Investment Ratings - Upgrade New Oriental Education (EDU) to Buy with target prices of US$77/HK$60, representing a potential upside of 54% [1][9] - Downgrade TAL Education Group (TAL) to Neutral with a target price of US$11.54, indicating a downside of 14% [1][18] Core Insights - The report highlights a pair trade strategy to capitalize on the diverging operational trajectories between EDU and TAL, with EDU expected to benefit from operating leverage in K12 education while TAL faces ongoing hardware losses [1][4] - EDU's revenue mix is shifting towards domestic segments, with K9 and Senior High expected to grow from 45% to 55% of revenue by FY26E, leading to significant margin expansion [2][12] - TAL's core Learning Services business provides a solid downside floor, but persistent losses in the Content Solutions segment limit near-term upside potential [3][18] Summary by Sections New Oriental Education (EDU) - The upgrade to Buy is based on a compelling domestic mix-shift story, with structural margin expansion expected as domestic segments grow significantly [2][54] - The report projects that each 1% revenue shift from overseas to domestic will add 8-10 basis points to consolidated margins, creating a multi-year earnings tailwind [2][13] - EDU's current valuation at ~17x NTM P/E does not reflect its intrinsic value, with a sum-of-parts analysis suggesting substantial upside potential [2][55] - Cost discipline measures, including rent cuts and controlled headcount growth, are expected to amplify operating leverage [2][14] - The anticipated dividend plan is viewed as a key near-term catalyst for re-rating [2][15] TAL Education Group (TAL) - The downgrade to Neutral reflects a balanced risk/reward profile, with limited near-term upside due to ongoing operational challenges [3][18] - TAL's core Learning Services business, combined with its net cash position, suggests a firm value floor at US$10.89 per share [3][31] - The Content Solutions segment is projected to continue incurring losses through FY27E, which significantly impacts overall profitability [3][18] - A proprietary lease-based analysis indicates that TAL's center maturity distribution is evolving, which is expected to drive margin expansion over time [20][24] - The report emphasizes the uncertainty surrounding the path to profitability for the Content Solutions segment, with execution risks persisting through FY28E [3][33]

Investment Rating - The report indicates a positive outlook for the gaming industry, estimating total game approvals in 2025 to reach between 1,500 and 1,700, with a significant increase in both domestic and imported titles [6][8]. Core Insights - The National Press and Publication Administration (NPPA) approved a total of 158 games in June 2025, marking the largest monthly batch in the past three years. This includes 147 domestic and 11 imported titles [1][6]. - In the first half of 2025, 812 games were approved, which is 18% and 12% higher than the approvals in the first and second halves of 2024, respectively. This growth is attributed to larger batch sizes for domestic games and more frequent approvals for imported games [6][8]. - Tencent and NetEase are expanding their portfolios with new first-person shooter (FPS) titles, reflecting a rising preference among gamers for this genre [1][6]. Summary by Sections Game Approval Highlights - The June 2025 approval batch included 137 mobile, 8 cross-platform, and 2 PC games domestically, along with 4 mobile, 3 cross-platform, and 4 PC games imported [2][3]. - Notable titles in the imported batch include "CrossFire: Rainbow" and "Squad," both FPS games published by Tencent, and "Wildgate," an FPS by NetEase [3][4]. - The domestic batch featured significant titles such as "Zhu Lu Ma Fa," "Rumble Adventure," and "Soul Land," showcasing a variety of RPGs and mobile games [4][9]. Market Trends - The report anticipates that game companies will accelerate new game launches and updates during the summer season to enhance user engagement and monetization [6][8]. - The increasing approval rates and the variety of genres being introduced suggest a robust growth trajectory for the gaming industry in China [1][6].

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies within it [2]. Core Insights - The production pipeline of the top-5 battery makers is estimated to increase by 6% month-over-month (MoM) and 48% year-over-year (YoY) [1]. - CATL's production pipeline is projected to rise by 13% MoM, while BYD's is expected to decrease by 4% MoM [1]. - Battery materials manufacturers are taking a cautious approach, with electrolyte, cathode, and anode production pipelines estimated to increase by 0%, 3%, and 2% MoM, respectively [1]. - Lithium production is forecasted to grow by 5% MoM, which may pose downside risks to recent lithium market calls if supply continues to increase [1]. Summary by Sections Production Pipeline - The top-5 battery makers are experiencing a significant increase in their production pipeline, with a 6% MoM and 48% YoY growth [1]. - CATL's production pipeline is notably improving, likely due to new production lines rather than demand-driven factors [1]. - BYD's production pipeline is showing a decline of 4% MoM [1]. Battery Materials - The production pipelines for battery materials are showing modest increases, with electrolytes remaining flat, cathodes up by 3%, and anodes up by 2% MoM [1]. - The cautious stance of battery materials makers indicates a wait-and-see approach in the current market environment [1]. Lithium Production - Lithium production is expected to rise by 5% MoM, which could impact recent market forecasts negatively if the supply trend continues [1].

