Macroeconomic Outlook - China's GDP growth target for 2025 is expected to be around 5%, with short-term demand needing a boost[3] - Policy focus remains on high-quality development, with no large-scale stimulus expected, but gradual monetary and fiscal adjustments[2] - Fiscal deficit is projected to increase to around 3.5% in 2025, with special bond issuance likely to exceed 1 trillion yuan[35] Policy and Reform - Monetary policy will continue to adjust gradually, with potential for further deposit and interbank rate cuts[23] - Fiscal policy will focus on debt resolution, risk prevention, and stabilizing the economy, with a moderate increase in fiscal deficit[2] - Supply-side reforms are expected, particularly in industries with low capacity utilization and persistent losses[2] Real Estate and Consumption - Real estate sales and investment are expected to gradually bottom out and recover with policy support[3] - Consumer spending growth remains sluggish, with retail sales growing 3.3% year-to-date in 2024, down from 3.7% in Q2[43] - Improving household income and expectations are crucial for boosting consumption[47] External Trade and Risks - Exports are expected to remain supportive in 2025, but trade surplus may narrow, reducing net exports' contribution to GDP[3] - Risks include policy uncertainties, geopolitical tensions, and potential miscalculations in assumptions[3] Global Market and Asset Allocation - U.S. Treasury yields may face upward pressure if Trump's policies are implemented, increasing market volatility[3] - The dollar index is expected to remain strong, while the euro and yen may weaken[3] - Gold and gold-like assets are recommended for long-term investment due to global economic divergence and currency system changes[102] U.S. Policy Impact - Trump's potential policies, including tax cuts and tariffs, could increase U.S. fiscal deficits and inflation, impacting global markets[74] - U.S. corporate tax rates may be reduced from 21% to 15% for domestic production under Trump's proposals[74] - Tariff increases could lead to stagflationary pressures in the U.S., with potential GDP growth reduction and job losses[79]

Market Performance - Major global asset prices declined last week, with the Hang Seng Index leading the drop at 6.3%[1] - The S&P 500 and Nikkei 225 fell by 2.1% and 2.2% respectively[1] - COMEX copper and London gold prices decreased by 5.7% and 4.5% respectively[1] - The 10-year U.S. Treasury yield rose by 13 basis points to 4.43%[1] U.S. Economic Indicators - October U.S. CPI increased by 2.6% year-on-year, marking a 0.2 percentage point rise from September[16] - Core CPI remained stable at 3.3% year-on-year[16] - October PPI rose by 2.4% year-on-year, exceeding market expectations of 2.3%[16] - Retail sales in October grew by 2.6% year-on-year, with a month-on-month increase of 0.4%[19] Inflation Expectations - As of November 15, the 5-year inflation expectation in the U.S. was 2.39%, down 4 basis points from the previous week[22] - The 10-year inflation expectation decreased by 2 basis points to 2.33%[22] - Market expectations for a 25 basis point rate cut by the Federal Reserve in December decreased slightly from 64.6% to 61.9%[22] European Economic Trends - The Eurozone's industrial production index fell by 2.8% year-on-year in September, a decline of 2.7 percentage points from August[30] - Employment in the Eurozone saw a slight increase of 1.0% year-on-year in Q3[30] Monetary Policy Outlook - Federal Reserve officials indicated a cautious approach to rate cuts, suggesting a potential slowdown in the pace of future cuts[35] - The European Central Bank may consider a rate cut in December, with indications of a more neutral monetary policy stance[36] - The Bank of Japan is still observing the economic outlook before making any rate adjustments[36]

