Investment Rating - The report upgrades the investment rating for several companies, including Cambricon, SMIC, AMEC, and VeriSilicon to "Buy" [3][70]. Core Insights - The semiconductor demand in the China market continues to grow, supported by advancements in generative AI, RISC V technology, and local suppliers gaining market share [2][4]. - Integrated circuit (IC) production in China showed a year-on-year growth of 4.0% in April 2025, while the import value increased by 8.9% year-on-year in May 2025 [4][22]. - The total revenue for semiconductors in China was reported at US$16.2 billion in April 2025, reflecting a 14.1% year-on-year increase [5][38]. Summary by Sections IC Production and Imports - IC production volume in April 2025 was 42 billion units, with a year-on-year growth of 4.0% [4][39]. - IC import volume increased by 9.9% year-on-year to 50 billion units in May 2025, while the import value rose by 8.9% year-on-year to US$34 billion [11][32]. - The average selling price (ASP) of IC imports decreased by 1% year-on-year in May 2025 [11][24]. Revenue Growth - The semiconductor sector's total revenue in April 2025 was up 14.1% year-on-year, indicating sustained growth in the industry [5][38]. - Taiwan's semiconductor companies reported a revenue growth of 25.3% year-on-year in May 2025 [9][42]. Inventory and Market Dynamics - The days of inventory (DOI) for China's electronics sector was 59 days in April 2025, lower than the historical average, indicating a healthy inventory level [28][9]. - Increased capital expenditure (capex) plans from local suppliers are expected to drive further market share expansion in the semiconductor sector [4][15].

Investment Rating - The report indicates a favorable outlook for Chinese private-owned enterprises (POEs), suggesting selectivity is required for investment success in this sector [1][3]. Core Insights - Chinese POEs are in the process of regaining market strength after losing nearly US$4 trillion in market capitalization since late 2020, with a significant underperformance compared to state-owned enterprises (SOEs) [1][4]. - The importance of the private sector has been acknowledged by policymakers, with recent legislative support aimed at promoting private enterprises [3][19]. - Regulatory risks have eased, contributing to a more favorable investment environment for listed POEs [3][20]. - The ongoing advancements in AI and technology are expected to enhance growth prospects for POEs, which constitute 72% of the defined AI-Tech universe [3][40]. - POEs are increasingly leading China's "Going Global" strategy, allowing for organic growth and higher profit margins [3][41]. - Profitability metrics for POEs have shown improvement, with profits and return on equity (ROE) rising by 22% and 1.2 percentage points, respectively, since the lows of 2022 [3][47]. - There are early signs of renewed investment appetite within the POE sector, indicating a return of "animal spirits" [3][56]. - POEs are currently trading at valuation discounts compared to historical ranges and SOEs, with cash returns reaching record highs [3][62]. Summary by Sections Section 1: Market Performance - Listed Chinese POEs have lost almost US$4 trillion in market capitalization since their peak in 2020, reflecting a 32% decline [4][6]. - POEs represent 60% of the total market capitalization of the listed universe in China [6][19]. Section 2: Regulatory Environment - The regulatory cycle for POEs has shifted towards a more accommodating stance, reducing the perceived policy risk premium [3][20]. - Recent legislative actions, including the first-ever POE law, aim to support the private economy and enhance investor confidence [3][19]. Section 3: Technological Advancements - AI and technology breakthroughs are reshaping the growth narrative for POEs, with significant representation in the AI-Tech sector [3][40]. - Widespread AI adoption is projected to boost corporate earnings in China by 2.5% annually over the next decade [3][36]. Section 4: Global Expansion - POEs are increasingly diversifying their revenue sources, with non-domestic sales expected to reach nearly 20% of total sales by 2024 [3][46]. - The profitability of POEs in overseas markets is generally higher than in the domestic market, driven by better pricing and reduced competition [3][45]. Section 5: Profitability Recovery - POEs have shown signs of profitability recovery, with expectations for further improvement in ROE and net margins [3][55]. - The consensus forecast indicates a potential uplift in ROE to around 13%-14% in the coming years [3][55]. Section 6: Investment Opportunities - The report emphasizes the need for selectivity in investing within the POE universe, highlighting specific investment themes such as the Chinese Prominent 10 and GS China Select AI Portfolio [1][74]. - The thematic bias towards high-quality SOEs remains, particularly those with strong shareholder returns [1][74].

