Investment Rating - The report assigns an "OUTPERFORM" rating to the company with a target price of RMB 64.35 [2][4]. Core Insights - The company reported a revenue of RMB 1.589 billion for the first three quarters of 2024, representing a year-on-year increase of 52.75%. The net profit attributable to shareholders was RMB 106 million, up 10.60% year-on-year, with a gross profit margin of 22.01% [2][16]. - In Q3 2024, the company achieved a revenue of RMB 631 million, a 60.90% increase year-on-year and a 27.36% increase quarter-on-quarter. The net profit attributable to shareholders for the same quarter was RMB 41 million, up 40.67% year-on-year [2][16]. - The company focuses on the design, development, and manufacturing of connection system products, which are widely used in various sectors including data communication, new energy vehicles, and industrial control [3][18]. Financial Performance - The company’s R&D expenses for the first three quarters of 2024 were RMB 111 million, a 29.91% increase year-on-year, with an R&D expense ratio of 7.00% [3][17]. - The forecast for net profit attributable to shareholders for 2024-2026 is RMB 185 million, RMB 241 million, and RMB 291 million, with corresponding EPS of RMB 1.17, RMB 1.52, and RMB 1.84 [4][19]. - The company is expected to benefit from the growing demand in the AI sector, particularly in high-speed cable solutions, which positions it favorably in the market [4][19]. Business Segmentation - The company’s product offerings include connectors, cable assemblies, and system modules, which are essential for various applications such as AI data centers and high-speed transmission solutions [3][18]. - The revenue forecast for the company's segments shows significant growth potential, particularly in the new energy vehicle sector, which is expected to grow at a rate of 50% in 2024 [9].

Core Viewpoints - The passive investment trend in A-shares is driven by the "buy the dip" logic of ETFs, with recent expansion of A500 ETFs supporting further development of passive investment [1] - Central Huijin and insurance capital are the main forces driving ETF expansion this year, and institutionalization is expected to remain the primary source of ETF growth in 2025 [1] - Over the long term, the pricing power of passive funds in A-shares is expected to increase, making it more difficult for active funds to achieve excess returns, although certain style investments may still offer opportunities [1] ETF Expansion Pace - Historically, A-share ETFs have expanded rapidly during market downturns, driven by the "buy the dip" trading logic [2] - The current ETF expansion since Q2 2021 has been faster, with net subscriptions playing a key role in the scale expansion [2] - The proportion of index funds in equity-oriented public funds increased from 17% in Q2 2021 to 47% in Q3 2024, with cumulative net subscriptions of passive funds reaching 2.6 trillion yuan during this period [2] - Broad-based ETFs have historically been the main driver of the increase in passive fund share, while sector-themed ETFs have had a limited impact [2] - Recently, the A500 index ETF has become a major force in driving expansion, with net subscriptions exceeding 200 billion yuan since mid-October [2] Institutionalization of ETF Expansion - Historically, institutional investors have expanded faster in bear markets, while retail investors have expanded faster in bull markets [3] - Sector-themed ETFs are more popular among retail investors, while broad-based ETFs are more popular among institutional investors [3] - In the current ETF expansion phase since Q2 2021, institutional investors have played a significant role, with their holdings of index equity funds increasing from 42% in 2021 to 57% in Q2 2024 [3] - Central Huijin has accelerated the current ETF expansion, with estimated cumulative net subscriptions of nearly 800 billion yuan from the beginning of the year to Q3 2024, while insurance capital has also contributed with estimated net subscriptions of over 55 billion yuan [3] Pricing Power of Passive Funds - Historically, the pricing power of passive equity funds in A-shares has been weaker than that of active equity funds [4] - In the current ETF expansion phase, the pricing power of passive funds has significantly increased, with sectors heavily weighted by passive funds, such as non-bank financials and banks, showing considerable gains [4] - Historically, active equity funds in A-shares have outperformed the index over the long term, but the difficulty of achieving excess returns for active funds may increase in the future, although certain styles may still offer advantages [4] Historical Trends and Future Outlook - The development of passive investment in A-shares has been evident during weak market conditions over the past two decades [16] - The current ETF expansion is faster than previous periods, with net subscriptions playing a crucial role in the scale expansion [17] - Broad-based ETFs have historically driven the increase in passive fund share, while sector-themed ETFs have had a limited impact [24] - The A500 index ETF has recently become a major force in driving expansion, with net subscriptions exceeding 200 billion yuan since mid-October [25] Institutional Investor Behavior - Institutional investors tend to expand faster in bear markets, while retail investors expand faster in bull markets [34] - Broad-based ETFs are more popular among institutional investors, while sector-themed ETFs are more popular among retail investors [35] - In the current ETF expansion phase, institutional investors have played a significant role, with their holdings of index equity funds increasing from 42% in 2021 to 57% in Q2 2024 [37] - Central Huijin has accelerated the current ETF expansion, with estimated cumulative net subscriptions of nearly 800 billion yuan from the beginning of the year to Q3 2024 [38] Passive vs Active Fund Performance - Historically, the pricing power of passive equity funds in A-shares has been weaker than that of active equity funds [46] - In the current ETF expansion phase, the pricing power of passive funds has significantly increased, with sectors heavily weighted by passive funds, such as non-bank financials and banks, showing considerable gains [47] - Historically, active equity funds in A-shares have outperformed the index over the long term, but the difficulty of achieving excess returns for active funds may increase in the future, although certain styles may still offer advantages [52]

