Investment Rating - The industry investment rating is "Positive" and maintained [10] Core Insights - The implementation of the national childcare subsidy policy is expected to support the birth rate and subsequently boost the consumption of baby diapers. The annual cash subsidy of 3,600 yuan per child for those under three years old is anticipated to have a positive impact on the market [2][6][13] - The report highlights the success of previous local subsidy trials, such as in Tianmen, Hubei, where birth rates increased significantly following the introduction of supportive measures [7][8] Summary by Sections Event Description - On July 28, the Central Committee and the State Council released the "Implementation Plan for the Childcare Subsidy System," which will provide cash subsidies starting January 1, 2025, for children under three years old [6] Event Commentary - The national rollout of the childcare subsidy policy is expected to enhance its effectiveness, with over 20 provinces already testing similar measures. The report cites Tianmen's experience, where birth rates increased by 17% in 2024, marking a turnaround after years of decline [7][8] - The report estimates that the total subsidy expenditure could exceed 100 billion yuan based on projected birth rates from 2022 to 2024 [13] Company Recommendations - **HaoYue Care**: Expected to have over 50% of its sales from baby diapers this year, with a projected market share increase from approximately 4% in 2019 to 9% by 2024 [8] - **Baiya Co.**: Anticipated to have about 3% of its sales from baby diapers in 2024, with growth driven by e-commerce and regional expansion [8] - **Hengan International**: Expected to have a 6% sales share from baby diapers in 2024, with a dividend payout ratio of 58% and an estimated dividend yield of 6.4% [8]

Investment Rating - The investment rating for the company is "Buy" and is maintained [7]. Core Viewpoints - The company is leveraging popular anime IPs to innovate traditional stationery products, with ongoing expansion of derivative products and international markets [2][4]. - The company has launched various collaborative products with well-known IPs, enhancing product functionality and appeal [9]. - The internationalization strategy includes brand acquisitions and market expansion, aiming for a global presence [9]. Summary by Relevant Sections Recent Developments - The company has partnered with popular anime IPs to create events in 15 cities and 21 locations, with new products launched in 40 flagship stores, 2700 themed stores, and 20000 specialty stores [2][4]. Product Innovation - Since 2025, the company has enhanced its product offerings in traditional stationery through IP collaborations and functional improvements, introducing products like blind box pens and advanced stationery [9]. - Notable collaborations include products themed around "Nezha" and partnerships with Tencent Video for new anime IPs [9]. Derivative Products and Market Strategy - The company is focusing on derivative products through its independent brand "Qizhi Haowan," targeting the two-dimensional economy with various merchandise [9]. - The product range includes badges, acrylic keychains, and other stationery items, leveraging multiple sales channels to reach students [9]. Financial Projections - The company expects steady revenue growth, with projected net profits of 1.54 billion, 1.66 billion, and 1.79 billion yuan for 2025-2027, corresponding to PE ratios of 19, 17, and 16 times [9].

1. Report Industry Investment Rating No relevant content provided in the report. 2. Report's Core View - During the week from July 21 to July 26, 2025, the convertible bond market continued its moderate upward trend, with the price center approaching historical highs, the valuation structure stretching overall, and market trading remaining active. The mid - cap style outperformed, and the valuation repair momentum of low - priced and medium - high - priced varieties increased, reflecting improvements in both credit and elasticity preferences. In the equity market, the growth style was dominant, and the continuous inflow of funds into the science - technology innovation and manufacturing sectors drove the active performance of high - elasticity convertible bond individual bonds. The intensity of style and industry rotation increased significantly, and the short - term emotional upsurge required vigilance against the risk of intensified fluctuations. At the current stage, it is recommended to re - evaluate the risk - return ratio and consider a balanced allocation of high - quality low - and medium - priced individual bonds, taking into account fundamental support, valuation safety, and liquidity [2][5]. - The price center of the current convertible bond market continued to rise, and the median weekly average price approached 130 yuan again. The valuation level entered the historical high - level range, and