Market Overview - During the week of May 12-16, the A-share market experienced fluctuations, with the Shanghai Composite Index, CSI 300, and ChiNext Index rising by 0.76%, 1.12%, and 1.38% respectively, while the CSI 500 slightly decreased by 0.10% [6] - The beauty care sector led the gains with an increase of 3.08%, followed by non-bank financials at 2.49% and automobiles at 2.40%. In contrast, the computer sector fell by 1.26%, defense and military by 1.18%, and media by 0.77% [6] - The current PE (TTM) for CSI 300 is 12.56 times, with a risk premium of 6.28%, which is above one standard deviation. The ChiNext Index has a PE (TTM) of 30.71, below one negative standard deviation [6] Economic Policy Developments - A significant reduction in bilateral tariffs was agreed upon during high-level Sino-U.S. trade talks, with the U.S. canceling 91% of additional tariffs and China reciprocating with a similar reduction. Both sides will establish a mechanism for ongoing trade relationship discussions [6] - The State Council emphasized strengthening the domestic circulation to counter international uncertainties, aiming for stable and high-quality economic development [6] Financial Indicators - As of the end of April, China's social financing scale increased by 8.7% year-on-year, with M2 balance growing by 8%, indicating a faster growth rate compared to the previous month. In the first four months of the year, RMB loans increased by 1 trillion 6 billion yuan [6] - The average interest rate for new corporate loans in April was approximately 3.2%, down by about 4 basis points from the previous month, maintaining a historically low level [6] Market Strategy Insights - The report suggests that the recent tariff negotiations have reduced downward economic pressure, leading to a recovery in market risk appetite. However, this may also imply a potential slowdown in the counter-cyclical policy support [6] - Short-term market indices may enter a phase of consolidation, while mid-term perspectives do not indicate a peak. The report recommends focusing on technology and industries where China has competitive advantages, particularly companies with strong supply chain positions [6] - The beauty care sector is expected to benefit from the upcoming 618 consumption promotion activities, while the technology and military sectors remain favored in the mid-term outlook [6] Valuation Analysis - The report highlights that in terms of PE valuation, sectors such as food and beverage, agriculture, forestry, and animal husbandry are at historical lows, while real estate, computers, and steel are at historical highs. In terms of PB valuation, agriculture, construction materials, and oil and petrochemicals are also at historical lows [27][29]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 22.08 CNY, based on a projected average P/E ratio of 16 times for comparable companies in 2025 [2][3]. Core Insights - The company is facing pressure on quarterly performance, with a notable decline in Q1 2025 net profit by 22.8% year-on-year, attributed to fluctuations in raw material prices [8]. - The sales structure is improving, with export and overseas sales revenue reaching 10.73 billion CNY in 2024, a 14.19% increase, accounting for 49.2% of total tire product revenue [8]. - The company plans to invest 8.71 billion CNY in building a third factory in Brazil, expected to generate annual revenue of 7.758 billion CNY and net profit of 1.213 billion CNY upon completion [8]. Financial Performance Summary - Revenue is projected to grow from 20.165 billion CNY in 2023 to 32.820 billion CNY by 2027, with a CAGR of 18.6% in 2023 and 26.4% in 2025 [6][10]. - The net profit attributable to the parent company is expected to increase from 1.391 billion CNY in 2023 to 2.692 billion CNY in 2027, reflecting a growth rate of 376.9% in 2023 [6][10]. - The company's gross margin is forecasted to stabilize around 20.7% to 21.2% from 2025 to 2027, despite fluctuations in raw material costs [6][10].

