Investment Rating - The report maintains an "Outperform" rating for the pharmaceutical industry [2] Core Insights - 2025 saw a record high in innovative drug asset transactions among multinational pharmaceutical companies, with 142 cases and a total transaction value of $264.5 billion, marking new highs since 2015 [3][9] - Eli Lilly's revenue for 2025 increased by 44% year-on-year, driven by GLP-1 drugs, with Tirzepatide achieving $36.5 billion in sales [3][39] - Novo Nordisk's sales growth was impacted by increased competition in the weight loss drug market, with a projected revenue decline of 5% to 13% for 2026 [3][40] Summary by Sections 1. Innovative Drug Asset Transactions - In 2025, the number of innovative drug transactions reached 142, with mergers and acquisitions (M&A) and collaborations at 36 and 106 respectively, both setting new records since 2015 [3][9] - The total transaction value was $264.5 billion, with M&A accounting for $106 billion and collaborations for $158.4 billion, also new highs since 2015 [3][9] 2. Performance Review of Pharmaceutical Companies - Eli Lilly's total revenue for 2025 was $65.2 billion, with a guidance for 2026 revenue between $80 billion and $83 billion, indicating a projected growth of 25% [3][39] - Novo Nordisk's total revenue for 2025 was 309.1 billion Danish Kroner, with a guidance for 2026 indicating a decline of 5% to 13% [3][40] - Other companies like AbbVie, AstraZeneca, and Roche reported single-digit growth, while JNJ and Gilead faced challenges due to patent expirations [3] 3. Factors Influencing M&A Decisions - Demand for acquisitions is driven by the need to address revenue gaps from expiring patents and declining R&D efficiency [3][19] - Financial capacity for M&A is supported by free cash flow after shareholder returns, allowing for smaller acquisitions [3][20] - Pricing considerations are crucial, as the valuation of innovative drug assets significantly impacts the internal rate of return (IRR) for acquisitions [3][21]

Investment Rating - The report maintains an "Outperform" rating for the pharmaceutical industry [2] Core Insights - 2025 saw a record high in innovative drug asset transactions among multinational pharmaceutical companies, with 142 cases and a total transaction value of $264.5 billion, marking new highs since 2015 [3][9] - Eli Lilly's revenue for 2025 increased by 44% year-on-year, driven by GLP-1 drugs, with Tirzepatide achieving $36.5 billion in sales [3][39] - Novo Nordisk's sales growth was impacted by increased competition in the weight loss drug market, with a projected revenue decline of 5% to 13% for 2026 [3][40] Summary by Sections 1. Innovative Drug Asset Transactions - In 2025, the number of innovative drug transactions reached 142, with mergers and acquisitions (M&A) and collaborations at 36 and 106 respectively, both setting new records since 2015 [3][9] - The total transaction value was $264.5 billion, with M&A accounting for $106 billion and collaborations for $158.4 billion, also new highs since 2015 [3][9] 2. Performance Review of Pharmaceutical Companies - Eli Lilly's total revenue for 2025 was $65.2 billion, with a guidance of $80 billion to $83 billion for 2026, indicating a projected growth of 25% [3][39] - Novo Nordisk's revenue for 2025 was 309.1 billion Danish Krone, with a guidance for 2026 indicating a decline of 5% to 13% [3][40] - Other companies like AbbVie, AstraZeneca, and Roche reported single-digit growth, while JNJ and Gilead faced challenges due to patent expirations [3] 3. Factors Influencing M&A Decisions - Demand for acquisitions is driven by the need to address revenue gaps from expiring patents and declining R&D efficiency [3][19] - Financial capacity for M&A is supported by free cash flow after shareholder returns, allowing for smaller acquisitions [3][20] - Pricing considerations are crucial, as the valuation of innovative drug assets significantly impacts the internal rate of return (IRR) for acquisitions [3][21]