the allocation strategy may need to be adjusted. As some individual bonds with longer durations entered the forced redemption stage, the outstanding scale continued to shrink, and the capacity shortage intensified. Meanwhile, the intensity of industry and style rotation was at a relatively high level, short - term sentiment heated up, and trading games became more prominent. From the perspective of sector rotation, it is recommended to focus on the mainline opportunities of the "anti - involution" related sectors in the current market and the potential opportunities in the commercial retail and transportation sectors. It is also recommended to re - evaluate the risk - return ratio in a high - level environment, pay attention to the rotation and repair opportunities of large - cap and medium - priced varieties, and take into account valuation safety and liquidity support [9]. - The A - share market continued its volatile upward trend during the week, and capital preference remained concentrated in high - elasticity sectors, with the growth style dominant. Small - and medium - cap stocks in the science - technology innovation sector were active, and the cyclical manufacturing sector also received some incremental capital support, forming the market's mainline, and market hotspots showed a structural spread. At the same time, the performance of the weight sectors was weak, and the capital switch may support the acceleration of the sector rotation rhythm, so caution is needed when participating in sector switches. Overall, it is recommended to continuously pay attention to the fundamental support and capital persistence of high - elasticity sectors, and at the same time, be vigilant against the callback risk in high - congestion directions, and maintain the flexibility and balance of the allocation [9]. - The convertible bond market continued to rise during the week, with the mid - cap style outperforming. The market trading sentiment recovered, but the momentum slowed down marginally. In terms of the valuation structure, looking at different market price intervals, the repair momentum of low - and medium - priced and medium - and high - priced varieties was relatively strong. The low - price interval reflected an improvement in credit preference, while the elastic gaming funds in the high - price interval were slightly cautious. The implied volatility continued to rise, and market fluctuations may be magnified periodically. The emotional upsurge requires vigilance against short - term callback risks. At the sector level, sectors such as medicine, basic chemicals, and power equipment received incremental capital support, and the capital concentration increased significantly. In terms of individual bonds, the outstanding performers were mostly driven by the strength of the underlying stocks, showing characteristics of high elasticity and medium - to - short durations. It is recommended to conduct a structured allocation around the direction that emphasizes both fundamental support and valuation elasticity [9]. - The supply rhythm of the primary market of convertible bonds was stable during the week. A total of 2 new bonds were listed, and 9 companies updated their issuance plans. In terms of terms, a total of 6 individual bonds announced that they were expected to trigger a downward revision, 9 announced no downward revision, and 1 individual bond proposed a downward revision. On the redemption side, 9 individual bonds announced that they were expected to trigger redemption, 5 announced early redemption, and 4 clearly stated no early redemption. Overall, the supply continued to advance, and clause games and redemption events occurred frequently. It is recommended to continuously pay attention to the allocation opportunities brought about by individual bond games [9]. 3. Summary According to Relevant Catalogs 3.1 Look at Stocks and Do Bonds: How to Layout When Convertible Bonds Reach High Levels - The median weekly average price of convertible bonds has reached a historical high. Since 2021, the median weekly average price of convertible bonds has gradually increased, briefly reaching the 130 - yuan mark in January and August 2022 but failing to break through effectively later. Currently, with the strengthening of the equity market and the fact that the outstanding convertible bonds are mostly "old bonds" and some high - priced varieties have entered the forced redemption stage, the market outstanding scale has further shrunk. As the median weekly average price of convertible bonds approaches the 130 - yuan mark again, the current allocation strategy needs to be re - evaluated [14]. - From the perspective of industry rotation, the rotation intensity has reached a relatively high historical level. The sum of the absolute values of the changes in the weekly sector price - increase rankings is used as the sector rotation intensity indicator, and the 24 - week average is used for smoothing. Both the current week's rotation intensity and the smoothed 24 - week average are above the 85th percentile since 2010, in a relatively high - level range [14]. - From the perspective of the net financing scale of the entire A - share market, short - term sentiment may enter an over - heated range. The net financing amount of the entire A - share market is positively correlated with the trend of the Wind All - A Index. The net financing amount is at the 98.9th percentile since 2010, and the 4 - week rolling regression slope of the net financing amount is at the 94.3rd percentile since 2010, reflecting a rapid rise in short - term sentiment and a possible entry into an over - heated range [17]. - From the perspective of industry rotation, it is possible to layout opportunities related to sectors in the fourth quadrant. The first - quadrant sectors are the current market mainline, and the fourth quadrant harbors the potential to become the first - quadrant sectors. In the current week, steel, building materials, non - ferrous metals, and coal were the absolute mainlines, and their relative momentum and relative strength indicators increased significantly compared with the previous week. From the perspective of rotation, in the short term, it is recommended to pay attention to the rotation opportunities of the transportation and commercial retail sectors, which are located in the fourth quadrant and have shown good performance in both relative momentum and relative strength indicators compared with the previous week [22]. - From the perspective of convertible bond style rotation, the large - cap and medium - price indexes may be gestating opportunities. The large - cap index and the medium - value index are weaker than other styles in terms of strength and momentum. As the overall price of convertible bonds continues to rise, some funds may choose to take profits and return to the large - cap and medium - price indexes [23]. 3.2 Market Theme Weekly Review 3.2.1 Equity Theme Weekly Review - During the week from July 21 to July 26, 2025, the trading themes in the equity market were active. The infrastructure industry chain related to the Yajiang Hydropower Project saw a surge in trading popularity. The water conservancy and hydropower index led the major theme directions with a weekly price increase of 27.1% and a weekly trading volume of 142.31 billion yuan. Resource - related themes such as the rare earth index, small - metal index, and lithium - ore index had weekly price increases of 24.5%, 17.5%, and 12.4% respectively. Leading - stock indexes, dragon - tiger list indexes, and limit - up trading indexes had weekly price increases of over 20%. The previously pressured high - amplitude index and market sentiment index recovered, rising by 23.3% and 17.8% respectively, indicating that funds were concentrated in high - elasticity fields. The technology field showed structural differentiation, with the chip design index and semiconductor industry index rising by 7.1% and 4.8% respectively, while the previously popular optical module (CPO) index and optical communication index declined by 2.1% and 0.8% respectively. In terms of capital flow, the trading - theme indexes showed a significant upward trend, and the total weekly trading volume of the leading - stock index, dragon - tiger list index, and limit - up trading index exceeded 970 billion yuan. The weekly trading volume of the high - amplitude index was 633.88 billion yuan, significantly increasing compared with the previous week. Overall, market sentiment was high, and short - term funds were active. It is recommended to pay attention to high - elasticity trading opportunities, be cautious when participating in short - term over - heated themes, and maintain the flexibility and balance of the strategy [27]. 3.2.2 Convertible Bond Weekly Review - During the week from July 21 to July 26, 2025, the convertible bond market continued to rise, and the capital style switched to mid - cap elastic varieties, further enhancing market activity. The overall valuation structure showed a repair trend. Looking at different market price intervals, both the low - and high - price intervals showed signs of recovery, but the valuation of the medium - price range was under pressure, indicating that gaming funds were becoming more cautious. The implied volatility fluctuated upward, and market sentiment heated up. At the industry level, both the cyclical and growth styles performed well, and the trading focus was concentrated in the medicine, power equipment, and chemical sectors. In terms of individual bonds, medium - to - short - duration and high - elasticity bonds were favored by the market and led the price increases. The supply rhythm of the primary market was stable, and structural games continued. In terms of allocation, it is recommended to dig for individual bonds with valuation advantages and underlying - stock catalysts among medium - priced varieties, while also participating in rotation market trends and controlling risks [30]. 