Group 1: ESG Policy Developments - The European Parliament approved more lenient CO2 emission targets for passenger cars and vans, allowing manufacturers to average emissions over three years from 2025 to 2027, potentially leading to an additional 26 to 51 million tons of CO2 emissions[11] - Xiamen has become the fourth city in China to release a comprehensive ESG action plan, aiming to enhance ESG awareness and policy frameworks by 2027, with a target of 70% ESG information disclosure rate for listed companies[15][16] - The National Green Finance Committee (NGFS) released its first short-term climate scenario, focusing on the impact of climate change on economic stability over a five-year period[10] Group 2: Domestic ESG Initiatives - The Ministry of Finance is seeking public opinion on revisions to the International Sustainability Disclosure Standards, aiming to reduce reporting burdens while ensuring useful disclosures[13][14] - Shanghai's market supervision bureau issued guidelines to enhance carbon measurement systems, supporting the city's carbon peak and neutrality goals by 2025[17] - Fuzhou's industrial carbon peak implementation plan aims for a peak in CO2 emissions by 2030, focusing on energy efficiency and low-carbon technologies[20] Group 3: Market and Economic Considerations - Domestic and international ESG policy advancements are lagging behind expectations, contributing to a downward trend in macroeconomic conditions[22] - Historical data may not accurately predict future performance, emphasizing the need for cautious investment strategies in the ESG sector[22]

Quantitative Factors and Construction Methods - **Factor Name**: Single-quarter ROE **Construction Idea**: This factor measures the return on equity (ROE) for a single quarter, reflecting the profitability of a company relative to its equity base[2][18] **Construction Process**: The formula for single-quarter ROE is: $ Quart\_ROE = \frac{Net\ Income \times 2}{Beginning\ Equity + Ending\ Equity} $ Here, "Net Income" represents the net profit for the quarter, and "Beginning Equity" and "Ending Equity" are the equity values at the start and end of the quarter, respectively[18] **Evaluation**: This factor performed well in the CSI All Share Index space during the past week, indicating its effectiveness in identifying profitable stocks[2][42] - **Factor Name**: Single-quarter ROA **Construction Idea**: This factor evaluates the return on assets (ROA) for a single quarter, assessing how efficiently a company utilizes its assets to generate profits[18] **Construction Process**: The formula for single-quarter ROA is: $ Quart\_ROA = \frac{Net\ Income \times 2}{Beginning\ Assets + Ending\ Assets} $ "Net Income" is the quarterly net profit, while "Beginning Assets" and "Ending Assets" are the total assets at the start and end of the quarter, respectively[18] **Evaluation**: This factor also demonstrated strong performance in the CSI All Share Index space over the past week, highlighting its utility in asset efficiency analysis[2][42] - **Factor Name**: Standardized Unexpected Earnings (SUE) **Construction Idea**: This factor captures the deviation of actual earnings from expected earnings, standardized by the standard deviation of expected earnings, to measure earnings surprises[18] **Construction Process**: The formula for SUE is: $ SUE = \frac{Actual\ Earnings - Expected\ Earnings}{Standard\ Deviation\ of\ Expected\ Earnings} $ "Actual Earnings" refers to the reported earnings, while "Expected Earnings" and their standard deviation are derived from analyst forecasts[18] **Evaluation**: This factor showed significant positive performance in the National SME Index (CSI 2000) and the ChiNext Index spaces, indicating its effectiveness in identifying earnings surprises[36][39] Factor Backtesting Results - **Single-quarter ROE**: - CSI All Share Index: Weekly return of 1.46%, monthly return of 1.95%, annualized return over the past year of -1.73%, and historical annualized return of 4.88%[42][43] - **Single-quarter ROA**: - CSI All Share Index: Weekly return of 1.09%, monthly return of 1.33%, annualized return over the past year of 0.27%, and historical annualized