Investment Rating - The report does not explicitly state an overall investment rating for the industry or specific companies [2]. Core Insights - The humanoid robot industry in China is experiencing significant growth, with companies like Orbbec and Rongtai expanding their market presence and revenue projections [3][4]. - The report highlights the increasing demand for components and technologies related to humanoid robots, indicating a robust supply chain development [2][3][4][5][6][7]. Company Summaries Orbbec (688322.SS) - Orbbec's humanoid robot revenue is projected to grow from Rmb4 million in 2024 to Rmb30 million in 2025, with market share in China expected to surpass that of Intel's RealSense [3][10]. - The dollar content for 3D vision technology is anticipated to increase from Rmb4,000-5,000 to Rmb8,000 as it becomes integrated into more parts of the robot [3]. Rongtai (603119.SS) - Rongtai has a ~50% market share in micro ballscrews used in humanoid robots and is expanding its operations by building a factory in Thailand to meet US customer requirements [4][10]. - The company aims to grow its core business by 20%-30% CAGR, driven by rising penetration rates in the humanoid robot supply chain [4]. Hengli (601100.SS) - Hengli plans to reduce the production cost of planetary roller screws to ~Rmb1,000 by the end of 2025 and is considering establishing a plant in Houston, TX, to secure orders from US customers [5][10]. - The company targets a +10% YoY revenue and earnings growth, primarily driven by strong demand in the excavator component business [10]. Bozhon (688097.SS) - Bozhon's subsidiary Linkhou is expected to generate Rmb400 million-500 million in revenue in 2025 by providing components and assembly services to Zhiyuan [6][10]. - The company has sold Rmb20 million-30 million worth of humanoid robot assembly equipment to a leading US humanoid robot maker since 2024 [6]. Wolong (600580.SS) - Wolong aims to become the second electric motor supplier to Zhiyuan, targeting revenue growth from Rmb15 billion in 2024 to Rmb16 billion in 2025 [7][10]. - The company plans to pursue mergers and acquisitions to fuel long-term growth, with net profit expected to rise from Rmb793 million in 2024 to Rmb1.1 billion in 2025 [7][10].

Investment Rating - The report rates Xiaomi shares as "Buy" with a target price of HK$73.00, indicating an expected return of 28.3% from the current price of HK$56.90 [5][32]. Core Insights - Xiaomi's recent product launch event showcased the YU7 electric vehicle (EV) with prices starting at Rmb253,500, which is nearly 4% lower than Tesla's Model Y. Initial orders for the YU7 reached 200,000 within 3 minutes and 289,000 within 60 minutes, exceeding market expectations [1][2][16]. - The company also introduced AI glasses priced at Rmb1,999, powered by Qualcomm's Snapdragon AR1 chip, and a range of new wearables and IoT products, indicating a strong push into the smart device market [3][11]. - The earnings forecast shows significant growth, with net profit expected to rise from Rmb19.3 billion in 2023 to Rmb77.5 billion by 2027, reflecting a robust growth trajectory [4]. Summary by Sections Product Launch - Xiaomi launched the YU7 EV with three models priced at Rmb253,500, Rmb279,900, and Rmb329,900. The basic model is Rmb10,000 cheaper than Tesla's Model Y. The company is offering Rmb55,000 in freebies for early orders [1][2][12]. - The AI glasses feature a 12MP camera, five microphones, and a battery life of 8.6 hours, with an estimated demand of around 300,000 units [3]. - A variety of new wearables and IoT products were introduced, including the Xiaomi Watch S4 and Xiaomi Buds Pro, which are expected to contribute significantly to revenue [11]. Financial Performance - The earnings summary indicates a projected increase in diluted EPS from Rmb0.763 in 2023 to Rmb2.978 in 2027, with a corresponding decrease in P/E ratio from 68.2x to 17.5x, suggesting improved valuation over time [4]. - The report highlights a positive outlook for the smartphone business and gross margin due to subsidy-driven demand in China and normalized component costs [32]. Valuation - The valuation of Xiaomi shares is based on a sum-of-the-parts (SOTP) approach, with a target set at 25.5x for core smartphone, IoT, and internet services business earnings, and 1.5x for smart EV sales, reflecting a favorable growth outlook [33].