Investment Rating - The report suggests a positive medium-term investment case for Chinese private-owned enterprises (POEs), indicating an improvement due to various macro, policy, and micro drivers [4]. Core Insights - The market concentration ratio among Chinese equities is low, with the top-10 companies representing only 17% of the total market cap, compared to 33% in the US and 30% in emerging markets excluding China [3][7]. - Regulatory pressures on POEs have eased, enhancing their growth prospects through organic and acquisitive means [11][14]. - Industry consolidation in POE-led sectors is currently low, suggesting potential for market share gains and profitability increases for existing leaders [18][20]. - Large POEs are increasingly involved in AI technologies, positioning them as key players in China's global expansion strategy, which has positively impacted their growth and profitability [5][41]. - The top-10 POEs trade at a forward price-to-earnings (fP/E) ratio of 13.9, which is a 22% premium over the aggregate market, indicating they are relatively inexpensive compared to their historical valuations [7][47]. Summary by Sections Market Concentration - China has one of the lowest market concentration ratios globally, with the top-10 companies representing 17% of the total listed market cap, down from a peak of 46% in the mid-2000s [3][7][13]. Regulatory Environment - The regulatory framework for POEs has become more transparent, with significant easing of pressures since mid-2021, including the approval of a law promoting private companies [11][14]. Industry Dynamics - Industry consolidation is low in POE-led sectors compared to the US, indicating potential for further market share gains [18][20]. - The competitive landscape in China remains fragmented, with many sectors showing high levels of competition and overcapacity [20][21]. Technological Advancements - Large POEs are at the forefront of AI technology development, which is crucial for their long-term competitiveness and market positioning [37][40]. Valuation Metrics - The top-10 POEs are trading at a forward P/E of 13.9, which is at the low end of their historical range, suggesting potential upside in valuations [47][48].

Investment Rating - The report does not explicitly provide an investment rating for the transportation sector or specific companies within it Core Insights - The Brent oil price has increased by 12% to $74/bbl due to geopolitical tensions, with a forecasted decline to $59 in Q4 2025 and $56 in 2026, assuming no disruptions in oil supply [1][7] - A potential drop in Iranian oil supply by 1.75mb/d could lead to Brent prices peaking over $90/bbl before declining back to the $60s as supply recovers [1][8] - The transportation sector, particularly tankers and airlines, may experience significant impacts from fluctuating oil prices and geopolitical risks [1][2] Tankers - Iranian oil constitutes 3% of global oil production; a reduction in this supply could shift 0.8-1.5% of global ocean tanker demand from shadow fleets to compliant fleets, potentially benefiting companies like COSCO Shipping Energy [1][21] - The report anticipates an upside in shipping rates and share prices for compliant tanker fleets due to the expected shift in demand [1] Airlines - Airlines are highly sensitive to oil price changes, with China Southern Airlines showing a 22% earnings downside per 1% increase in oil price, followed by China Eastern Airlines and Air China at 17% and 10% respectively [5][17] - Despite short-term pressures on earnings due to rising fuel costs, long-term demand for air travel is expected to remain stable, provided there are no widespread concerns over aircraft safety [5][17] - The report maintains a bearish medium-term outlook on Brent oil prices, forecasting $66 in 2025 and $56 in 2026, which could alleviate some pressure on airline earnings in the longer term [5][7]