3.3 Market Weekly Tracking 3.3.1 Main Stock Indexes Strengthened, and Cyclical Sectors Were the Mainline of the Week - **Main stock indexes continued to strengthen, and small - and medium - cap science - technology innovation stocks performed strongly**: During the week from July 21 to July 26, 2025, the main A - share stock indexes continued to strengthen. The Shanghai Composite Index had a weekly price increase of 1.7%, the Shenzhen Component Index had a weekly price increase of 2.3%, and the ChiNext Index led the main stock indexes with a weekly price increase of 2.8%. In terms of style, small - and medium - cap science - technology innovation stocks performed prominently. The CSI 500 Index rose by 4.6% weekly, the CSI 2000 Index had a weekly price increase of 3.3%, the SSE 50 Index had a weekly price increase of 1.7%, and the STAR 50 Index had a weekly price increase of 1.8%. In terms of capital, the market's main funds continued to flow out net during the week, and the outflow pressure increased. The average daily trading volume of the entire market was about 1.8 trillion yuan, a week - on - week increase of 0.3 trillion yuan. The market showed a net capital outflow on all five trading days of the week. The net capital outflow scale expanded from 1.364 billion yuan on Monday to 4.083 billion yuan on Wednesday, then significantly shrank to 0.3 billion yuan on Thursday, and expanded again to 3.098 billion yuan on Friday, possibly indicating short - term profit - taking behavior by funds. The average daily net outflow of main funds during the week was 2.474 billion yuan, an increase of 0.792 billion yuan compared with the previous week, and market sentiment remained cautious [31]. - **The overall performance of different industries strengthened, and cyclical sectors were relatively dominant**: During the week from July 21 to July 26, 2025, the A - share market continued its structural differentiation pattern, and cyclical sectors performed strongly. The steel sector led the Shenwan primary industries with a price increase of 9.1%. The coal and non - ferrous metal sectors followed closely, with weekly price increases of 9.0% and 8.9% respectively. The building materials and building decoration sectors had weekly price increases of 7.9% and 5.9% respectively, and their trading volumes increased week - on - week, indicating the market's preference for cyclical sectors. The previously leading high - elasticity sectors continued their upward trends. The communication and computer sectors had weekly price increases of 7.5% and 4.1% respectively. The consumer sector showed internal structural differentiation. The beauty care and medicine and biology sectors both had weekly price increases of 5.4%, while the food and beverage and household appliances sectors performed relatively weakly, with only 1.5% and 0.1% weekly price increases respectively. The banking sector performed poorly, with a weekly price decline of 2.3%, leading the decliners among all industries. Overall, market funds were concentrated in cyclical sectors. It is recommended to pay attention to cyclical industries with policy support and definite performance, while also considering the technology - growth sectors. Be cautious about previously high - level sectors and guard against adjustment risks [36]. - **The trading volume showed a significant structural flow pattern**: The market funds showed obvious structural flow characteristics during the week, which was positively correlated with the sector price increases. The electronics sector had the highest average daily trading volume of 181.02 billion yuan, a week - on - week increase of 3.47 billion yuan, accounting for 10.0% of the market. The computer sector had an average daily trading volume of 148.48 billion yuan, a week - on - week decrease of 16.95 billion yuan, but still accounting for 8.2% of the market, indicating a relatively high level of overall capital attention. The non - ferrous metals, machinery, and power equipment sectors received incremental capital support of 35.81 billion yuan, 33.71 billion yuan, and 32.40 billion yuan respectively, and their average daily trading volumes were 115.25 billion yuan, 144.15 billion yuan, and 148.16 billion yuan respectively, indicating a strong willingness to layout in cyclical sectors [37]. - **The market sector congestion showed a differentiated pattern**: Cyclical sectors showed obvious congestion characteristics. The infrastructure industry chain centered on the Yajiang Hydropower Project became the main direction of capital allocation. The building materials and building decoration sectors showed obvious characteristics of high trading volume and high turnover rate, with their trading volume percentiles reaching the 