Core Insights - The report highlights a positive outlook for various industries in March 2026, driven by domestic demand policies and sector-specific growth opportunities [2][3] - Key stocks recommended across different sectors are expected to show significant profit growth and favorable valuations, indicating potential investment opportunities [2][3] Industry Summaries Social Services - China Oriental Education is positioned to benefit from the growth in new service consumption, with a projected net profit of 1.1 billion yuan in 2026, reflecting a 40% increase and a PE ratio of approximately 11 times [2][3] Construction - Yaxin Integration is expected to gain from significant investments in the cleanroom industry, with orders and performance not fully anticipated, particularly from major clients like Micron and TSMC [2][3] Non-Bank Financials - CITIC Securities is recommended as a leading brokerage benefiting from market recovery and favorable policy environments, with valuations not reflecting the improving profit trends [2][3] Agriculture - Youran Dairy, a leader in dairy farming, is set to benefit from rising beef and milk prices, with expectations of high earnings recovery due to favorable market conditions [2][3] Power Equipment and New Energy - Delijia is expanding its capacity in wind power gearbox projects, with a strong order backlog and projected profit growth of 55% in 2025 [2][3] - Sifang Co. is actively expanding its overseas presence and has secured multiple projects, with a focus on cutting-edge technologies like solid-state transformers [2][3] Automotive - Xingyu Co. is positioned in a high-growth segment of automotive lighting, with a focus on smart products and expanding its global customer base, projecting revenues of 16 billion yuan in 2025 [2][3] Home Appliances - Haier Smart Home is benefiting from domestic policies promoting appliance upgrades and is enhancing operational efficiency through digital transformation, with a stable increase in market share [2][3] Basic Chemicals - Chuanheng Co. is expected to increase its phosphate mining capacity significantly by 2028, with a strong dividend payout history and high-quality product offerings [2][3] Military Industry - Lianchuang Optoelectronics is experiencing substantial growth in laser products and is entering the commercial space launch market, indicating a broad market potential [2][3]

Investment Rating - The report maintains an "Outperform" rating for the industry [2] Core Viewpoints - Optical Circuit Switch (OCS) technology enables direct switching of optical signals between fiber ports without optical-electrical-optical (O/E/O) conversion, significantly reducing latency and power consumption, with potential power savings of over 30% for AI computing clusters and data center interconnect systems [3][4][92] - The OCS market is expected to grow rapidly, with a projected market size exceeding $2.5 billion by 2029, driven by increasing demand for AI data centers and enhanced customer penetration [4][79] - OCS technology has four main technical routes: MEMS, liquid crystal, piezoelectric, and silicon waveguide, with MEMS being the fastest to commercialize, primarily led by Google [4][14][92] Summary by Sections 1. OCS as a New Photonic Interconnect Technology - OCS technology avoids traditional bandwidth bottlenecks and power losses associated with electrical switching, offering high bandwidth capacity and low latency [3][13] - The four main technical routes for OCS are MEMS, liquid crystal, piezoelectric, and silicon waveguide, each with different cost, performance, and technical difficulty trade-offs [14][92] 2. OCS Applications for AI Data Centers - Google has been at the forefront of developing ASIC chips, with the TPU reaching its seventh generation, indicating a strong push towards integrating OCS technology in data centers [51][64] - The TPU architecture utilizes OCS technology to interconnect thousands of TPU chips, enhancing performance and efficiency [64][71] 3. OCS Industry Chain Company Layout - Various companies are positioned within the OCS industry chain, including Silex, Tengjing Technology, and Zhongji Xuchuang, each focusing on different aspects of OCS technology and components [83][84] - Companies like Lumentum and Coherent are key suppliers for MEMS and liquid crystal OCS solutions, indicating a robust supply chain for OCS technology [4][14][84] 4. Investment Recommendations - The report suggests focusing on companies within the OCS supply chain, particularly those with deep collaborations with leading global firms, such as Zhongji Xuchuang and Guangxun Technology, as they are expected to benefit from the growth in OCS technology [4][90]