Investment Rating - The machinery sector is rated as underperforming, with a weekly excess return of -0.43 percentage points and a year-to-date excess return of -2.12 percentage points, ranking 15th among all sectors [2][19][65]. Core Insights - The report emphasizes a proactive fiscal policy and accommodative monetary policy as highlighted in the recent meetings of the Political Bureau of the CPC Central Committee and the Central Economic Work Conference, aiming to boost consumption and investment [3][66]. - In November, the Consumer Price Index (CPI) showed a slight increase, while the Producer Price Index (PPI) decline narrowed, indicating mixed signals in the macroeconomic environment [4][67]. - The report identifies key investment opportunities in sectors such as rail transit equipment, lithium battery equipment, and industrial gases, with specific mentions of partnerships and technological advancements in these areas [7][9][68]. Summary by Sections Macro Policy - The Central Economic Work Conference emphasized the need for a more proactive fiscal policy, increasing the fiscal deficit ratio, and implementing accommodative monetary policy to enhance economic stability and growth [3][66]. Macro Data - November CPI rose by 0.2% year-on-year, while PPI fell by 2.5% year-on-year, with significant price declines in oil and gas extraction and electrical machinery [4][67]. Industrial Gases - Prices for liquid gases have slightly decreased, with liquid oxygen averaging 392 RMB/ton and liquid nitrogen at 399 RMB/ton, while rare gases remained stable [5][68]. Rail Transit Equipment - From January to November, national railway fixed asset investment grew by 11.1% year-on-year, with passenger volume increasing by 12.6% [7]. Lithium Battery Equipment - CATL and Stellantis announced a joint venture to build a lithium battery factory in Spain with an investment of 4.1 billion euros, aiming for a production capacity of 50 GWh by the end of 2026 [7]. Suggested Targets - The report suggests focusing on companies such as CRRC Corporation, Hangzhou Oxygen Plant Group, and Sany Heavy Industry as potential investment opportunities within the machinery sector [14][69].

Core Insights - The report suggests that if Trump is re-elected as President of the United States, the foreign trade environment for China may face disturbances, potentially leading to a phenomenon of "export grabbing" similar to that observed during the 2018-2019 US-China trade tensions [2][3] - Historical data indicates that after the imposition of tariff threats, there was a notable increase in export activities, particularly in sectors heavily reliant on exports to the US, such as automotive and machinery [2][4] - Currently, the phenomenon of export grabbing is not yet evident, but it may gradually emerge once the specific goods affected by tariffs are clarified, especially in sectors like machinery and computers that have a high dependency on the US market [2][5] Trade Tensions Review - The report reviews the 2018-2019 US-China trade tensions, highlighting that during Trump's previous term, there was a high degree of policy commitment in trade areas, and he has indicated intentions to impose further tariffs on Chinese imports if re-elected [3] - The report notes that over half of the export goods were affected during the trade tensions, with significant impacts observed following the announcement of tariff lists [3] Export Grabbing Dynamics - The process of imposing tariffs involves several stages, including investigation, threats, publication of tariff lists, and the effective date of tariffs, with export grabbing becoming more pronounced after the clear announcement of tariff threats [4] - Initial phases of the trade tensions saw a gradual increase in imports from China to the US, but this was likely influenced by uncertainties regarding the extent of tariff imposition [4] Sector-Specific Export Trends - Analysis of the export grabbing phenomenon indicates that sectors such as automotive, electronics, and machinery exhibit more significant export increases compared to lighter industries like textiles and apparel, due to their higher dependency on the US market [5] - The report anticipates that as the timeline for tariff implementation becomes clearer, sectors with high reliance on US exports, particularly machinery and computers, may experience more pronounced export grabbing [5]