Investment Rating - The report suggests a positive outlook for the photovoltaic (PV) industry, indicating a turning point after a prolonged price decline, with a focus on quality and technology innovation [28]. Core Insights - The PV industry is at the bottom of its cycle, with signs of a turning point emerging. The industry has experienced a significant price decline over nearly two years, and there is a consensus to avoid price competition, emphasizing quality and technology [28][9]. - Domestic demand for PV is expected to grow steadily, supported by frequent government policies aimed at promoting renewable energy. The report highlights that the newly installed capacity in China reached 160.88 GW in the first three quarters of 2024, a year-on-year increase of 24.8% [12][13]. - New technologies are gaining support in bidding processes, which is expected to facilitate rapid promotion. The report notes that new technologies are being recognized for their efficiency and profitability, with significant bidding projects already underway [19][23]. Summary by Sections 1. PV Cycle Bottom and Turning Point Signals - The industry is recognized to be at the bottom of its cycle, with a sample of 52 PV companies showing a net profit of -28.11 billion yuan in Q2 2024, improving to 6.69 billion yuan in Q3 2024. The report indicates that polysilicon prices have stabilized, suggesting a potential recovery [4][6]. - The report emphasizes the importance of industry self-discipline, with multiple meetings held to address issues such as price competition and to promote advanced technology applications [6]. 2. PV Demand: Frequent Domestic Policies and Sustainable Growth - The report outlines several government initiatives aimed at supporting the renewable energy sector, including the 2024-2025 energy conservation and carbon reduction action plan, which provides a framework for achieving dual carbon goals [12][14]. - The report forecasts that domestic installed capacity will reach 250 GW in 2024 and 270 GW in 2025, reflecting a robust growth trajectory [14]. 3. New Technologies Supported by Bidding, Expected Rapid Promotion - New technologies are being supported in bidding processes, with significant projects like the Huaneng Group's procurement of 15 GW of PV components, which includes N-type, HJT, and BC technologies [19][20]. - The report anticipates that 2025 will be a critical year for the development of new technologies, particularly if production challenges can be overcome [23][24]. 4. Investment Recommendations - The report recommends focusing on leading companies at the bottom of the material price cycle, such as Tongwei Co., Longi Green Energy, and JinkoSolar, among others. It also highlights growth opportunities in inverter and energy storage sectors [28].

Investment Rating - The report suggests a focus on companies in the lithium battery supply chain that have pricing elasticity and cost differentiation capabilities, particularly in the midstream sector [2]. Core Insights - The report indicates that 2025 marks the beginning of a new cycle for lithium batteries, with expectations of supply-demand balance restoration and profitability recovery in the sector [2]. - The report highlights continuous innovation in lithium battery technologies, including solid-state and sodium batteries, which are expected to create investment opportunities [2]. - The report emphasizes the significant growth potential in the charging station market, particularly in Europe and the U.S., where there is a substantial gap in public charging infrastructure [4]. - The report notes that the energy storage market is experiencing high growth in both domestic and U.S. markets, with expectations of continued demand in 2025 [6]. - The hydrogen energy sector is projected to maintain high demand for alkaline electrolyzers, while the fuel cell vehicle market faces challenges in meeting targets [8]. Summary by Sections Lithium Battery Sector - The report anticipates a recovery in profitability and a restoration of supply-demand balance in the lithium battery sector by 2025, driven by increased production capacity and pricing flexibility among leading companies [2]. - Key companies to watch include CATL, EVE Energy, and others that are positioned well in the midstream supply chain [2]. Charging Infrastructure - The report highlights the significant growth in public charging stations in the U.S. and Europe, with growth rates of 48.6% and 24.0% respectively in 2023 and 2024 [4]. - Recommended companies include Daotong Technology and Wanma Co., which are well-positioned in the charging station market [4]. Energy Storage - The report projects a 69% increase in the scale of energy storage installations in China in 2024, with expectations of continued high demand and profitability improvements for energy storage companies [6]. - Key players in the energy storage market include Shenghong Co. and Weiteng Electric [6]. Hydrogen Energy - The report notes a 219.3% increase in the number of electrolyzer tenders in the first half of 2024, indicating strong demand in the hydrogen sector [8]. - Companies to focus on include Huaguang Huaneng and Yihua Tong [9].

Investment Rating - The report maintains a positive outlook on the photovoltaic (PV) sector, indicating that despite recent adjustments, the industry's turning point logic remains unchanged and the sector is still worth attention [2]. Core Insights - The report highlights that the recent centralized procurement by Huaneng for 15GW of PV modules shows a significant price increase compared to October, with N-type bids ranging from 0.675 to 0.722 RMB/W, indicating a shift away from low-price competition towards a focus on technology and quality [2][26]. - The report emphasizes that the industry is moving towards recognizing and rewarding new technologies, as evidenced by the premium prices for HJT and BC technology sections, which are over 0.1 RMB higher than traditional options [2][26]. - The report notes an increase in industry concentration, with leading companies such as Longi, Jinko, and Chint dominating the procurement candidates, which is expected to benefit these leaders in the long run [2][26]. Price Trends - The report provides a detailed overview of the current pricing trends in the PV supply chain, indicating that the average price of dense material is stable at 40 RMB/kg, while silicon wafer prices for P-type and N-type remain unchanged or show slight increases [5][8]. - The report also mentions that the average prices for PERC and TOPCON cells are stable, with dual-glass PERC module prices holding steady at around 0.68 to 0.69 RMB/W [5][8]. Market Performance - The report indicates that the PV sector has underperformed compared to the CSI 300 index, with a recent weekly decline of 3.66% and a year-to-date performance lagging by 24.44% [6][15]. - The report highlights that the current price-to-earnings (P/E) ratio for the PV sector is 49.19, which is relatively high compared to other sectors, suggesting a potential for future growth despite recent market challenges [21][15]. Procurement Insights - The report details that Power China's centralized procurement volume for 2025 is set to increase by 24% year-on-year, with both modules and inverters each at 51GW, reflecting optimism for the market scale in the coming year [4][27]. - The procurement includes various packages for N-type Topcon and HJT technologies, indicating a strategic focus on advanced technologies in upcoming projects [4][27].