Investment Rating - The investment rating for the industry is "Outperform the Market" (maintained) [3][26]. Core Insights - The report highlights the support of tax incentives for marine oil and gas development and natural gas import utilization, aiming to enhance domestic oil and gas supply capabilities and ensure national energy security [4][5]. - The report emphasizes the increasing importance of imported natural gas in China's energy supply, with a focus on stabilizing costs through tax refunds on eligible imports [5][14]. - The marine oil and gas sector is identified as a strategic focus for future development, with significant investments expected to continue in the coming years [6][9]. Summary by Sections Industry Policy Commentary - The Ministry of Finance, Customs, and the State Taxation Administration issued a notification on tax incentives for energy resource exploration and development during the 14th Five-Year Plan period, including exemptions on import duties for essential equipment used in marine oil and gas exploration [4]. - The policy aims to reduce the import costs of marine oil and gas exploration equipment, thereby enhancing project internal rates of return and promoting deep-sea oil and gas field development [5][22]. Market Trends - Global marine oil and gas exploration spending has been on the rise, with investments exceeding $100 billion in 2022 and expected to remain high in the coming years [6]. - China's marine oil and gas exploration and production expenditures are projected to continue increasing, with CNOOC's capital expenditure for 2024 estimated at 132.7 billion yuan, reflecting a growth trend [9]. Investment Recommendations - The report suggests focusing on companies such as CNOOC, CNOOC Services, and CNOOC Development due to the favorable tax policies that will lower equipment procurement costs and enhance project profitability [5][22]. - It also recommends monitoring China National Petroleum Corporation (CNPC) and CNOOC in light of the tax refund mechanism for imported natural gas, which is expected to mitigate cost fluctuations, especially during high gas price periods [5][22].

Investment Rating - The investment rating for the company is "Outperform the Market" [1] Core Insights - The company, Anfu Technology, has transformed from a retail business to a leader in the domestic small battery industry by acquiring a controlling stake in Nanfu Battery and divesting its original retail operations [3][15] - Nanfu Battery is recognized for its high profit margins, strong return on equity (ROE), and robust cash flow, maintaining a market share of over 80% in the domestic alkaline battery market [6][47] - The company is actively investing in high-tech sectors, including AI and semiconductor manufacturing, to build a second growth curve alongside its core battery business [3][5] Summary by Sections 1. Anfu Technology: Domestic Small Battery Industry Leader - Anfu Technology was established in 1984 and listed on the A-share market in 2016, initially focusing on retail [15] - In 2022, the company acquired 51% of Yajing Technology, gaining control of Nanfu Battery and successfully transitioning to the consumer battery sector [15][12] 2. Controlling Nanfu Battery: A Stable "Cash Cow" Business - Nanfu Battery has been the market leader in alkaline manganese batteries for 32 consecutive years, with a retail market share of 85.9% in alkaline 5 and 7 batteries for 2024 [6][47] - Revenue for Nanfu Battery grew from 2.18 billion to 4.64 billion (CAGR +10%) from 2016 to 2024, with net profit increasing from 500 million to 920 million (CAGR +8%) [6][53] - The company plans to acquire the remaining shares of Yajing Technology and minority stakes in Nanfu Battery to enhance profitability [6] 3. Strategic Investment in Yilaimi: Potential for "Electric + Optical" Dual Layout - Yilaimi is positioned to develop next-generation optical chips, with a production capacity supporting 200,000 to 500,000 chips annually [6] - The strategic investment in Yilaimi is part of the company's broader strategy to integrate into the semiconductor industry and explore new growth avenues [6] 4. Profit Forecast and Valuation - Revenue projections for 2025-2027 are 4.82 billion, 5.31 billion, and 5.83 billion, with year-on-year growth rates of +4.0%, +10.1%, and +9.8% respectively [6] - The estimated net profit attributable to the parent company for the same period is 235 million, 421 million, and 594 million, reflecting significant growth [6] - The stock's reasonable value range is estimated between 57.6 and 69.1 yuan, corresponding to a market capitalization of 14.85 billion to 17.81 billion [6]