Investment Rating - The report maintains a "Buy" rating for Meituan, JD, Alibaba, Guming, Mixue, and Yum China, with specific target prices set for each company [19][24][25][27][28][36]. Core Insights - The food delivery industry in China has seen a significant increase in daily order volumes, reaching approximately 120 million, driven by platform subsidies and evolving consumer behavior [13][16]. - Competitive strategies among food delivery platforms have intensified, particularly between Meituan, JD, and Taobao Instant Shopping/Ele.me, with each platform adopting aggressive subsidy strategies to capture market share [7][9][12]. - Long-term market share projections indicate Meituan will hold a dominant position with 60-65% of the GTV market share, followed by Taobao Instant Shopping/Ele.me at 25-28% and JD at 10-15% [13][19]. Summary by Sections Market Dynamics - The food delivery market has expanded due to increased on-demand consumption, with daily orders growing from around 80 million to 120 million, including 30 million incremental orders attributed to subsidies [13][16]. - The expert anticipates that a portion of the new orders, particularly meal orders, may persist even after subsidies normalize [13]. Competitive Strategies - Meituan has focused on maintaining order volume and market share through differentiated offerings and targeted subsidies, particularly in higher-tier cities [7][19]. - JD has ramped up its order volume to 25 million daily orders, leveraging its delivery network and aggressive subsidy strategies [12][24]. - Taobao Instant Shopping/Ele.me has initiated campaigns to attract consumers, benefiting from traffic on the Taobao platform [9][19]. Long-term Projections - The expert presented various long-term market share scenarios, projecting Meituan's market share to remain robust while JD and Taobao Instant Shopping/Ele.me will capture smaller shares [13][19]. - The expert expects JD's loss per order to peak in Q2 2025, with gradual improvements anticipated by Q4 2025 [13].

Investment Rating - The report assigns a "Buy" rating to Sino Biopharmaceutical with a 12-month price target of HK$3.92, indicating a downside potential of 17.7% from the current price of HK$4.77 [8][10]. Core Insights - The company is expected to achieve double-digit sales growth in 2025, driven by a 25% year-on-year increase in innovative drug sales, projected to rise from approximately Rmb12 billion in 2024 to around Rmb15 billion in 2025, contributing over half of total sales [2][8]. - The management highlighted a significant deal worth several billion US dollars is anticipated to be realized soon, reflecting the company's active negotiations with multinational pharmaceutical and leading biotech companies [3][6]. - The earnings growth is expected to outpace revenue growth due to ongoing savings in selling, general, and administrative expenses, along with an improved gross margin from a shift towards more profitable innovative drugs [2][8]. Summary by Sections Sales Growth and Financial Performance - The company is confident in achieving double-digit total sales growth in 2025, with innovative drug sales expected to grow by 25% year-on-year [2]. - The generic portfolio is also anticipated to show positive growth, with major drugs having Rmb500 million or more in sales effectively managing the impacts of the volume-based procurement (VBP) policy [2][8]. Pipeline and Deal-Making - Sino Biopharmaceutical has a robust R&D pipeline with multiple innovative assets, including potential treatments for COPD and breast cancer, which are currently in various phases of clinical trials [6][7]. - The company is focusing on out-licensing as a key strategy to unlock global potential and generate sustainable collaboration income [3][6]. Market Position and Competitive Advantage - Anlotinib, a key product, is targeting peak sales of over Rmb6 billion, demonstrating superior efficacy compared to existing treatments for non-small cell lung cancer (NSCLC) [7]. - The management emphasized the large market for NSCLC in China, which can accommodate multiple players, and highlighted the advantages of their product's established recognition and cost efficiency [7].