100% historical peak and their turnover rate percentiles being 100% and 99% respectively. The capital concentration and trading activity were both at historical high levels. The steel and non - ferrous metal sectors also maintained high popularity, with their trading volume percentiles reaching the 98th percentile and their turnover rate percentiles being 98% and 95% respectively. The transportation sector had both indicators at the 96th percentile of the historical level, reflecting that under the expectation of policy - driven infrastructure industry chain profitability, the capital layout intensity continued to increase. The internal differentiation of the technology - growth sector intensified. The computer sector maintained high activity with a 90% trading volume percentile and an 84% turnover rate percentile. The electronics sector had an 89% trading volume percentile but only a 63% turnover rate percentile, and the communication sector had a 92% trading volume percentile but only a 40% turnover rate percentile, indicating selective capital allocation. The food and beverage sector had a trading volume percentile of only 45% and a turnover rate percentile of only 55%, indicating a low willingness of capital allocation. Overall, currently, funds are concentrated in infrastructure and some cyclical sectors. It is recommended to pay attention to possible short - term adjustment risks and consider potential rotation sectors that may experience high - low switches [43]. 3.3.2 Convertible Bond Market Continued to Strengthen, and Mid - Cap Convertible Bonds Outperformed - **The convertible bond market as a whole continued to rise, and mid - cap convertible bonds led the way**: During the week from July 21 to July 26, 2025, the convertible bond market continued to rise, and the price increase was slightly larger than that of the previous week. In terms of style, mid - cap convertible bonds performed better. The CSI Convertible Bond Index rose by 2.1% weekly, with the Wind Mid - Cap Convertible Bond Index leading the increase at 2.5%, the large - cap index rising by 1.5%, and the small - cap convertible bond index rising by 2.4%. The market as a whole continued to recover, but the momentum weakened marginally. The leading performance of the mid - cap index reflected that funds were biased towards high - elasticity varieties. In terms of capital, the trading activity of the convertible bond market increased significantly, with an average daily trading volume of about 85.86 billion yuan, a week - on - week increase of 12.02 billion yuan [47]. - **The valuation of the convertible bond market stretched overall by parity interval**: In the low - parity interval, there was a repair trend. The conversion premium rate of the below - 80 - yuan interval stretched by 2.08%, and the 80 - 90 - yuan interval stretched by 1.36%. In the 100 - yuan parity interval, the conversion premium rate of the 90 - 100 - yuan interval stretched by 1.78%, and the 100 - 110 - yuan interval stretched by 1.06%. In the medium - and high - parity intervals, the 110 - 120 - yuan interval stretched by 0.55%, the 120 - 130 - yuan interval compressed by 1.06%, and the above - 130 - yuan interval stretched by 1.19%. The valuation of the convertible bond market stretched overall by parity

Market Performance - The deep stock connect heavy positions led the market with a return of 2.30%[12] - Quantitative fund heavy positions performed well with a return of 1.96%[12] - The overall market speed of industry and style rotation showed a slight decline[4] Sector Analysis - The materials sector led with a return of 5.25%, exceeding the overall A-share market by 3.03%[20] - The energy sector followed with a return of 4.97%, outperforming the benchmark by 2.76%[20] - The real estate and services sector achieved a return of 3.22%, exceeding the benchmark by 1.01%[20] Investment Style - High valuation and high volatility stocks outperformed, while low valuation and low beta stocks adjusted negatively[22] - The high valuation index returned 2.14%, while the low valuation index returned -0.88%[24] Thematic Trends - The "Emission Reduction Pioneer" theme led with a return of 5.95%[26] - The carbon neutrality series also performed well, with the carbon neutrality index returning 3.91%[26] - The overall performance of the carbon neutrality series was strong, indicating a growing focus on sustainability[26]

行业研究丨点评报告丨软件与服务 [Table_Title] 上海发放智能网联汽车示范运营牌照，Robotaxi 产业落地持续推进 丨证券研究报告丨 报告要点 [Table_Summary] 7 月 26 日，在第八届世界人工智能大会（WAIC）上，上海智能网联汽车示范运营牌照发放， 百度智行科技（上海）有限公司、大众交通（集团）股份有限公司、上海赛可出行科技服务有 限公司、上海强生出租汽车有限公司、赛可智能科技（上海）有限公司、小马易行科技（上海） 有限公司、上海锦江出租汽车服务有限公司、上海友道智途科技有限公司等 8 家公司成为首批 获准企业。建议关注 Robotaxi 运营平台及供应链相关标的。 分析师及联系人 [Table_Author] 宗建树 陈耀文 SAC：S0490520030004 SAC：S0490525070002 SFC：BUX668 请阅读最后评级说明和重要声明 %% %% %% %% research.95579.com 1 软件与服务 cjzqdt11111 [Table_Title 上海发放智能网联汽车示范运营牌照， 2] Robotaxi 产业落地持续推进 [Table_Sum ...

