Company Analysis - Jiumaojiu (9922 HK) is expected to see a recovery in same-store sales and the initial effects of store reform are in line with expectations [2] - In Q2, same-store sales are anticipated to improve, with a notable decrease in the decline from double digits in April to single digits in early June, significantly better than the 21.2% drop in Q1 [2] - The average selling price has stabilized due to reduced discounts, and the decline in Q2 is mainly attributed to decreased foot traffic [2] - The table turnover rate for the Taier brand is expected to improve to approximately 3.3 times in Q2 from 3.1 times in Q1, driven by a low base from last year, reduced competition, extended holidays, and consumer sentiment boosted by appliance subsidies [2] - Store renovations have had a positive impact, with significant upgrades emphasizing fresh ingredients and diverse menus [2] - Three large stores in Guangzhou have been renovated at an investment of 1.8-2 million yuan each, with completion in 45 days, achieving turnover rates of 4-5 times on weekdays and 6-8 times on weekends [2] - Approximately 20 small stores have also been upgraded, costing 200,000-300,000 yuan each, with a 30% increase in same-store sales post-renovation [2] - The management indicated that a sales growth of about 12% would cover the additional costs incurred from renovations [2] - Plans are in place to upgrade 50 stores in the first half of the year, reaching 70 by July, and further adjusting 100-150 stores in the second half [2] Market Performance - The Hang Seng Index closed at 24,367, up 2.41% for the day and 42.94% year-to-date [3] - The Hang Seng Tech Index rose by 3.12%, reflecting a year-to-date increase of 44.81% [3] - The Shanghai Composite Index increased by 0.50%, with a year-to-date rise of 14.37% [3] - The US markets showed mixed results, with the Dow Jones up 0.24% and the S&P 500 up 0.64%, while the Nasdaq rose by 0.95% [3] - European markets had varied performances, with the DAX down 1.01% and the CAC up 0.37% [3] Sector Insights - The Hong Kong stock market saw materials, energy, and financial sectors leading the gains, while consumer staples, healthcare, and utilities declined [5] - In the A-share market, non-ferrous metals, agriculture, and non-bank financials performed well, while biomedicine, communications, and beauty care lagged [5] - The European Central Bank projected that gold will account for 20% of global central bank reserves by 2024, surpassing the euro's 16% share, making it the second-largest reserve asset after the dollar [5]

Investment Rating - The report maintains a HOLD rating for Jiumaojiu with a target price raised to HK$ 2.99 from the previous HK$ 2.56, indicating an upside potential of 11.4% from the current price of HK$ 2.68 [1][3][14]. Core Insights - The company is experiencing a recovery in same-store sales (SSS), with a decline narrowing in 2Q25E, attributed to initial successes in store format upgrades. The sustainability of this recovery into 2H25E and FY26E is crucial [1][10]. - The management has implemented a store format upgrade focusing on fresh ingredients, which has shown positive results. The upgrades are expected to enhance traffic and sales significantly [10][14]. - The financial forecasts have been revised upwards, with net profit estimates for FY25E, FY26E, and FY27E increased by 9,042%, 33%, and 22% respectively, reflecting lower impairment losses and improved operating margins [14]. Financial Summary - Revenue projections for FY25E are set at RMB 6,140 million, with a slight year-on-year growth of 1.1%. For FY26E and FY27E, revenue is expected to grow to RMB 6,911 million and RMB 7,088 million respectively [2][18]. - Operating profit is forecasted to increase from RMB 327.3 million in FY25E to RMB 532.6 million in FY26E, with net profit expected to rise from RMB 142 million in FY25E to RMB 298 million in FY26E [2][18]. - The report highlights a significant increase in diluted EPS for FY25E to RMB 0.103, reflecting a growth of 9,154.1% compared to the previous year [11][18]. Share Performance - The market capitalization of Jiumaojiu is approximately HK$ 3,897.3 million, with a 52-week high of HK$ 5.54 and a low of HK$ 2.19 [4]. - Recent share performance shows a 1-month increase of 3.9%, but a decline of 31.1% over the past 6 months [6]. Shareholding Structure - The largest shareholder is Mr. Guan Yi Hong, holding 37.4% of the shares, followed by JPMorgan Chase & Co with 7.5% [5]. Valuation Metrics - The report indicates a P/E ratio of 23.9x for FY25E, which is expected to decrease to 11.4x in FY26E and further to 9.5x in FY27E [2][18]. - The projected dividend yield for FY25E is approximately 2.1%, with a payout ratio assumed at 50% of net profit [14].