Consumption - Automotive consumption remains strong, with retail and wholesale year-on-year growth rates recorded at 32.1% and 54.5% respectively[16] - Non-durable goods consumption, such as textiles and apparel, shows a slight decline, with the China Textile City transaction volume experiencing a seasonal drop but still recording a year-on-year growth of 29.0%[16] - Service consumption, including movie attendance and amusement park visits, has weakened, with movie attendance dropping to -31.3% year-on-year[18] Investment - Infrastructure funding remains relatively abundant, with new corporate medium to long-term loans amounting to 210 billion yuan, a year-on-year decrease of 236 billion yuan[22] - New housing sales in 30 major cities showed a seasonal increase, with average daily sales area at 430,000 square meters, but year-on-year growth fell to 17.2% due to a low base effect[22] - Construction progress in infrastructure and real estate is relatively fast, with the asphalt plant operating rate rising to 29.7%[23] Trade - South Korea's export data improved significantly, with a year-on-year increase of 12.4% in early December, while China's import growth surged to 30.2%[26] - Despite a slight decline in port data, the overall export outlook remains strong due to robust overseas demand and expectations of increased exports[26] Production - Steel production continues to weaken, with a decline in operating rates for blast furnaces and rebar, indicating ongoing challenges in the steel sector[30] - Coal and electricity demand is supported by seasonal increases, with coal consumption in coastal provinces showing a year-on-year positive change[30] Prices - Food prices have shown a marginal decline, with pork prices decreasing by 0.9% month-on-month and a year-on-year increase of 16.0%[42] - The Producer Price Index (PPI) for energy and construction materials remains stable, with coal prices recorded at 716 yuan per ton[43] Liquidity - The funding rates have slightly increased, with R007 and DR007 reported at 1.91% and 1.69% respectively, reflecting a week-on-week rise[45] - The US dollar index has risen to 106.94, with the exchange rate against the yuan at 7.280, indicating a strengthening dollar[45]

[Table_MainInfo] Amber Zhou amber.lh.zhou@htisec.com 宏观研究 证券研究报告 宏观快报点评 2024-12-14 政府借钱，企业还债 ——11 月金融数据点评 [Table_Summary] 投资要点： 11 月社融同比增速在连续 3 个月回落后与 10 月持平，主要得益于政府债和 企业债的拉动，而信贷表现较历史同期偏弱。从结构上看，在地方化债加码 的背景下，政府债融资同比多增，但地方城投平台隐债中的部分贷款被置换 出来，影响了企业信贷的存量。同时，受地产增量政策影响，房地产销售持 续改善，对居民中长期贷款形成一定支撑。9 月下旬以来一揽子增量政策的 影响有所显现。 近日，12 月政治局会议和中央经济工作会议落幕，会议均定调积极，强调将 实施"更加积极有为的宏观政策"，我们认为，财政政策有望边际加码，货币 政策会实现渐进式的降息。从过去经验来看，融资指标是我国经济的领先指 标。往后看，融资增速的变化将是我们观察经济回升情况、政策发力效果的 关键。 风险提示：政策力度不及预期、房地产走势的不确定性。 请务必阅读正文之后的信息披露和法律声明 社融增速持平 地方化 ...

Group 1 - The core conclusion of the report indicates that the 2024 Central Economic Work Conference has set a positive tone, with monetary, fiscal, real estate, and capital market policies expected to work in concert, potentially accelerating domestic economic recovery and transitioning the stock market into a new phase driven by fundamentals [2][10][21] - The report highlights three major policy shifts: a shift to "moderately loose" monetary policy, an emphasis on "more proactive" fiscal policy, and a focus on stabilizing the real estate and stock markets [10][11][12] - The report suggests that mid-to-high-end manufacturing and technology manufacturing are likely to be the mid-term focus areas in the stock market, with a strategic emphasis on consumer opportunities [21][25] Group 2 - The report outlines nine key tasks for economic work in 2025, prioritizing consumption and domestic demand expansion, emphasizing technological innovation, and promoting reform and opening up [21][24] - It notes that the focus on boosting consumption has been elevated to the top priority, indicating a potential increase in support measures for consumer-related policies [21][22] - The report anticipates that the combination of supportive policies and improving fundamentals will clarify the mid-term market direction, particularly in sectors benefiting from supply-demand advantages [21][25] Group 3 - The report provides data indicating that from January to November, exports of home appliances and automobiles have maintained high growth rates, with year-on-year export growth rates of 15.5% and 16.9% respectively [25] - It also mentions that the cumulative year-on-year growth rate of retail sales of consumer goods in October was 3.5%, marking an end to eight consecutive months of decline [17][25] - The report emphasizes that the technology sector is expected to benefit from both policy and technological support, particularly in areas such as digital infrastructure and AI applications [26][27]