return of 4.14%[42][43] - **Standardized Unexpected Earnings (SUE)**: - National SME Index (CSI 2000): Weekly return of 6.41%, monthly return of 19.22%, annualized return over the past year of 32.33%, and historical annualized return of 10.98%[36] - ChiNext Index: Weekly return of 7.76%, monthly return of 26.34%, annualized return over the past year of 44.74%, and historical annualized return of 7.82%[39] Composite Factor Portfolio Construction - **MFE Portfolio Construction**: **Idea**: The Maximized Factor Exposure (MFE) portfolio is designed to maximize the exposure to a single factor while controlling for constraints such as industry and style exposures, stock weight deviations, and turnover[55][59] **Optimization Model**: The optimization problem is formulated as: $ \begin{array}{ll} max & f^{T}w \\ s.t. & s_{l} \leq X(w-w_{b}) \leq s_{h} \\ & h_{l} \leq H(w-w_{b}) \leq h_{h} \\ & w_{l} \leq w-w_{b} \leq w_{h} \\ & b_{l} \leq B_{b}w \leq b_{h} \\ & 0 \leq w \leq l \\ & 1^{T}w = 1 \\ & \Sigma|w-w_{0}| \leq to_{h} \end{array} $ Here, $f$ represents the factor values, $w$ is the weight vector, and the constraints include style, industry, stock weight, and turnover limits[55][58] **Evaluation**: The MFE portfolio approach ensures that factor effectiveness is tested under realistic constraints, making it a robust method for evaluating factor performance[55][59] MFE Portfolio Backtesting Results - **CSI 300 Index**: - Weekly excess return: Maximum 1.05%, minimum -0.81%, median 0.00%[46][49] - Monthly excess return: Maximum 3.00%, minimum -1.15%, median 0.30%[46][49] - **CSI 500 Index**: - Weekly excess return: Maximum 1.00%, minimum -0.08%, median 0.40%[50][52] - Monthly excess return: Maximum 2.73%, minimum -0.42%, median 0.99%[50][52] - **CSI 1000 Index**: - Weekly excess return: Maximum 0.82%, minimum -0.26%, median 0.28%[53][54] - Monthly excess return: Maximum 3.52%, minimum -0.08%, median 1.72%[53][54]

Investment Rating - The report maintains a "Positive" investment rating for the non-ferrous and steel industry [5]. Core Viewpoints - The report emphasizes the importance of closely monitoring investment opportunities in strategic metals such as rare earths, especially following significant price increases in overseas markets due to China's export controls [8][13]. - In the steel sector, there has been a notable increase in rebar consumption and a slight rise in overall steel prices, indicating a positive trend in demand [14][38]. Summary by Sections 1. Core Viewpoints: Focus on Strategic Metals - The report highlights the strategic importance of rare earth metals, particularly in light of recent U.S.-China trade discussions that aim to reduce tariffs, which could enhance global economic recovery [8][13]. - Following China's export restrictions on heavy rare earths, overseas prices have surged, with dysprosium and terbium prices in Europe increasing nearly threefold [8][13]. 2. Steel Sector: Price Trends - Rebar consumption has risen significantly, with a reported consumption of 2.6 million tons, marking a 21.69% increase week-on-week [14][18]. - The overall steel price index has seen a slight increase of 0.92%, with hot-rolled coil prices rising to 3,320 CNY/ton, a 1.40% increase, and cold-rolled prices at 3,767 CNY/ton, a 1.31% increase [14][38]. 3. New Energy Metals: Supply and Price Declines - Lithium production in April 2025 was reported at 70,640 tons, a year-on-year increase of 40.38%, but with a slight month-on-month decline [15][42]. - Nickel production has seen a significant year-on-year decrease of 14.18%, while cobalt prices have shown a downward trend [15][44]. 4. Industrial Metals: Copper and Aluminum - Copper smelting fees have slightly increased, with the LME aluminum price settling at 2,474 USD/ton, reflecting a minor week-on-week rise of 0.20% [16]. - The production costs for electrolytic aluminum have decreased significantly, leading to increased profitability for producers [16][28]. 5. Precious Metals: Market Adjustments - Gold prices have experienced a notable decline of 3.72% week-on-week, attributed to reduced demand for safe-haven assets following positive developments in U.S.-China relations [17].