Investment Rating - The industry investment rating is "Positive" and maintained [13] Core Viewpoints - The ongoing anti-involution policies are expected to improve profitability in certain sectors, particularly photovoltaic and float glass industries, while also highlighting the potential in cement and carbon fiber sectors [7][8] - The report emphasizes the importance of monitoring policy developments and market dynamics as they significantly influence industry performance [7] Summary by Sections Basic Situation - Cement prices continue to decline, with a national average price of 345.81 yuan/ton, down 3.06 yuan/ton week-on-week and down 46.94 yuan/ton year-on-year [27] - The average shipment rate for cement companies in key regions dropped to 43%, a decrease of 2.7 percentage points week-on-week and 3.0 percentage points year-on-year [9][26] - Glass inventory continues to decrease, with a total inventory of 5,334 million weight boxes, down 225 million weight boxes week-on-week, reflecting a 4.05% decline [10][39] Recommended Sectors - The report recommends focusing on special fiberglass and African chains, with leading companies being the main investment focus for the year [11] - Key sectors with improving profitability include photovoltaic and float glass, driven by internal changes in leading companies like Qibin Group [8] - The waterproofing industry is also highlighted due to price strategy changes from leading companies, such as Oriental Yuhong [8] Market Dynamics - The report notes that the real estate market continues to show weakness, with a year-on-year decline of 9% in transaction area for new homes across 30 major cities [9] - The float glass market is experiencing a rise in prices due to increased speculative demand and replenishment from downstream sectors, with a production capacity utilization rate of 81.56% [10][36] - The carbon fiber industry is benefiting from cost reductions in leading companies, which is expected to enhance profitability [8]

Investment Rating - The report maintains a "Positive" investment rating for the industry [9] Core Viewpoints - The report highlights the ongoing growth of the AI industry in China, particularly following the WAIC 2025 conference, which showcased significant advancements in AI technology and applications [8][53] - It emphasizes the potential of domestic AI models and related infrastructure, suggesting a focus on domestic model manufacturers, AI intelligent entities, and the domestic computing power supply chain [8][53] Summary by Sections Market Performance - The computer sector experienced a slight increase of 1.59% last week, ranking 25th among major industries in the Yangtze River region, with a market share of 8.31% in total trading volume [2][6][16] Key Events - The WAIC 2025 conference took place, featuring over 800 companies and showcasing more than 3,000 cutting-edge exhibits, marking the largest scale in its history [8][40] - The National Data Bureau held a press conference regarding the progress of the data element comprehensive pilot zone construction, indicating a push towards data marketization [30][35] Recommendations - The report recommends focusing on: 1. Domestic large model manufacturers 2. AI intelligent entity-related stocks 3. Domestic computing power supply chain 4. Domestic computing infrastructure-related stocks 5. High-quality data-related stocks [8][53] Industry Developments - The report notes the continuous evolution of the open-source ecosystem in China, with significant projects and collaborations emerging from the WAIC conference [22][29] - It highlights the increasing importance of data elements and their marketization, with pilot zones established in multiple provinces to explore data value realization [30][36]

Investment Rating - The investment rating for the company is "Buy" and is maintained [7]. Core Views - The company announced a shareholder return plan for the next three years (2025-2027), committing to distribute no less than 80% of the annual net profit attributable to shareholders or a minimum of 0.45 CNY per share (including tax), whichever is higher [2][4]. - The company's overseas business is rapidly expanding, with a recent contract for a project in Saudi Arabia valued at approximately 2.012 billion CNY, expected to contribute 8.98% to the 2024 revenue [9]. - The company is focusing on global sales of customized curtain wall products and photovoltaic components, with significant orders signed in Australia and other regions [9]. - The high dividend value is highlighted, with a projected dividend payout ratio of 80% leading to estimated dividend yields of 6.5%, 7.0%, and 7.6% for the years 2025, 2026, and 2027 respectively [9]. Summary by Sections Shareholder Return Plan - The company plans to distribute at least 80% of the annual net profit attributable to shareholders or a minimum of 0.45 CNY per share (including tax) for the years 2025-2027 [2][4]. Overseas Business Expansion - The company secured a significant project in Saudi Arabia, contributing to a 57% year-on-year increase in overseas orders, which now account for 28% of total orders [9]. - The company is expanding its presence in markets such as Saudi Arabia, Dubai, Thailand, and Vietnam [9]. Product Development - The company is actively selling customized curtain wall products and photovoltaic components globally, with notable orders in Australia and other regions [9]. Dividend Policy - The company emphasizes shareholder returns, with a high dividend payout ratio and a commitment to maintaining a minimum dividend per share, enhancing the certainty of dividend payments [9].

