19 June 2025 Equity Research Report China Healthcare Equities Demand for innovative drug clinical trials shifting to China amid supportive policies China's clinical efficiency leap: Catching up with the world with strengthened competitiveness. The National Medical Product Administration (NMPA) published a circular in June, proposing to reduce the review and approval time of clinical trial applications for all innovative drugs to 30 days from the previous 60 days, following the pilot programme in July 2024. ...

Investment Rating - The report maintains a "Buy" rating for Prysmian (PRY IM) with a target price of EUR74 and Emerson Electric (EMR US) with a target price of USD153, indicating positive investment opportunities in the capital goods sector [7][15][76][77]. Core Insights - The HSBC Global Composite Capex Lead Indicator declined to -30 in May 2025 from -7 in March 2025, reflecting a slowdown in global capital expenditure due to tariff volatility, although some sectors showed improvement [7][21]. - The FTSE World Industrials Index has shown resilience, increasing by 9% quarter-to-date despite geopolitical uncertainties and tariff-related challenges [7][14]. - The report highlights a potential for positive performance in the FTSE World Industrials over the next six months, supported by a reading of -30 in the lead indicator [7][21]. Summary by Sections Global Capex Outlook - The report forecasts global capex to reach approximately USD3.9 trillion in 2025, with sectors like Software, Airlines, and Computer Hardware expected to lead growth [23][24]. - The capital goods sector is experiencing varied performance across regions, with EMEA showing improvement while APAC and the Americas faced declines [7][31][35]. Regional Analysis - **Americas**: The capex lead indicator declined marginally to -36 in May 2025, with mixed performance across sectors; manufacturing improved while construction and utilities declined [31][32]. - **EMEA**: The capex lead indicator improved to -11 in May 2025, driven by early-cycle improvements in manufacturing and transport [33][34]. - **Asia Pacific**: The capex lead indicator fell to -40 in May 2025, primarily due to a significant decline in mainland China, although Japan showed some improvement [35][36]. Subsector Performance - **Manufacturing**: The lead indicator improved to +13 in May 2025, with positive trends in the Americas and EMEA, while mainland China declined [43][44]. - **Utilities**: The lead indicator rose significantly to +45 in May 2025, indicating strong growth in solar and gas generation investments [56][57]. - **Consumer**: The lead indicator improved slightly to -56 in May 2025, with low-level improvements in the Americas and EMEA, while Japan and mainland China saw declines [58][59]. Stock Recommendations - **Prysmian**: The company is well-positioned to benefit from US electrification trends and has a strong demand outlook in the T&D segment, justifying a Buy rating [68][69]. - **Emerson Electric**: The company is expected to benefit from a transformation towards automation and improved margins, leading to a Buy rating with a target price of USD153 [76][77].

Investment Rating - The report maintains a "Hold" rating for both H and A shares of Dongfang Electric, with target prices raised to HKD12.30 and RMB19.30 respectively [5][9]. Core Insights - Dongfang Electric-H has significantly outperformed Dongfang Electric-A, with a year-to-date increase of 50% compared to 6% for A shares, attributed to improved sentiment towards global power equipment, particularly nuclear [2][9]. - The report indicates that the current share price has largely priced in the positive outlook for global nuclear investment, suggesting limited upside potential without meaningful earnings growth [2][5]. - The company anticipates a steady increase in revenue from nuclear equipment, projecting RMB5 billion in 2025, RMB6 billion in 2026, and RMB7 billion in 2027, which will account for 11% of total revenue by 2027 [3][22]. Summary by Sections Nuclear Power - Global nuclear investment is gaining momentum, with China expected to approve the construction of 10 nuclear plants annually from 2026 to 2030, leading to a projected revenue increase from nuclear equipment [3][22]. - The gross profit margin for nuclear equipment is expected to be between 18-20% from 2025 to 2027, down from previous estimates of 20-30% [3][22]. Coal Power - Orders for coal power equipment are expected to peak in 2026, with a decline in tender sizes from 100GW in 2023 to an anticipated average of 50GW from 2026 to 2030 [4][22]. - The company expects thermal equipment margins to gradually recover, reaching approximately 20% in 2025 [22]. Financial Estimates - Earnings estimates for 2025 have been cut by 9%, while estimates for 2026 and 2027 have been raised by 6% and 14% respectively, reflecting the latest order cycle for thermal and nuclear power equipment [5][25]. - The report highlights that the earnings estimates for 2025 are 12% below consensus, indicating a potentially overly optimistic market outlook [5][9]. Market Performance - The H/A discount for Dongfang Electric has reached a 10-year low of 26%, reflecting the strong performance of H shares compared to A shares [2][5]. - The report notes that the buoyant expectations for global nuclear investment have likely been factored into the recent rally in share prices, suggesting a cautious outlook moving forward [5][9].