Investment Rating - The report maintains a "Positive" investment rating for the paper and light industry sector [6] Core Viewpoints - The light manufacturing industry index increased by 0.87%, underperforming the market by 0.25 percentage points, while the paper sub-sector declined by 0.47%, underperforming the market by 1.59 percentage points [2][13] - The report highlights that the cultural paper sector is entering an off-season, with pulp and paper prices declining [4] - Recommendations include leading companies in the integrated pulp and paper industry such as Sun Paper (002078, Buy), and special paper leaders like Xianhe Co. (603733, Buy) [4] Summary by Sections Market Review - The light manufacturing industry index rose by 0.87%, while the paper sub-sector fell by 0.47%, ranking 12th among 28 first-level industries [2][13] - The four major sub-sectors of light manufacturing ranked by growth were furniture, packaging and printing, cultural and entertainment products, and paper, with respective increases of 1.67%, 1.09%, 0.21%, and a decrease of 0.47% in the paper sector [2][13] Industry Chain Data Tracking - The report notes a decline in wood pulp product prices, with the average market price for double glue paper dropping by 48 CNY/ton, copper plate paper by 10 CNY/ton, and white card paper by 41 CNY/ton [39] - The profitability of wood pulp products is declining, with small paper companies experiencing a decrease of 78 CNY/ton for double glue paper, while large companies saw a decrease of 48 CNY/ton [49] - Mechanized paper and board production for the first quarter of 2025 reached 38.19 million tons, a year-on-year increase of 3.8% [58] Raw Materials - Domestic waste paper prices slightly increased by 1 CNY/ton, while foreign waste prices remained stable [24] - The report indicates that the inventory of wood pulp at two major Chinese ports reached 1.81 million tons, a 1% increase from the previous month [25][33] Profitability Levels - Profitability for wood pulp products is declining, with small companies seeing significant drops in profitability across various paper types [49] - The report highlights a divergence in profitability for boxboard paper, with low-grade boxboard increasing by 7 CNY/ton while high-grade boxboard decreased by 8 CNY/ton [56]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 12.18 CNY [2][5]. Core Views - The company is experiencing continuous overseas capacity expansion, with the roof business becoming a new growth point [1]. - The revenue and profit forecasts have been adjusted, with projected net profits for 2025-2027 being 963 million, 1.164 billion, and 1.365 billion CNY respectively [2]. - The company’s revenue for 2024 is expected to be 6.377 billion CNY, reflecting an 8.8% year-on-year growth, while the net profit is projected to be 802 million CNY, a 22.7% increase [9]. Financial Information - The company’s financial performance shows a steady increase in revenue and net profit over the years, with 2023 revenue at 5.861 billion CNY and a net profit of 654 million CNY [4]. - The gross margin is expected to improve slightly from 26.9% in 2023 to 27.5% in 2027, while the net profit margin is projected to rise from 11.2% to 13.8% over the same period [4]. - The company’s earnings per share (EPS) are forecasted to grow from 0.40 CNY in 2023 to 0.83 CNY in 2027 [4]. Business Development - The roof business is entering a phase of significant growth, with sales of roof products expected to increase substantially, particularly in the North American market [9]. - The company has achieved a notable increase in sales for its roof products, with a projected revenue of 6.03 billion CNY for roof systems, marking an 80.6% year-on-year growth [9]. - The construction of a new production facility in Mexico is progressing, with the project expected to reach operational status by the end of 2024 [9].