Industry Overview - The demand for excavators in the Chinese construction machinery industry showed a slight decline of 1% year-on-year in May, which is below expectations. However, this is viewed as a single-month drop following a strong growth trend since early 2024, indicating resilience in the excavator market driven by replacement demand [2] - In contrast, the domestic sales of wheel loaders increased by 17% year-on-year in May, likely supported by robust capital expenditures in the non-ferrous metals sector [2] - The report maintains a buy rating for Sany Heavy Industry (600031 CH), Hengli Hydraulic (601100 CH), and Zoomlion Heavy Industry (1157 HK / 000157 CH) [2] Market Performance - The Hang Seng Index closed at 24,163, up 1.56% year-to-date, while the Hang Seng Tech Index rose by 2.00%, reflecting a 43.25% increase for the year [2] - The performance of major global stock indices was mixed, with the US Dow Jones and S&P 500 showing slight gains, while the German DAX and French CAC experienced declines [3] Company Specifics - Hengli Hydraulic's hydraulic cylinder production for excavators continues to show an upward trend, indicating stable downstream orders [2] - The report highlights the potential for investment in the construction machinery sector, particularly in companies that are expected to benefit from ongoing infrastructure developments and equipment upgrades [2]

Investment Rating - The report maintains a "Buy" investment rating for BYD Company Limited (01211) with a target price of 470 HKD [1] Core Views - The report forecasts BYD's sales at 5.25 million units for the year and an annual increase of 4% in the average selling price (ASP) of new energy vehicles [1] - The estimated profit for the year remains unchanged at 57.5 billion RMB [1] - BYD's management emphasizes that all business operations are under the listed company [1] Financial Overview - BYD's accounts payable and notes payable for 2024 are projected to total 244 billion RMB, with approximately 98% of other payables (around 143 billion RMB) related to supplier debts, totaling about 387 billion RMB [1] - The report suggests that this level of accounts payable is manageable compared to BYD's projected annual revenue of 777 billion RMB and net cash of 74 billion RMB [1] Sales Projections - Management anticipates overseas sales to exceed 900,000 units this year, with total sales expected to maintain over 20% growth [1] - BYD's long-term overseas sales target is set between 4 to 6 million units, while domestic sales targets range from 6 to 7 million units, based on an 80-90% market share in the domestic new energy vehicle sector, where BYD holds approximately 30% [1] - BYD's Chairman Wang Chuanfu stated that the goal of selling 10 million units annually will be achieved "not too long" from now [1]

Investment Rating - The industry investment rating is "Outperform the Market," indicating that the industry is expected to perform better than the market benchmark over the next 12 months [7]. Core Insights - The semiconductor sector is experiencing robust growth driven by AI-related demand, with significant revenue increases reported by key players like Broadcom [2][4]. - Broadcom's AI business is a core growth driver, with AI-related revenue reaching $4.4 billion, accounting for 29.3% of total revenue, and expected to grow by 60% year-over-year [4]. - The demand for AI infrastructure is rapidly increasing, with projections that major cloud providers will deploy millions of accelerator clusters by 2027, aligning with the company's market serviceable target of $60-90 billion for AI accelerators [4]. Summary by Sections Semiconductor Industry Overview - The semiconductor industry is witnessing a strong performance, with Broadcom reporting record revenues of $15 billion in Q2 FY2025, a 20.2% year-over-year increase [2]. - The gross margin for Broadcom improved to 79.4%, reflecting operational efficiency and strong demand in AI semiconductor and software infrastructure [2]. AI Business Impact - Broadcom's AI-related revenue is projected to grow significantly, with management forecasting a 60% increase in AI business revenue this year, driven by rising demand for XPU and network solutions [2][4]. - The AI network business saw revenue growth exceeding 170%, indicating a strong market for AI-related infrastructure [4]. Future Projections - Broadcom anticipates Q3 FY2025 revenue to reach $15.8 billion, with semiconductor business expected to grow by 25% to $9.1 billion [2]. - The company is also focusing on custom chip development in collaboration with major clients, which could further enhance revenue streams in the future [4]. Investment Recommendations - The report maintains "Buy" ratings for several companies within the semiconductor supply chain, including Zhongji Xuchuang, Shengyi Technology, and Shenzhen South Circuit, with target prices set at RMB 151, RMB 34.5, and RMB 146.81 respectively [4].