Industry Investment Rating - The report does not explicitly provide an overall investment rating for the machinery industry [2] Core Views - The machinery sector faced pressure in 2024Q1-Q3, with a decline in revenue and net profit, particularly in Q3 [2] - Sub-sectors such as semiconductor equipment, boiler equipment, and export consumer chains showed strong performance in terms of revenue and net profit growth [3][4] - Industrial economic recovery is expected, supported by fiscal policies and potential opportunities in real estate and government debt resolution [5] Key Financial Metrics - In 2024Q1-Q3, the machinery industry's median revenue growth was +5.06%, while net profit growth was -6.90% [2] - The industry's gross margin was 27.88%, down 0.09 percentage points year-over-year (YoY), and the net margin was 7.45%, down 1.19 percentage points YoY [2] - In 2024Q3, the industry's median revenue growth was +3.52%, and net profit growth was -4.41%, with a gross margin of 28.16% and a net margin of 6.39% [2] Sub-Sector Performance - Semiconductor equipment, nuclear power equipment, and export consumer chains were among the top-performing sub-sectors in terms of revenue growth in 2024Q1-Q3 [3] - Boiler equipment, export consumer chains, and semiconductor equipment led in net profit growth during the same period [3] - In 2024Q3, boiler equipment, scientific instruments, and semiconductor equipment showed the highest net profit growth [4] Industrial Economic Outlook - Manufacturing PMI in October 2024 was 50.1%, indicating a recovery in industrial economic activity [5] - Fiscal policies are expected to support economic growth, with measures to address local government debt and stabilize the real estate market [5] Raw Material and Cost Factors - Steel prices have declined since January 2024, with the price index at 95.75 on October 25, 2024, down 10.15% YoY [7] - Aluminum prices have risen, with LME aluminum spot settlement price at $2,600.5 per ton on October 25, 2024, up 19.81% YoY [7] - Brent crude oil futures remained volatile, with a settlement price of $76.05 per barrel on October 25, 2024, down 15.95% YoY [7] Valuation and Key Sectors - As of October 31, 2024, the machinery industry's valuation is in the upper-middle range among industries, with a rolling P/E ratio of 25.57x [8] - Key sectors include terminal investment-related sectors (e.g., construction machinery, rail equipment), energy equipment (e.g., photovoltaic, wind power), and emerging industries (e.g., semiconductor equipment, scientific instruments) [8]

Investment Rating - The report does not explicitly state an investment rating for the industry [2] Core Insights - The USD appreciated slightly against the RMB, while the EUR depreciated. Sea freight rates for Europe, East and West US, and Southeast Asia routes increased significantly [2][25] - The comprehensive index of China's export container freight index (CCFI) was 1388.22, up 64.53% year-on-year and 1.51% month-on-month [2][25] - The digital printing industry is rapidly developing, with a significant increase in equipment and production output from 2015 to 2023 [27][28] Summary by Sections Exchange Rates and Freight Rates - As of November 13, 2024, the USD/RMB spot rate was 7.23, up 0.84% from November 6, while the EUR/RMB rate was 7.67, down 0.35% [2][25] - In the second week of November 2024, the CCFI comprehensive index was 1388.22, with notable increases in various routes: Europe route at 1847.16 (up 93.91% YoY), East US route at 1225.10 (up 48.53% YoY), West US route at 1227.36 (up 69.87% YoY), and Southeast Asia route at 1005.39 (up 56.52% YoY) [2][25] Macro Data - In October, the US inflation rate was 0.2% month-on-month, with a year-on-year CPI increase of 2.6%. The Eurozone CPI growth was 2% YoY, up from 1.7% [3][26] - Turkey's CPI in October was 48.58% YoY, while Southeast Asian countries showed varied inflation rates [4][26] Key Industry Updates - The digital printing industry in China has seen a rise in equipment to about 50,000 units, with a significant annual growth rate in production output from 2015 to 2023 [27][28] - The processing fees for digital transfer printing are lower than traditional printing, leading to a high substitution rate [27][28] Investment Recommendations - The report suggests continued attention to specific companies such as Hangzhou Honghua Digital Technology Stock, Hangzhou GreatStar Industrial, Yindu Kitchen Equipment, and Zhejiang Taotao Vehicles [28]