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 12.18 CNY [2][5] Core Views - The company is experiencing continuous overseas capacity expansion, with the roof business becoming a new growth point [1] - The revenue and profit forecasts have been adjusted, with projected net profits for 2025-2027 at 963 million, 1.164 billion, and 1.365 billion CNY respectively, reflecting a growth rate of 20.0%, 20.9%, and 17.3% [2][4] Financial Summary - The company’s revenue for 2023 is reported at 5.861 billion CNY, with a year-on-year growth of 13.9%. Projections for 2024, 2025, 2026, and 2027 are 6.377 billion, 7.387 billion, 8.638 billion, and 9.875 billion CNY, respectively, indicating growth rates of 8.8%, 15.8%, 16.9%, and 14.3% [4] - The gross profit margin is expected to improve gradually from 26.9% in 2023 to 27.5% in 2027, while the net profit margin is projected to increase from 11.2% to 13.8% over the same period [4] - The company’s operating profit for 2023 is 802 million CNY, with forecasts of 943 million, 1.107 billion, 1.344 billion, and 1.581 billion CNY for the following years, showing growth rates of 35.7%, 17.6%, 17.4%, and 21.4% [4] Business Development - The roof business is entering a phase of significant growth, with sales of roof products expected to increase substantially, supported by contracts with major clients such as General Motors, Ford, Tesla, and Rivian [9] - The company’s overseas business accounted for 86.4% of its revenue in 2024, with production facilities in Mexico ensuring compliance with trade agreements, thus minimizing the impact of potential tariffs [9] - The construction of a new production facility in Mexico is progressing, with an expected annual output of 700,000 roof products, which is anticipated to be operational by the end of 2024 [9]

Group 1 - The first enhanced strategy ETF tracking the CSI A500 has been established, with a subscription amount of 1.016 billion yuan and 7,765 effective subscription accounts, marking the largest fundraising scale for an enhanced index ETF in the past two years [4][5][7] - The main sales channels for the Morgan CSI A500 Enhanced Strategy ETF include CITIC Securities and Guotou Securities [5][7] - Recently, a number of money market funds have implemented purchase limits, adjusting large subscription limits for distribution channels or directly suspending subscriptions [5][7] Group 2 - In the past year, a total of 1,110 new public funds were established, raising 1.15 trillion yuan, with stock funds accounting for 546 new funds and 330.726 billion yuan raised [8] - This period saw the establishment of 17 new funds, including 8 stock funds, 4 mixed funds, 4 bond funds, and 1 FOF fund, raising a total of 15.363 billion yuan [12] - The largest newly established fund was the Guotai Zhongdai Preferred Investment Grade Credit Bond Index A, with a scale of 5.999 billion yuan [12] Group 3 - The average return for ordinary stock funds last week was -0.69%, while mixed funds returned -0.72% and bond funds returned -0.02% [19] - Year-to-date, ordinary stock funds have an average return of 3.11%, mixed funds 2.31%, and bond funds 0.64% [19]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 23.75 CNY, based on a comparable company PE average of 25 times for 2025 [2][5]. Core Views - The company has shown positive sales growth in its self-owned brands, particularly in the new energy vehicle segment, with significant year-on-year increases [1][8]. - The company is expected to see a recovery in earnings, with projected EPS for 2025-2027 at 0.95, 1.03, and 1.15 CNY respectively [2]. Financial Summary - Revenue is projected to decline from 726,199 million CNY in 2023 to 614,074 million CNY in 2024, before gradually increasing to 742,172 million CNY by 2027, reflecting a compound annual growth rate (CAGR) of approximately 3.9% from 2025 to 2027 [4][9]. - Operating profit is forecasted to recover significantly from 10,376 million CNY in 2024 to 21,995 million CNY in 2027, indicating a strong rebound with a growth rate of 74.4% in 2025 [4][9]. - Net profit attributable to the parent company is expected to rise sharply from 1,666 million CNY in 2024 to 13,325 million CNY in 2027, with a remarkable growth of 560.3% in 2025 [4][9]. - The gross margin is projected to improve from 9.4% in 2024 to 11.1% in 2027, while the net margin is expected to stabilize around 1.7% [4][9]. - The company’s price-to-earnings ratio is forecasted to decrease from 117.3 in 2024 to 14.7 in 2027, indicating an improvement in valuation as earnings recover [4][9].