Company Analysis - SANY International is expected to return to a growth trajectory in 2025, driven by stable demand for tunneling machines, strong growth in large port equipment, and better-than-expected performance in domestic wide-body vehicles [5] - The emerging business segments, including photovoltaic, lithium energy, and intelligent mining, are projected to have manageable losses, estimated at approximately 200 to 250 million RMB this year, alleviating market concerns [5] - The target price for SANY International has been raised to HKD 8.7, maintaining a 2025 P/E ratio of 11 times, consistent with the average since 2017, indicating an attractive buying point at the current valuation of 8 times [5] - BYD's management emphasizes that all business operations are under the listed company, with controllable liquidity risks regarding accounts payable totaling 244 billion RMB for FY24 [6] - The company aims for overseas sales to exceed 900,000 units this year, with total sales expected to maintain over 20% growth [6] - BYD's long-term sales targets include 4-6 million units overseas and 6-7 million units domestically, with a market share of 30% in the domestic new energy vehicle market [6] Industry Analysis - The semiconductor industry is witnessing strong performance, with Broadcom reporting record revenue of USD 15 billion for Q2 2025, a year-on-year increase of 20.2% [4] - The revenue guidance for Q3 2025 is set at USD 15.8 billion, with semiconductor business expected to grow by 25% to USD 9.1 billion, driven by AI semiconductor and software infrastructure [4] - The Asian markets are experiencing a resurgence in foreign investment, with net inflows of USD 10.65 billion in May, the highest monthly net inflow since February of the previous year [3]

Macro Overview - The impact of tariffs on the Chinese economy is less than expected, with GDP growth projected to decline from 5.4% in Q1 to 4.9% in Q2 and 4.7% in the second half of the year [9][10] - The Chinese economy shows resilience, with stock and currency markets expected to remain stable during the US-China trade negotiation window [11] - The US economy is experiencing slight stagflation, with GDP growth forecasted to drop from 2.8% last year to 1.5% this year due to tariff impacts [12] Technology Sector - The technology sector remains cautiously optimistic, with leading companies in the domestic and overseas supply chains reporting better-than-expected Q1 performance, driven by domestic subsidies and stable demand for smartphones and PCs [1][2] - For Q2, revenue and gross margin guidance are mixed, with a slowdown in overseas demand for consumer electronics, but a strong outlook for AI server shipments [1] - Key companies to watch include Xiaomi, Apple, and Qualcomm, with expected revenue growth of 5-15% for Apple’s supply chain and 10-15% for Android brands [1] Semiconductor Industry - The trend of domestic substitution in the semiconductor industry is expected to accelerate, with a focus on AI-related self-sufficiency [1] - Major cloud providers are maintaining high capital expenditures for AI infrastructure, indicating strong growth potential for AI applications and semiconductor companies [1] - Recommended stocks include Horizon Robotics, Hezhong Technology, and Weir Group, which are expected to benefit from the AI demand surge [1][8] Internet Sector - Most internet companies reported Q1 earnings that met or exceeded expectations, although competition in transaction-based platforms is raising concerns about profit growth visibility [2] - Companies with strong business models and high barriers to entry are likely to outperform in a competitive environment [2] - Recommended stocks include NetEase and Tencent Music, which are expected to see stable profit growth [2] Automotive Sector - Several automakers reported strong Q1 earnings, with Geely's net profit nearing the upper limit of forecasts and XPeng turning profitable for the first time [3] - The automotive sector is experiencing a new price war, but the impact on overall profitability is expected to be manageable [5] - Recommended stocks include Geely and XPeng, which are anticipated to benefit from new product cycles and strong sales [5][8] Real Estate Sector - The real estate sector shows optimism, with major developers reporting contract sales that align with expectations [5] - Policy support is expected to release pent-up demand, with a stable housing sentiment observed since March [5] - Recommended stocks include China Resources Land and Longfor Group, which are expected to benefit from improved market conditions [5][8] Insurance Sector - The insurance sector is expected to see stable growth in new business value, driven by improvements in value rates [6] - The property and casualty insurance sector is experiencing a slowdown in premium growth, particularly in auto insurance [6] - Recommended stocks include China Pacific Insurance and AIA Group, which are expected to perform well due to their strong fundamentals [7][8] Consumer Goods - The essential consumer goods sector is expected to see marginal improvements, with consumer behavior becoming more cautious yet slightly more willing to spend [4] - Recommended stocks in the food and beverage sector include Nongfu Spring, which is expected to benefit from a rebound in consumer spending [4][8] - The discretionary consumer sector is showing strong performance, particularly in tea, coffee, and travel-related industries [4]