Investment Rating - The investment rating for the industry is "Outperform the Market" (maintained) [3][26]. Core Insights - The report highlights the support of tax incentives for marine oil and gas development and natural gas import utilization, aiming to enhance domestic oil and gas supply capabilities and ensure national energy security [4][5]. - The report emphasizes the increasing importance of imported natural gas in China's energy supply, with a focus on stabilizing costs through tax refunds on eligible imports [5][14]. - The marine oil and gas sector is identified as a key area for future development, with significant investments expected to continue in the coming years, reflecting high industry prosperity [6][9]. Summary by Sections Industry Policy Commentary - The Ministry of Finance, General Administration of Customs, and State Taxation Administration issued a notification on tax incentives for energy resource exploration and development during the 14th Five-Year Plan period, which includes exemptions from import tariffs for essential equipment used in marine oil and gas exploration and emergency rescue projects [4]. - The policy aims to reduce the import costs of marine oil and gas exploration equipment, thereby enhancing the internal rate of return on projects and promoting the development of deep-sea oil and gas fields [5][22]. Investment Recommendations - The report suggests focusing on companies such as China National Offshore Oil Corporation (CNOOC), CNOOC Services, and CNOOC Development, as the tax incentives will lower procurement costs and improve project profitability [5][22]. - It also recommends paying attention to China National Petroleum Corporation (CNPC) and CNOOC, as the tax refund mechanism for imported natural gas will help mitigate cost fluctuations, especially during periods of high gas prices [5][22]. Market Trends - Global marine oil and gas exploration spending is on the rise, with investments expected to remain above $100 billion in the coming years, indicating a robust market outlook [6]. - China's marine oil and gas exploration and production expenditures are projected to continue increasing, with significant capital expenditures planned for 2024 and 2025 [9][14].

Investment Rating - The investment rating for the lithium industry is "Outperform" [1] Core Views - Supply: The rebound in lithium prices has stimulated supply, but short-term increments are limited. Australian lithium mines are stabilizing production, while South American salt lakes are experiencing slower-than-expected ramp-up in capacity. Zimbabwe has tightened export policies, which may impact supply in the short term [3][12][16]. - Demand: Domestic demand for power batteries is expected to peak, with energy storage becoming a significant marginal variable for lithium salt demand. Global lithium demand is projected to reach approximately 2 million tons LCE in 2026, driven by a 50% year-on-year increase in energy storage battery demand and a 20% growth in power battery demand [5][6]. - Balance Sheet: Supply and demand are tightening, with inventory cycles further declining. Global lithium supply and demand are expected to be around 2 million tons LCE, and any unexpected demand increase could create a significant supply gap. The current inventory cycle for lithium salts in China is less than one month, indicating a tightening market [6][31]. Supply Summary - Overseas Supply: Australian lithium mines are stabilizing production, but the recovery of suspended projects is slow. South American salt lakes have many new projects, but their ramp-up progress is below expectations. Zimbabwe's recent export policy changes may temporarily affect supply [3][12][16]. - Domestic Supply: Domestic lithium spodumene mines have not yet entered large-scale production. The supply disruptions in lithium mica have not been resolved, and new projects in domestic lithium salt lakes are expected to contribute some incremental supply [4][20][27]. Demand Summary - The demand for lithium is expected to be driven by both power and energy storage batteries, with a projected global demand of around 2 million tons LCE in 2026. The energy storage battery demand is expected to significantly exceed expectations starting from the second half of 2025, while power battery demand is anticipated to recover quickly from March 2026 [5][6]. Balance Sheet Summary - The lithium market is expected to experience a tightening supply-demand balance, with inventory cycles decreasing. The current inventory cycle for lithium salts in China is less than one month, indicating a potential for price increases in the near term [6][31].