Investment Rating - The report maintains a "Hold" rating for CGN Power and Dongfang Electric, with target prices adjusted to HKD2.90 (from HKD2.70) and HKD12.30 respectively. Hyundai E&C is rated as "Buy" with a target price of KRW93,000 [4][10][51]. Core Insights - China's nuclear power capacity is projected to reach 66GW by 2025 and 110GW by 2030, accounting for 7% of the power supply mix by 2030, up from 5% in 2024. This growth is supported by the approval of at least 10 new reactors annually since 2022 [2][9][13]. - The development of small modular reactors (SMRs) is highlighted as a key area for expansion, with several projects nearing commercial operation. However, the high levelized cost of energy (LCOE) for SMRs compared to large-scale reactors and renewables presents challenges for domestic deployment [3][28][30]. - The report emphasizes the importance of equipment and turnkey solution providers in capturing growth in the nuclear sector, as they are better positioned than utilities, which face longer return profiles and tariff variations [4][9]. Summary by Sections China's Nuclear Power Development - China's nuclear capacity is on track to nearly double by 2030, with significant investments in new technologies including SMRs and fusion [9][12]. - The government aims for 70GW of nuclear power by 2025, with expectations to surpass 110GW by 2030 as approvals accelerate [13][30]. Small Modular Reactors (SMRs) - China is advancing in SMR technology, with projects like Shidao Bay 1 and Changjiang Linglong-1 nearing commercial operation. However, the current capex for SMRs is significantly higher than for large-scale reactors [3][28]. - The ACP100 reactor, designed for multiple applications, is set for grid connection by 2026, showcasing China's capability in SMR development [22][28]. Investment Opportunities - Key players in the nuclear supply chain include CGN Power, Dongfang Electric, and Hyundai E&C, with the latter benefiting from global nuclear expansion [4][10]. - The report identifies potential for SMR technology exports, particularly to developing markets with limited grid capacity [32]. Fusion Power - Fusion power is still in early stages, with significant challenges in achieving sustainable reactions. However, China is investing in fusion research with a target to build an industrial prototype by 2035 [33][38]. - Opportunities in the supply chain for fusion-related equipment are anticipated, driven by ongoing experimental projects [42]. Uranium Market - China's reliance on uranium imports remains high, with current prices elevated due to geopolitical tensions. The demand for uranium is expected to double by 2040, driven by the expansion of nuclear capacity [45][49].