Investment Rating - The report maintains an "Outperform" rating for the company with a target price of HKD 27.35 per share based on a 2024 PE valuation of 12X [5][17]. Core Insights - The company reported a significant increase in net profit, with a 172.3% rise to USD 150 million in Q3 2024, driven by a 12.5% increase in total revenue to USD 2.06 billion [2][13]. - Manufacturing revenue grew by 23.1% year-on-year, while the gross profit margin (GPM) increased by 0.6 percentage points to 24.1% [2][14]. - The company achieved a 9M return on invested capital (ROIC) and return on assets (ROA) of 10.8% and 6.5%, respectively, marking a 7-year high [2][13]. Financial Performance - Q3 manufacturing capacity utilization reached 95%, the highest in nine quarters, with a 9M GPM at a 7-year high [3][14]. - The average selling price (ASP) for products decreased by 4.9% year-on-year to USD 20.73, but the decline in prices narrowed each quarter [4][15]. - The retail segment saw Baosheng revenue decline by 10.8% to RMB 4 billion, but the gross profit margin improved to 33.5% [5][16]. Revenue Forecast - The company expects net profits for 2024-2026 to be USD 470 million, USD 520 million, and USD 570 million, respectively, reflecting a positive growth outlook [5][17]. - The dividend payout ratio is projected to be around 70% in 2024, leading to an expected dividend yield of 10.0% based on the closing price on November 15 [5][17].

Equity – Asia Research 风渐起，心动到幡动——中国经济和资本市场展望 Winds Rising, Hearts Stirring: Outlook for China's Economy and Capital Markets 吴信坤Xinkun Wu xk.wu@htisec.com 周林泓Amber Zhou amber.lh.zhou@htisec.com 17 Nov 2024 本研究报告由海通国际分销，海通国际是由海通国际研究有限公司，海通证券印度私人有限公司，海通国际株式会社和海通国际证券集团其他各成员单位的证券 研究团队所组成的全球品牌，海通国际证券集团各成员分别在其许可的司法管辖区内从事证券活动。关于海通国际的分析师证明，重要披露声明和免责声明，请 参阅附录。(Please see appendix for English translation of the disclaimer) 从近期股市的变化谈起 924发动的行情，类似519行情：政策利好，突然放量大涨。 详见《参考99年519——这轮股市行情及经济走出困境的思考-20241006》 2500 2700 2900 ...

Investment Rating - The report maintains a positive outlook on the coal industry, suggesting that coal prices are expected to stabilize and potentially rise in the short term due to seasonal demand and favorable fiscal policies [5]. Core Insights - October coal production reached 412 million tons, showing a year-on-year increase of 4.6% and a cumulative output of 3.89 billion tons for January-October, reflecting a 1.2% increase year-on-year [2][8]. - Demand for thermal power, crude steel, and cement showed improvements in October, with thermal power output increasing by 1.8% year-on-year [2][8]. - The report highlights that the coal supply has returned to historical peak levels, with limited production increases expected in November and December [2][8]. - The average daily coal consumption in power plants rose significantly to 5.4 million tons, a 1.4% increase year-on-year, indicating a potential peak in demand as temperatures drop [3][9]. - The report notes that while steel prices are declining, the overall hot metal output remains stable, providing some support for demand in the coal sector [4][10]. Summary by Sections Production and Demand - October raw coal output was 412 million tons, with a cumulative output of 3.89 billion tons for the year, reflecting a year-on-year increase of 1.2% [2][8]. - Demand for thermal power, crude steel, and cement showed mixed results, with thermal power increasing by 1.8% year-on-year [2][8]. Price Trends - As of November 15, coal prices at Qinhuangdao port were RMB 837 per ton, with a slight decrease compared to previous weeks [3][9]. - The report anticipates that coal prices may stabilize and rise due to increased demand and limited downside from import price spreads [3][9]. Investment Recommendations - The report suggests focusing on coal companies with low valuations and high dividends, such as China Coal Energy and China Shenhua Energy, which are expected to see marginal improvements in operations and dividends [5][11]. - Companies like Inner Mongolia Dian Tou Energy and Shanxi Coal International are highlighted for their expected performance improvements and growth potential in 2025 [5][11].