Macro Commentary - The US economy is facing stagflation risks as the May services PMI unexpectedly contracted, indicating a significant drop in demand and the highest inflation rate in 22 years [5][4] - The manufacturing PMI also showed a widening contraction, with delivery times lengthening and tariffs disrupting both demand and supply chains [5] - A slight stagflation is expected in the US economy in the second half of the year, with the policy environment remaining unfriendly for the next three months [5][4] Industry Commentary - In the Chinese automotive industry, the average discount rate in May expanded by 0.7 percentage points to approximately 15%, primarily driven by German brands [5] - Major Chinese brands maintained relatively stable average discounts, with the exception of NIO, which saw an increase in its discount rate [6] - BYD's average discount rate in May increased by 1.9 percentage points to 8.2%, raising concerns about its promotional activities amid high inventory levels [6] Company Commentary - DualityBio is positioned to become a global leader in ADC (Antibody-Drug Conjugate) technology, with a diverse product pipeline and strategic collaborations [11][12] - The company has established multiple strategic partnerships, with total transaction amounts exceeding $6 billion, enhancing its global market presence [11] - The projected total revenue for DualityBio is expected to reach RMB 2 billion, RMB 1.5 billion, and RMB 1.5 billion in 2025E, 2026E, and 2027E respectively, primarily from licensing and collaboration income [12] Company Commentary (Continued) - Innovent Biologics' IBI363 shows significant potential as a next-generation immunotherapy, with promising survival benefits in NSCLC [12][13] - IBI363 demonstrated a median progression-free survival (mPFS) of 9.3 months in squamous NSCLC, outperforming other candidates in the same category [12] - The company plans to initiate a Phase III clinical trial for IBI363 in the second half of 2025, targeting IO-treated squamous NSCLC [13]

Economic Indicators - The US Services PMI unexpectedly contracted in May, dropping from 51.6 in April to 49.9, below market expectations of 52[2] - The Manufacturing PMI decreased by 0.2 to 48.5, also below the expected 49.5, indicating a continued contraction in the manufacturing sector[2] - The New Orders Index for services plummeted from 52.3 to 46.4, reflecting a significant decline in demand[2] Inflation and Price Pressures - The Prices Index for services surged from 65.1 to 68.7, marking the highest expansion rate since late 2022, indicating inflationary pressures[2] - The Manufacturing Prices Index remained high at 69.4, despite a slight decrease from 69.8, suggesting persistent inflation in goods[2] Economic Growth Projections - The projected GDP growth rates for the US are expected to decline from 2.1% in Q1 to 1.8% in Q2, 1.3% in Q3, and 1% in Q4 of this year[2] - The PCE inflation rate is anticipated to rise from 2.5% in Q1 to 3% in Q3 and 2.9% in Q4[2] Policy Environment - The policy environment is expected to remain unfavorable in the next three months, with the White House likely to continue pressuring trade partners and the Federal Reserve possibly pausing interest rate cuts[1] - Improvement in the policy environment is anticipated in Q4, with potential agreements with major trading partners and a return to interest rate cuts by the Federal Reserve[1]

Economic Indicators - The US services PMI unexpectedly contracted in May, dropping from 51.6 in April to 49.9, below the market expectation of 52[2] - The manufacturing PMI decreased by 0.2 to 48.5, also below the market expectation of 49.5[2] - The new orders index for services plummeted from 52.3 to 46.4, indicating a significant weakening in demand[2] Inflation and Price Pressures - The price index for services rose from 65.1 to 68.7, marking the highest expansion rate since late 2022[2] - The manufacturing price index remained high at 69.4, indicating persistent inflationary pressures in the US[2] Economic Growth Projections - The projected GDP growth rates for 2023 are expected to decline from 2.1% in Q1 to 1.8% in Q2, 1.3% in Q3, and 1% in Q4[2] - The PCE inflation is forecasted to rise from 2.5% in Q1 to 3% in Q3 and 2.9% in Q4[2] Policy Environment - The policy environment is expected to remain unfriendly in the next three months, with the White House likely to continue pressuring trading partners and the Federal Reserve possibly pausing interest rate cuts[2] - Improvement in the policy environment is anticipated in Q4, with potential agreements with major trading partners and a return to interest rate cuts by the Federal Reserve[2]