Investment Rating - The report assigns a "Buy" rating for the data center sector, indicating a positive outlook for investment opportunities in this industry [1]. Core Insights - The report emphasizes that technology development, particularly AI and cloud transformation, is driving demand for data centers, with a forecasted 60% increase in demand by 2027, compared to only 10% growth in logistics demand [3][71]. - It highlights that the data center sector is currently mispriced, with average valuations correcting to 20x 1Y forward EV/Ebitda, which is at the lower end of the logistics range of 20-30x, suggesting potential for re-rating based on earnings delivery and monetization [3][71][106]. Summary by Sections Lessons from E-commerce Boom on Logistics Assets - The e-commerce boom during 2020-2024 led to a doubling of e-commerce value in Singapore and Australia, significantly impacting logistics fundamentals, with rental growth of 23% in Singapore and 100% in Sydney [2][20]. - The share prices of logistics-related stocks approximately doubled from the Covid trough, with EV/Ebitda expanding from 20x to 30x before correcting back to around 20x [2][20]. Applying Lessons to Data Centers - Data center demand growth is driven by cloud transformation and AI adoption, with a forecast of 60% increase in demand by 2027 [3][71]. - The report indicates that data center vacancy rates are expected to remain below historical averages until 1Q28, with stronger rental growth anticipated in markets with tight vacancies starting in 2024 [3][71]. Buy Recommendations - Keppel is well-positioned as a data center sponsor with a projected 4.7% dividend yield for 2026 and strong balance sheet capacity for acquisitions [4]. - Goodman Group is noted for its strategic assets and positive pivot towards data centers, while NextDC is highlighted for its first-mover advantage in Australia [4]. - DigiCo REIT is recognized for its favorable supply/demand dynamics in the US and Australia [4].

Investment Rating - The report indicates a positive outlook for the China healthcare sector, with a recovery underway and improving investor sentiment, particularly in the biotech segment, which has seen a year-to-date performance increase of 37% [1]. Core Insights - The report highlights a significant recovery in the China healthcare sector, driven by improving investor sentiment and bottoming valuations, with offshore healthcare stocks up 21% year-to-date [1]. - Biotech companies are expected to benefit from licensing-out themes and resilience to geopolitical uncertainties, with key events like ASCO in June serving as potential catalysts for individual stock performance [1]. - There is a growing interest in domestic demand, particularly in capital expenditures and hospital traffic, with robust equipment tendering observed [1]. - The report anticipates a consumption recovery in areas such as refractive surgeries and orthodontics, although the sustainability of this recovery is contingent on the broader macroeconomic outlook [6]. - The report emphasizes the importance of global collaboration and licensing opportunities for pharmaceutical companies, with a focus on upcoming data releases at ASCO to enhance business development visibility [16]. Summary by Relevant Sections Biotech - The biotech sector is focusing on global licensing deals and achieving break-even points, with significant catalysts expected from the upcoming ASCO conference [13][14]. - Companies like Zai Lab and Innovent are highlighted for their innovative drug pipelines and potential for global collaboration [14][15]. Pharma - The pharmaceutical industry experienced soft growth in Q1 2025, but companies with strong product cycles, such as Hengrui, are showing better earnings trends [16]. - Collaboration opportunities are expected to increase, particularly with data releases at ASCO [16]. CDMO - CDMO companies reported better-than-expected results in Q1 2025, with strong order growth and maintained guidance for FY25 [17]. - Companies like WuXi Apptec and Asymchem are noted for their resilience in earnings delivery [17]. Medical Consumables - The report indicates challenges in inpatient surgeries due to reimbursement controls, but opportunities exist in the obesity and GLP-1 segments [19]. - Surgical volumes are expected to remain challenging, with ongoing pricing pressures [19]. Capital Equipment - Strong tendering activity was noted, but pricing pressures from value-based purchasing (VBP) are leading to longer revenue realization timelines [21]. - Companies like United Imaging and Mindray are expected to see positive growth in the coming quarters [21]. Retail Pharmacy - The retail pharmacy sector is undergoing a market clearing process, with a net decrease in drugstores for the first time, indicating a consolidation trend [26]. - Yifeng is highlighted as a resilient player in this space, benefiting from operational efficiency [26].