Investment Rating - The report maintains a "Buy" rating for Gigadevice Semiconductor and raises the target price to RMB149.50 from RMB140.20, implying approximately 24% upside from the current share price of RMB121.01 [5][12][36]. Core Insights - The report highlights favorable supply-demand dynamics for DDR4, which are expected to continue, benefiting Gigadevice's specialty DRAM business [3][12]. - The 3D DRAM business is progressing well and is anticipated to start generating revenue in the second half of 2025, particularly in mid-end smartphones [4][12]. - The report introduces 2027 estimates, projecting a revenue of RMB14,611 million and a net profit of RMB2,659 million [31]. Summary by Sections Investment Rating - Maintain "Buy" rating and raise target price to RMB149.50 from RMB140.20 [5][12][36]. Financial Performance - The report lowers 2025-26 EPS estimates by 2% and 1% respectively, while still being above consensus by 6% for 2025 [31][32]. - Revenue estimates for 2025-26 are raised by 22% and 28% respectively, driven by expected ASP increases due to supply constraints [33][34]. Market Dynamics - Anticipated 35% increase in specialty DRAM ASP in 2025 due to supply-demand disparity as major suppliers phase out DDR4 products [3][12]. - The total addressable market (TAM) for other DDR4 suppliers is projected to be RMB12 billion, RMB45 billion, and RMB46 billion for 2025-27 [3][12]. Growth Drivers - The 3D DRAM business is expected to be a significant growth engine, with initial revenue generation anticipated in 2H25 [4][12]. - The report emphasizes the stable relationship with CXMT, which will support Gigadevice's capacity expansion in DDR4 [3][12]. Valuation Metrics - The report estimates a net profit CAGR of 34% from 2024-27, adopting a target PE multiple of 52.3x, which is 16% below the historical average [5][36].

Asia Memory Equities Memory prices continue to hover higher Korea Soaring memory prices: We reiterate our positive view on the memory sector. Previously, we highlighted a faster memory turnaround from April (see: Asia Memory report, 10 March). We now see that memory prices are hovering higher throughout 2Q, with a higher level of blended ASPs of +3-8% q-o-q due to 1) earlier phase-out of DDR4 products leading to aggressive purchases on the fear of shortages while solid demand for DDR4 is supported by the le ...

Investment Rating - The report assigns a "Buy" rating to CRL, C&D, China Jinmao, and KE Holdings, indicating a positive outlook for these companies in the real estate sector [8][9]. Core Insights - The recent property tour in Beijing suggests a return to normalcy in the market, with healthy visitation levels and a stabilized market backdrop, indicating that the effects of the recent property crisis have faded [2][4]. - Developers that have upgraded their products are experiencing solid sell-through rates of 60-80%, with a notable increase in the price ceiling for new homes, suggesting a competitive environment driven by product quality [3][4]. - There is a growing expectation for additional policy support to stabilize the market, although concerns about secondary home price weakness appear to be exaggerated [4]. Summary by Sections Market Overview - The property tour in Beijing reaffirmed confidence in the market, with project visits indicating a normalized backdrop and healthy visitation levels [2]. - The primary market is expected to decouple from the secondary market in terms of pricing and product quality [2]. Developer Performance - High-end developers are seeing strong sales, with C&D achieving approximately RMB 6 billion in sales at a recent project, indicating robust demand in the luxury segment [3]. - Developers are expected to benefit from a consistent flow of high-profile projects, which will help revive market sentiment [3]. Policy Expectations - There is a calibrated rise in policy expectations, with market participants anticipating support for sales momentum while being cautious of potential overstimulation by the government [4]. Stock Preferences - The report highlights CRL, C&D, China Jinmao, and KE Holdings as the best-positioned stocks to benefit from price appreciation in the new home market, with specific target prices indicating significant upside potential [5][9]. - C&D is particularly noted for attracting investor interest due to its clear pipeline of new projects [5].