Investment Rating - The report upgrades the GDP growth forecast to 5.0% for 2025E from 4.7% amid continued deflation [3][4][27]. Core Insights - A divergent domestic recovery is expected to continue, with the new economy gaining momentum while the property sector struggles [3][27]. - The report anticipates a 10bps rate cut and a 50bps RRR cut in 25H2E, alongside an estimated RMB500bn extra quasi-fiscal stimulus [3][52][56]. - Exports have shown resilience, with a growth of 6.0% YoY in dollar terms and 8.8% YoY in real terms in the first five months of 2025, despite high tariffs [4][11][18]. Economic Outlook - The report highlights a steady macro backdrop that could fuel structural highlights for investing [3]. - The household savings rate remains elevated at 41.1% in 25Q1, indicating cautious consumer behavior [28][33]. - Retail sales growth is anticipated at 4.7% YoY in 2025E, with a moderation to 4.5% YoY in the latter half of the year [28]. Export Dynamics - The impact of US tariffs is significant, with exports to the US dropping by -21.0% YoY in April and -34.5% YoY in May [5][26]. - Structural drivers such as transshipment and supply chain diversification have contributed to the resilience of exports [5][18]. - The report estimates a full payback of the US$32.3bn front-loading effect could drag exports growth by -1.5ppts for the remaining months of the year [26]. Investment Trends - Investment is divided between old and new economies, with AI capex remaining strong while traditional sectors face challenges [43][45]. - The report nudges down the FAI forecast to 4.0% YoY for 2025E, reflecting ongoing property downturn and tariff tensions [43][45]. - High-tech sectors continue to see rapid growth, with FAI up 11.6% YoY in Jan-May, particularly in IT [46][49]. Policy Measures - Policymakers are expected to maintain a wait-and-see approach, with limited urgency for immediate policy changes [47][60]. - The report suggests that structural monetary policies and quasi-fiscal tools will be utilized to support economic growth [52][53]. - No interim budget revision is anticipated, with the Ministry of Finance having a remaining quota of RMB7.5trn for the second half of the year [60][62].

Investment Rating - The report does not explicitly provide an investment rating for the semiconductor and hardware industry, but it highlights significant growth potential in AI infrastructure and related technologies. Core Insights - The constraints of AI growth are multifaceted, including power, compute at scale, connectivity for low latency, and talent, indicating substantial opportunities for infrastructure development [1] - The focus of AI is shifting from training to inferencing, emphasizing the importance of data capture, extraction, and actionable insights [1][2] - Enterprise AI is still in its early stages, while sovereign AI is gaining traction as a national priority for model and infrastructure ownership [1][5] - The agent-to-employee ratio is projected to be 2000:1, suggesting that every enterprise could effectively become a supercomputer, necessitating modern infrastructure [1][5] - The effectiveness of edge AI will depend on the specific use cases and the value they unlock [1] - The cost and speed of inference for reasoning models are creating opportunities for new entrants in the GPU market [1] Summary by Sections AI Hardware Infrastructure - VAST Data is developing an operating system based on a Distributed and Shared Everything architecture to meet the growing data demands of AI [2] - Traditional training methods are overwhelming legacy platforms, necessitating significant infrastructure changes to support scalable AI [2] - The shift from training to inferencing is expected to drive the need for advanced data handling capabilities [2] Market Dynamics - VAST Data has achieved $2 billion in software sales since its inception, with key customers including xAI and Coreweave [6] - The company is cash flow positive and has secured large contracts, indicating strong market demand [6] - VAST perceives traditional storage competitors as lagging, while startups face higher barriers due to the scale and lead VAST has established [6]