Investment Rating - The report indicates a higher geopolitical risk premium in the near term but maintains an unchanged forecast for 2026 oil prices [5][26][29] Core Insights - Brent oil prices have increased by 12% to $74 per barrel due to escalating tensions in the Middle East, particularly Israeli strikes on Iran's nuclear program [4][5] - The forecast predicts Brent and WTI prices will decline to $59 and $55 per barrel in Q4 2025, and to $56 and $52 per barrel in 2026, assuming no disruptions to oil supply [5][29] - Two alternative scenarios are considered for potential price impacts: one involving damage to Iran's export infrastructure leading to a peak Brent price of over $90 per barrel, and another considering broader regional disruptions that could push prices above $100 per barrel [20][24] Summary by Sections Price Forecasts - The report adjusts the Brent price forecast for Q3 2025 to $63 per barrel from $61, while maintaining a long-term forecast of $56 for 2026 [5][29] - The report outlines a detailed forecast for Brent and WTI prices across various quarters, indicating a gradual decline in prices through 2026 [29] Geopolitical Risks - The report highlights the increased geopolitical risks due to recent events in the Middle East, which could lead to short-term price volatility [6][26] - It emphasizes that while the geopolitical risk premium may normalize if oil supply remains stable, the current situation has heightened uncertainty [6][26] Iranian Oil Infrastructure - The report estimates Iran's crude production at 3.6 million barrels per day (mb/d) and discusses the potential impact of damage to its oil infrastructure on global energy prices [7][16] - It notes that damage to upstream or midstream assets would have a more significant impact on prices compared to downstream assets [7][16] Scenarios for Price Upside - The first scenario considers a reduction in Iranian production by 1.75 mb/d for six months due to infrastructure damage, with a subsequent recovery [17][20] - The second scenario examines risks to regional trade routes and potential disruptions in the Strait of Hormuz, which could significantly affect global oil prices [23][24]

Investment Rating - The report maintains a positive view on select covered developers, reiterating Buy ratings on CRL, COLI, Greentown, Jinmao, and Longfor [6][50][51]. Core Insights - The housing supply ratio in China is currently at 1X, which is lower or comparable to other sample countries, indicating potential for improvement as inventory is disclosed [2][8]. - The report identifies that 37% of sample cities have a housing supply ratio below 0.9X, while 26% have a ratio above 1.1X, with the excess inventory concentrated in Tier-3 and Tier-4 cities [8][14]. - The analysis suggests that a long-term housing supply ratio of 1.1X is reasonable, implying a potential funding need of Rmb0.7tn-1.6tn for inventory buybacks, which is equivalent to 0.5-1.2% of national GDP [6][35][36]. - The government has accelerated land buyback efforts, announcing nearly Rmb400bn in buybacks, primarily focused on lower-tier cities [6][37][47]. Summary by Sections Housing Supply Ratios - The report examines 78 cities, accounting for approximately 50% of China's population and housing stock, revealing a housing supply ratio of 0.7X for Tier-1 cities, 0.89X for Tier-2 cities, and 1.02X for Tier-3/4 cities [6][8][11]. - The report builds four illustrative cases to analyze how housing ratios could change based on different assumptions regarding urban household formation and living space per capita [27][28]. Inventory Analysis - As of end-1Q25, the sample cities are estimated to have 1.5 billion square meters of unsold residential inventory, with nearly half remaining as raw land [22][25]. - The average saleable inventory is projected to last 26 months, while total unsold inventory could take up to 6 years to clear [25][22]. Developer Performance - The report highlights that covered developers have shown more resilient primary average selling price (ASP) performance compared to secondary markets, with a significant portion of land investment concentrated in top-performing markets [50][51]. - The expected improvement in margins and return on equity (ROE) beyond 2027 is supported by better investment strategies and decreasing contributions from older low-margin land banks [51][60].