Investment Rating - The report initiates coverage with an "Outperform" rating for the company [3][82]. Core Insights - The company is a leading player in high-end interior design, focusing on "space design + soft decoration," and is positioned in the top tier of the industry [1][14]. - Despite the downturn in the real estate market, the company is expected to benefit from policies promoting high-quality housing, leading to a renewed demand for high-quality design and decoration services [1][21]. - The company's profitability is recovering, with a significant rebound in revenue and profit anticipated starting in 2025, projecting a net profit of CNY 0.58-0.80 billion, representing a year-on-year growth of 72%-137% [1][30]. Financial Health - The company maintains a strong financial position with cash and cash-equivalent assets totaling approximately CNY 16 billion, accounting for 74% of total assets and 37% of market capitalization [2][46]. - The company has minimal interest-bearing debt, with a debt-to-asset ratio of 19.6% as of Q3 2025, indicating a light asset operation model [2][46]. - The operating cash flow has remained stable, with net cash inflows of CNY 1.5 billion in 2025, significantly higher than net profit during the same period [49][53]. Revenue and Profit Forecast - The company forecasts revenues of CNY 7.00 billion, CNY 9.25 billion, and CNY 11.03 billion for 2025, 2026, and 2027, respectively, with year-on-year growth rates of 32.2%, 32.1%, and 19.3% [70][60]. - The projected net profit for 2025-2027 is CNY 0.69 billion, CNY 1.60 billion, and CNY 2.24 billion, with net profit margins of 9.9%, 17.3%, and 20.3% [70][82]. Valuation - The target valuation range for the company is set between CNY 29.12 and CNY 31.15, corresponding to a total market capitalization of CNY 52-56 billion, indicating a potential upside of 13%-21% from the current stock price [3][82]. - The valuation is supported by both absolute and relative valuation methods, with a projected price-to-earnings ratio of 66.9 for 2025, decreasing to 20.7 by 2027 [4][80].

- The report discusses the methodology for calculating dividend points in stock indices, which is crucial for accurately estimating the premium or discount in stock index futures contracts. The calculation considers the dividend impact of index constituent stocks, which naturally causes the index level to drop in price indices but is reinvested in total return indices[12][42][45] - The dividend points are calculated using the formula: $$\text{Dividend Points} = \sum_{n=1}^{N} \frac{\text{Dividend Amount of Stock}_n}{\text{Total Market Value of Stock}_n} \times \text{Weight of Stock}_n \times \text{Index Closing Price}$$ Here, \(N\) represents the number of constituent stocks, and the calculation only includes stocks with ex-dividend dates between the current date and the futures contract expiration date[42][45] - The methodology for estimating key parameters includes: 1. **Constituent Stock Weights**: Adjusted daily using the formula: $$W_{n,t} = \frac{w_{n0} \times (1 + r_n)}{\sum_{i=1}^{N} w_{i0} \times (1 + r_i)}$$ where \(w_{n0}\) is the weight of stock \(n\) on the last disclosed date, and \(r_n\) is the non-adjusted return of stock \(n\) since that date[46] 2. **Dividend Amounts**: Estimated as the product of net profit and dividend payout ratio. If not disclosed, net profit is predicted using historical profit distribution patterns, and the payout ratio is estimated using historical averages[48][51] 3. **Ex-Dividend Dates**: Predicted using historical patterns and linear extrapolation based on the stability of the time interval between announcement and ex-dividend dates[52][57] - The accuracy of the dividend point estimation model is evaluated by comparing predicted and actual dividend points for indices like SSE 50, CSI 300, CSI 500, and CSI 1000. The model shows high accuracy, with errors generally within 5 points for SSE 50 and CSI 300, and within 10 points for CSI 500 and CSI 1000[58][62][65]