Investment Rating - The report maintains a "Buy" rating for JCET Group, Tianshui Huatian, and TongFu Microelectronics, with target prices adjusted to Rmb42.000, Rmb11.500, and Rmb30.000 respectively [5][46][51]. Core Insights - The OSAT industry is expected to continue its revenue and profit growth through 2025, with a projected 20% increase in capex, benefiting back-end equipment vendors [1][3][22]. - The OSAT sector is currently halfway through its recovery phase, with demand driven by industrial, automotive, and advanced packaging for high-performance computing (HPC) and power semiconductors [2][8][21]. - JCET is highlighted as the top pick due to its significant exposure to advanced packaging and new growth potential in automotive and memory sectors [4][28]. Summary by Sections Industry Overview - The OSAT industry has been experiencing growth since 1Q24, on track for its sixth consecutive quarter of year-over-year growth, with inventory levels well managed [2][8]. - Historical growth cycles for the OSAT industry have lasted between 3 to 7 years, indicating that the current cycle is still in its early stages [2][8]. Capacity and Utilization - Overall OSAT capacity utilization rates (UTR) are estimated to be between 60-70% in 1Q25, with expectations for improvement throughout the year [3][17]. - Advanced packaging capacity remains tight, while traditional packaging is expected to drive UTR improvements in the latter half of 2025 [3][18]. Company-Specific Insights - JCET is projected to see a 40% increase in capex this year, while Tianshui Huatian and TongFu Microelectronics are also expected to benefit from the industry's recovery [3][22]. - Tianshui Huatian's reliance on AMD for 50% of its revenue poses a risk amid geopolitical tensions, despite potential gains from the industry recovery [4][26]. Financial Projections - JCET's revenue for 2025 is revised to Rmb41.457 billion, reflecting a 3% increase from previous estimates, with a gross profit margin of 14.1% [40]. - Tianshui Huatian's revenue is expected to remain stable at Rmb16.126 billion for 2025, while TongFu Microelectronics' revenue is adjusted down to Rmb27.441 billion [46][51].

Investment Rating - The report does not explicitly provide an investment rating for the industry or market discussed Core Insights - Concerns over US fiscal debt sustainability have been a recurring theme in discussions, with net interest now constituting 14% of the US fiscal budget, making it the third largest expenditure item after health insurance and social security [2][5] - The Congressional Budget Office (CBO) projects the fiscal deficit for FY2025 to be $1.7 trillion against revenues of $5.2 trillion, with total US debt expected to rise from $36.2 trillion to approximately $60 trillion by 2034 due to proposed spending plans [5][6] - The bond market is currently viewed as stable, with no significant regime change detected despite rising concerns about fiscal sustainability [13][22] - The relationship between equity markets and US fiscal debt is critical, as bond market conditions can influence government spending capabilities [32] Summary by Sections US Fiscal Debt Concerns - The US fiscal debt has significantly increased under both the Trump and Biden administrations, raising investor concerns about the sustainability of this debt [9][26] - Historical underestimations by the CBO regarding US debt levels have led to skepticism about future projections [6][7] Bond Market Dynamics - The US10-year bond yields are currently in the range of 3.84%-4.61%, with expectations of an increase to 3.99%-4.73% by year-end [17][37] - A breakdown below the lower end of this range could indicate a recession, while a rise above the upper end would signal increased concerns about fiscal sustainability [22][23] Investment Opportunities - If bond yields remain stable within the projected range without a recession, significant investment opportunities may arise, particularly in dual digital options [37][39] - The correlation between TLT ETF and US10-year bond yields has been over 96%, indicating a strong relationship that can guide investment strategies [33][34]

Investment Rating - The report does not explicitly provide an investment rating for the lithium industry but indicates a bearish outlook on lithium prices and forecasts [1][2] Core Insights - The lithium market is experiencing a significant surplus, with an estimated surplus of around 6% of total supply for the year [1] - Citi Commodity Team has downgraded their price forecasts for lithium salts and spodumene (SC6) by an average of 13% for CY25, 27% for CY26, and 20% for CY27 [1] - Average selling prices (ASPs) for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) have shown a downward trend, with current prices at Rmb60.5k/t and Rmb59.2k/t respectively [2] Summary by Sections Market Outlook - The lithium market is building large surpluses, leading to downward pressure on prices [1] - The price for SC6 spodumene has been downgraded to US$600/t from US$700/t [1] Production and Inventory - China's Li2CO3 production increased by 2% week-over-week to 18,462 tons [2] - Total inventory of Li2CO3 reached 134,901 tons, reflecting a 1% increase week-over-week [2] - Inventory levels for downstream players, smelters, and battery makers showed mixed trends, with downstream inventories decreasing by 1% [2]