Group 1: Economic Policy Insights - The 2024 Central Economic Work Conference indicates a positive tone, with expectations for coordinated monetary, fiscal, real estate, and capital market policies to stimulate economic recovery[2] - The conference emphasizes boosting consumption and expanding domestic demand as top priorities, highlighting a shift in focus towards consumer-driven growth[21] - The fiscal policy is set to be more proactive, with potential increases in the fiscal deficit target to 3.5-4.0% and continued issuance of special bonds to support infrastructure and consumption[11] Group 2: Market Outlook - The stock market is expected to transition into a new phase driven by fundamentals, supported by the implementation of incremental policies[17] - Key economic indicators show improvement, with November manufacturing PMI at 50.3%, PPI turning positive for the first time since June, and a 5.4% year-on-year increase in exports[17] - The A-share net profit growth is projected to rise to 5-10% in 2025, indicating a shift from asset revaluation to fundamental-driven growth[17] Group 3: Sector Focus - Mid-to-high-end manufacturing and technology sectors are identified as mid-term investment themes, with strong fundamentals and supportive policies expected to drive growth[21] - The global humanoid robot market is anticipated to grow at a compound annual growth rate of 50% from 2024 to 2028, indicating significant opportunities in technology manufacturing[26] - Consumer goods sectors are also highlighted for strategic focus, with policies aimed at boosting consumption likely to enhance the performance of retail and service industries[27]

Economic Policy Direction - The Central Economic Work Conference emphasized "implementing more proactive macro policies" to ensure stable growth within a "high-quality" framework, avoiding large-scale stimulus measures[8] - The GDP growth target for 2025 is expected to be around 5%[9] - Fiscal policy is likely to see a marginal increase, with the deficit rate projected to rise to 3.5%-4%[11] Fiscal Policy - The conference proposed to increase the issuance of special bonds and local government bonds, with a total increase expected to reach around 2 trillion yuan[11] - The focus will be on enhancing fiscal spending efficiency and supporting consumption and livelihood improvements[11] Monetary Policy - A gradual interest rate cut is anticipated, with the aim of maintaining liquidity and aligning monetary supply with economic growth targets[15] - The impact of exchange rates on monetary policy is expected to be manageable, with various tools available to stabilize the currency[15] Domestic Demand Expansion - The emphasis on expanding domestic demand has increased, with a shift towards promoting consumption rather than relying heavily on investment[16] - Initiatives to boost consumer spending, such as increasing pensions and enhancing consumption scenarios, are expected to be implemented[16] Real Estate Policy - The focus remains on stabilizing the real estate market without strong stimulus, with existing policies needing effective implementation[18] - Measures include controlling new land supply and promoting the renovation of old housing to meet demand[20] Capital Market Stability - The conference highlighted the importance of stabilizing the stock market to boost confidence in the real economy[22] - Future policies may include structural monetary tools to enhance investor confidence and market activity[22] Industrial Policy - The focus will be on leading technological innovation to develop a modern industrial system, with increased support for basic research and key technologies[23] - The government aims to attract more social capital for venture investments and nurture innovative enterprises[23]

Investment Rating - The report assigns an "Outperform" rating to the company, with a target price of 29.43 RMB based on a 27x PE valuation for 2024 [5][22]. Core Insights - The company is a leader in the global mica insulation materials industry, focusing on R&D, production, and sales of mica insulation, fiberglass cloth, and new energy insulation materials. Its products are widely used in various sectors including cables, household appliances, new energy vehicles, energy storage, photovoltaic, and rail transit [2][22]. - The company's revenue and net profit have shown steady growth, with total revenue from 2021 to Q3 2024 being 877 million, 842 million, 927 million, and 777 million RMB, reflecting year-on-year changes of 30.84%, -3.93%, 10.07%, and 14.75% respectively. The net profit after non-recurring items was 121 million, 125 million, 160 million, and 153 million RMB, with significant growth rates [3][22]. - The mica market is expanding, with a projected CAGR of 18.00% until 2027, reaching 41.81 billion RMB. The company's new energy insulation materials revenue grew by 204.09% year-on-year in H1 2024, indicating strong economic benefits from this segment [4][22]. Financial Performance Summary - The company achieved total revenue of 8.77 billion RMB in 2021, 8.42 billion RMB in 2022, 9.27 billion RMB in 2023, and 7.77 billion RMB in the first three quarters of 2024, with a net profit of 1.21 billion RMB, 1.25 billion RMB, 1.60 billion RMB, and 1.53 billion RMB respectively [3][19]. - The overseas revenue accounted for 28.41% of total revenue in H1 2024, with a gross profit margin of 52.65%, indicating a growing international presence [3][22]. - The company plans to enhance its delivery capacity with new production bases in Wuhan and Malaysia, which are expected to contribute to stable revenue growth [4][22]. Profit Forecast - The forecast for net profit attributable to shareholders is 202 million RMB for 2024, 251 million RMB for 2025, and 312 million RMB for 2026, with corresponding EPS of 1.09, 1.35, and 1.68 RMB per share [5][22].