当前如何看创新药 - 对话汇丰晋信李博康 20250618 摘要 汇丰晋信医疗先锋基金致力于捕捉中国内地和香港医疗先锋主题股票市 场的投资机会，均衡配置 A 股和港股，大约各占 50%。 创新药领域虽短期波动，但整体趋势向好，多家公司开始盈利，商业模 式确定性增强，吸引非医药投资者关注。 美国肿瘤大会期间，多家头部创新药公司在 BD 方面取得超预期成果， 获得海外大公司青睐，展现持续超预期能力。 未来一年以上维度内，医药行业尤其是创新药领域将继续修复并上涨， 国内估值底部稳固，商业确定性增强。 传统药企的重估远未结束，业绩稳健增长，利润增速可达 15-20%以上 且可持续，创新实力及国际化经验尚未被市场充分认可。 当前医药基金主要配置思路包括创新型医药资产、转型中的老牌传统制 药企业和自下而上的阿尔法型个股，均衡配置可有效控制风险并实现收 益最大化。 国产创新药具备"又快又好又便宜"的优势，与海外大型药企的需求形 成完美匹配，BD 合作预计不会很快降速。 Q&A 汇丰晋信医疗先锋基金今年以来的表现如何？ 截至 2025 年 6 月 17 日，汇丰晋信医疗先锋基金今年以来的收益率约为 50%，跑赢业绩基准 40 ...

Investment Rating - The report indicates a strong year-to-date return performance for emerging markets (EM) local debt, suggesting a favorable investment outlook despite recent geopolitical risks and rising oil prices [9]. Core Insights - Foreign demand for Korea government debt remains robust, with inflows of USD8.2 billion in May 2025, following USD7.9 billion in April [13]. - Emerging markets are experiencing a shift in foreign investment patterns, with stronger inflows into low yielders like Korea, contrasting with outflows from high yielders [9][10]. - Mexico government debt has seen significant outflows, totaling approximately USD4 billion in 2Q25, indicating a decline in foreign interest [11][12]. Summary by Sections Foreign Capital Flows - Inflows into Korea government debt reached USD8.2 billion in May, with notable investments in Korea Treasury Bonds (KTBs) [13]. - Malaysia government debt attracted USD3 billion in inflows in May, up from USD2.3 billion in April, indicating strong foreign interest [14]. - Colombia government debt saw an increase of USD436 million in foreign holdings in May, contrasting with previous months [15]. Emerging Markets Trends - The report highlights a strong performance of EM local debt, with a focus on positioning for lower rates in low yielders [9]. - Foreign investors increased their holdings in Indonesia and Hungary, while outflows were noted from India, Thailand, and South Africa [10]. - The report emphasizes the importance of geopolitical stability and economic indicators in shaping future investment flows into EM sovereign debt [9].

Investment Rating - The report maintains a risk-on stance heading into H2, with a mild overweight (OW) on equities, high-yield (HY) credit, and emerging market debt (EMD), while underweighting developed market (DM) rates [6][11]. Core Insights - The first half of the year has been characterized by high levels of uncertainty, yet historical data suggests that risk assets tend to rebound following spikes in economic policy uncertainty [2][26]. - Potential catalysts for upside include subdued sentiment, positive activity surprises, renewed optimism around AI, and a weaker US dollar boosting earnings [3][11]. - Despite recent rallies, sentiment and positioning remain subdued, indicating room for further investment in equities, particularly in the US [4][81]. Summary by Sections Economic Outlook - High levels of uncertainty have affected companies and central banks, with the US labor market and UST yields entering a "Danger Zone" at 4.7% [5][19]. - The consensus GDP forecast diffusion index shows tentative signs of improvement, which could support cyclical asset classes [38]. Asset Allocation - The report suggests a tactical allocation favoring equities, particularly in the US, with a focus on emerging markets and eurozone equities [6][12]. - Gold is highlighted as a preferred hedge, while DM rates, especially USTs and JGBs, are underweighted [6][11]. Market Sentiment - Aggregate sentiment indicators are still signaling a buy, with systematic strategies remaining light in positioning, suggesting skepticism towards risk assets [81][83]. - Long-only investors have reduced equity exposure, particularly in HY credit, which is seen as a bullish signal for future performance [4][81]. Earnings Expectations - Q2 EPS growth expectations have been revised down by over 6% since January, but lower expectations may lead to positive surprises [58][60]. - The weaker dollar is expected to benefit US earnings, particularly for large-cap companies, while smaller companies may face challenges [63][64].