications - Investors are keen on AI monetization ideas, especially in mainland China, as AI agents are seen to help enterprises reduce costs. Companies like Beisen and Yonyou are attracting investor interest due to their AI functionalities [4]. Overseas Expansion - BOCHU's overseas expansion is well-received, with investors not overly concerned about tariffs due to its collaboration with local integrators. There is also interest in BOCHU's welding business [5]. Turnaround Stories - Investors prefer growth potential over valuation, with Glodon noted for its effective cost control despite concerns about limited growth in the property sector [6]. Company Ratings and Financials - Sangfor (300454 CH): Buy, Target Price RMB143.00, Upside 54% [7][32] - iFlytek (002230 CH): Buy, Target Price RMB57.00, Upside 21% [7][32] - Shiji (002153 CH): Buy, Target Price RMB11.00, Upside 27% [7][32] - Glodon (002410 CH): Buy, Target Price RMB17.00, Upside 28% [7][32] - BOCHU (688188 CH): Buy, Target Price RMB160.71, Upside 23% [7][32] - Hundsun (600570 CH): Buy, Target Price RMB44.00, Upside 30% [7][32]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The global economic outlook remains uncertain due to ongoing US tariffs and geopolitical tensions, particularly regarding Iran and its nuclear ambitions [3][4][24] - US tariffs are expected to have a significant impact on both US and global growth, with a projected decline in global GDP from 2.8% in 2024 to 2.5% in 2025 [8][22] - The average effective tariff rate for US consumers has reached 15.8%, the highest since 1936, indicating a substantial increase in trade costs [9][46] Summary by Sections Key Forecasts - Global GDP growth is forecasted to slow from 2.8% in 2024 to 2.5% in 2025 and further to 2.3% in 2026 [22] - Developed economies are expected to grow at a slower pace compared to emerging markets, with the US GDP growth projected at 1.8% for 2025 [22] Economic Environment - The report highlights the volatility in global trade data due to frontloading ahead of US tariffs, which has led to a surge in imports followed by a sharp decline [12][52] - US tariffs are anticipated to slow trade growth, with global trade growth projected at just 1.8% in 2025 and 0.6% in 2026 [12][71] Tariff Implications - US tariffs are described as a multi-purpose tool that will likely lead to higher inflation and lower growth in the US, with ongoing uncertainty regarding future tariff negotiations [11][50] - The report notes that countries with lower exposure to US tariffs may benefit, particularly those positioned to supply components currently sourced from mainland China [13][74] Consumer Spending and Inflation - US consumer spending is expected to slow due to weaker employment and slower real wage growth, while inflation pressures may persist despite a general slowdown in growth [15][16] - The report anticipates sticky core inflation in the US, influenced by supply shocks from tariffs and lower immigration [16] Central Bank Actions - The Federal Reserve and European Central Bank are expected to pause rate changes during the summer, amidst ongoing global economic uncertainty [17][31] - Divergences in central bank policies are noted, with the Fed likely to cut rates modestly by the end of 2026 [17] Fiscal Policy and Trade Negotiations - Ongoing US fiscal negotiations are highlighted as critical, with potential implications for economic growth depending on the outcomes [18][19] - The report emphasizes the importance of monitoring trade negotiations and their impact on global economic dynamics [20][33]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Domestic consumption in China is showing signs of improvement, particularly driven by extended sales periods and trade-in programs during shopping festivals [5][10] - The ongoing tensions in the Middle East have led to fluctuations in oil prices, with expectations for Brent crude to stabilize around USD65 per barrel by Q4 2025 if de-escalation occurs [2][4] - The impact of oil price shocks is expected to have a mixed effect on different sectors, with a potential drag on real GDP growth and increases in CPI and PPI [4] Summary by Sections Oil Market - Approximately 18% of China's energy consumption is derived from crude oil, with about 70% of this being imported [3] - The Strait of Hormuz is crucial for China's oil imports, accounting for over 40% of its crude oil shipments [3] - A 10% increase in Brent crude oil prices could reduce real GDP growth by approximately 0.1 percentage points while increasing headline CPI and PPI by around 0.3 and 1.3 percentage points respectively over a year [4] Consumption Trends - The "618" shopping festival in 2025 saw a 15% year-on-year growth in gross merchandise value (GMV), a significant recovery from a 7% decline in 2024 [5] - Trade-in programs contributed approximately RMB380 billion in sales, representing 9% of monthly retail sales in May [5][10] - Service consumption is expected to grow, with events like the Jiangsu Urban Football League driving increased spending in culture and tourism [11] Fiscal Policy and Support - Fiscal spending has focused on improving livelihoods, with social security and education spending rising by 9.2% and 6.7% year-on-year respectively in the first five months of 2025 [13] - The government plans to allocate additional subsidies for trade-in programs, with a total of RMB138 billion earmarked for localities in the coming months [10] - The Lujiazui Forum highlighted China's commitment to financial reforms, including RMB internationalization and technological innovation [15] Real Estate and Land Sales - The property sector remains weak, with property investment down 12% year-on-year in May, affecting land sales revenue which decreased by 11.9% in the first five months [14][47] - New home sales in Tier-1 cities have also seen a year-on-year decline, indicating ongoing challenges in the real estate market [42][52] Economic Activity Indicators - Various economic indicators such as the operating rates in the steel and chemical sectors have shown stability, while coal consumption in major provinces has increased seasonally [16][25][26] - National box office revenues rose by 12%, reflecting a recovery in entertainment consumption [32]