Investment Rating - The industry investment rating is "Positive" and maintained [8] Core Viewpoints - Since 2024, some waste incineration and water service companies have announced reductions in loan interest rates and financial expenses, which are expected to contribute positively to their performance in a low-interest environment [2][16] - The report emphasizes the importance of focusing on companies with stable performance, increased dividends, valuation recovery, and declining borrowing costs in the waste incineration and water service sectors [6][40] Summary by Sections Debt Situation - Waste incineration and water service projects typically have a high debt financing ratio, often around 70%. These projects require significant upfront investment over 1-2 years, followed by a 20-30 year period to recover costs through operational income [4][17] - As of the end of 2024, the outstanding debt for major companies in the sector includes: - China Everbright International: 91.7 billion HKD - Conch Venture: 28.2 billion HKD - Hanlan Environment: 16.3 billion CNY - Beijing Enterprises Water Group: 75.5 billion CNY - Yuehai Investment: 23.9 billion HKD - Xingrong Environment: 14.8 billion CNY [4][17] Trends in Debt Ratios - The debt ratio for waste incineration companies has shown a declining trend over the past two years, while the increase in water service companies' debt ratios has slowed down [5][21] Impact of Borrowing Costs - Since 2018, interest rates have been on a downward trend, and as new project loan rates decrease, some companies are replacing high-interest loans. This could lead to further reductions in borrowing costs, positively impacting the performance of waste incineration and water service companies [6][31] - The report recommends focusing on companies in the waste incineration and water service sectors that exhibit stable performance and declining borrowing costs, highlighting companies such as Hanlan Environment, Xingrong Environment, China Everbright International, and others [6][40] Performance Sensitivity to Borrowing Costs - If the average borrowing cost decreases by 10, 30, or 50 basis points in 2025, the estimated profit elasticity for leading companies such as Beijing Enterprises Water Group, China Everbright International, and Green Power will be 3.62%, 10.86%, and 18.10% respectively [38] - If the average borrowing cost reaches 2.50% in 2025, the profit elasticity for top companies will be significantly higher, with estimates of 28.28% for Yuehai Investment and 20.57% for Beijing Enterprises Water Group [38] Industry Growth and Transformation - The waste incineration and water service sectors are experiencing steady growth, improved cash flow, and increased dividends. Recent market reforms are pushing the industry towards a transformation from government-oriented (To G) to business and consumer-oriented (To B, To C) models, which is expected to accelerate valuation recovery [6][40]

Investment Rating - The report maintains a "Positive" investment rating for the communication industry [9] Core Insights - In Q2 2025, the communication sector saw a decline of 0.57%, ranking 31st among major industries, but has increased by 17.08% since the beginning of the year, ranking 7th [2][4] - Public fund holdings in the communication sector significantly increased in Q2 2025, with optical modules being the core focus for allocation [5] - The AI arms race is intensifying as North American tech giants ramp up investments, leading to a "Davis Double Play" moment for the AI industry chain, which is expected to accelerate commercial monetization and boost PE valuations [2][7] - The communication sector's valuation remains low, offering high cost-performance for allocation [7] Summary by Sections Market Performance - The communication sector's performance in Q2 2025 shows a 0.57% decline, with a year-to-date increase of 17.08% [2][4] - Top gainers in the sector include Dongxin Peace (+34.1%), Shen Sanda A (+9.8%), and Dingtong Technology (+9.7%), while the biggest losers are Dekeli (-9.6%), Hengbao Shares (-8.3%), and Yingweik (-7.3%) [4] Fund Holdings - In Q2 2025, public fund holdings in the communication sector rose to 5.37%, an increase of 2.63 percentage points, ranking 6th among 32 major industries [5] - The allocation ratios for communication equipment, telecom applications, and operators were 4.52%, 0.11%, and 0.74%, respectively, with year-on-year increases [5] AI Investment Trends - Major North American companies are significantly increasing their AI investments, with Meta planning two large data centers with a total capacity of 3 GW by 2030 [6] - Oracle and OpenAI are adding 4.5 GW of data center capacity, while Google has raised its capital expenditure plan for 2025 from $75 billion to $85 billion [6] - The report highlights the rapid growth in AI application usage and the increasing demand for AI computing resources [6] Investment Recommendations - Recommended stocks include China Mobile, China Telecom, and China Unicom for operators; Zhongji Xuchuang, Xinyi Sheng, and Tianfu Communication for optical modules; and Fenghuo Communication and Huafeng Technology for domestic computing [7] - AI application recommendations include Heertai, Tuobang Shares, and Meige Intelligent [7]