22 May 2025 | 9:39PM JST Japan Economics Analyst Is China Exporting Deflation? (Ota) Tomohiro Ota +81(3)4587-9984 | tomohiro.ota@gs.com Goldman Sachs Japan Co., Ltd. +852-2978-1802 | andrew.tilton@gs.com Goldman Sachs (Asia) L.L.C. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. c45a43530f604d12bcb9a82b5aa6b9f6 Akira Otani +81(3)45 ...

Investment Rating - The report maintains a "Buy" rating for Kingsoft Office with a 12-month target price of Rmb446, indicating an upside potential of 58.2% from the current price of Rmb282 [11]. Core Insights - Kingsoft Office is recognized as the largest domestic office productivity software provider in China, with its WPS software offering similar functionalities to Microsoft Office while providing additional services such as cloud storage and collaboration [8]. - The company is focusing on expanding its WPS AI user base, with Monthly Active Users (MAU) growing 8% year-over-year to 647 million by the end of Q1 2025, driven by the introduction of AI features [2][3]. - The WPS 365 platform for enterprise users has shown strong growth, achieving Rmb151 million in revenue for Q1 2025, a 63% year-over-year increase, supported by the adoption of State-Owned Enterprises (SOE) and other enterprises [3]. - Customized AI models have been launched for industry clients, significantly reducing hardware costs by 90% and improving paper writing quality by 72% [4][7]. Summary by Sections User Base Expansion - The MAU of WPS AI reached 19.7 million by the end of 2024, representing 3% of the total MAU, with management emphasizing efforts to enhance user engagement through features like a 7-day AI trial for new users [2]. WPS 365 Growth - The WPS 365 platform is highlighted for its comprehensive capabilities in office software, collaboration, and AI, providing a one-stop solution for enterprise users [3]. Customized AI Solutions - Kingsoft Office has developed customized AI models, including a government model with deep reasoning capabilities, which have led to significant cost reductions and quality improvements for clients [4][7]. Investment Thesis - The investment thesis is supported by expectations of increased Average Revenue Per User (ARPU) from the transition to a new membership system, subscription growth from enterprise clients, and long-term opportunities in AI [8].

Investment Rating - The report maintains a Buy rating for JD.com Inc. with a 12-month target price of US$50 and HK$194 for the Hong Kong listing, indicating an upside potential of 48.6% and 46.4% respectively [2][16]. Core Insights - JD.com is viewed as an underappreciated differentiated business within the Chinese internet sector, benefiting from domestic consumption policies and category expansion, which are expected to drive further valuation multiple expansion [2]. - The company anticipates sustained healthy growth momentum in JD Retail, expecting double-digit growth in both top line and profit, supported by enhanced procurement capabilities [1]. - The food delivery segment is seen as a synergistic extension of JD Retail, enhancing user engagement and attracting new customers while improving fulfillment efficiency [1][11]. Summary by Sections JD Retail Outlook - JD.com expects continued double-digit growth in JD Retail, driven by improved procurement capabilities and economies of scale [1]. - The company has observed healthy user retention and positive repeat purchase rates among early food delivery users [1]. Food Delivery Business - Food delivery is integrated into JD's broader retail strategy, enhancing user experience and increasing consumption frequency [1]. - The company aims to differentiate its food delivery service through quality offerings and lower merchant charges, while also focusing on user engagement and operational improvements [11]. Financial Projections - JD.com projects total revenue growth from Rmb1,158.8 billion in 2022 to Rmb1,484.2 billion by 2027, with a compound annual growth rate (CAGR) of approximately 6% [12]. - The gross profit margin is expected to stabilize around 16% over the forecast period, with net income projected to grow from Rmb44.7 billion in 2022 to Rmb58.7 billion by 2027 [12].

Investment Rating - The report rates both Weichai Power's A- and H-shares as Buy [16]. Core Insights - Weichai Power is on track with sales of large-bore engines, maintaining its full-year target and showing positive development in blended average selling price (ASP) [1]. - The company anticipates that the impact of the replacement policy will become more visible by June, as local government implementations vary [1][10]. - Weichai is committed to developing a strong new energy powertrain business and may consider acquisitions to support this growth [1][15]. - Shareholder return enhancement is a focus, with plans for increased cash dividends and share buybacks [1][15]. Sales and Market Performance - Sales volume for large-bore engines reached 2,400 units in Q1, with April achieving 800 units, reflecting a 50% year-over-year increase [10]. - The domestic market's contribution to sales has risen to 40%, up from 30% in 2024 [10]. - The blended ASP for large-bore engines increased to RMB 450,000 from RMB 430,000 in 2024 [10]. - The full-year sales volume target is set at 120,000 units, with expectations for data-center application engines to stabilize at 2,500 to 2,600 units over the next two years [10]. Strategic Focus and Future Outlook - Weichai's long-term strategy includes focusing on new energy powertrains, off-highway machinery engines, overseas expansion, and aftermarket services [15]. - The company is exploring acquisition targets in new energy powertrains and humanoid robots [15]. - Management expects total industry sales of 950,000 units, with potential upward revisions depending on the implementation of the replacement policy [10]. Financial Projections - Revenue for 2024 is projected to be RMB 1.5 billion, with expectations to increase to RMB 4-5 billion in the current year [11]. - The expected net profit for the current year is RMB 100 million [11]. - The company anticipates a robust free cash flow profile, yielding approximately 10-20% from 2025 to 2027 [14].

Ryan M. Nash, CFA +1(212)902-8963 | ryan.nash@gs.com Goldman Sachs & Co. LLC Americas Diversified Financials 1Q25 mutual fund and hedge fund Financials positioning analysis We assess Financials sector mutual fund and hedge fund positioning, using 13F data from the GS equity strategy team's reports (Mutual Fundamentals and Hedge Fund Trend Monitor). Mutual funds (MFs) decrease exposure to Financials in aggregate, with Financials seeing the biggest QoQ decrease in 1Q25 of any sector in the S&P 500, Financials ...

22 May 2025 | 12:34PM EDT US Daily: Lower Oil Prices Won't Offset Much of the Effects of Tariffs on Inflation, Inflation Expectations, and Growth (Rindels) +1(212)902-0394 | jan.hatzius@gs.com Goldman Sachs & Co. LLC Alec Phillips +1(202)637-3746 | alec.phillips@gs.com Goldman Sachs & Co. LLC Jan Hatzius David Mericle +1(212)357-2619 | david.mericle@gs.com Goldman Sachs & Co. LLC Ronnie Walker +1(917)343-4543 | ronnie.walker@gs.com Goldman Sachs & Co. LLC Manuel Abecasis +1(212)902-8357 | manuel.abecasis@gs ...

Investment Rating - The report maintains a "Buy" rating on Hunan Yuneng with a target price (TP) of Rmb62.0, up from Rmb60.0, indicating a positive outlook for the company as a key beneficiary of the LFP cathode upcycle [3][54]. Core Insights - The report highlights a cyclical recovery in China's LFP cathode sector driven by strong demand from Battery Energy Storage Systems (BESS) and New Energy Vehicles (NEV), with LFP cathode demand expected to grow by approximately 24% in 2025E-2026E, leading to a compound annual growth rate (CAGR) of 31% from 2024 to 2026 [1][17]. - The cost advantages of LFP batteries over NCM batteries are projected to expand to around 30% in 2025E, significantly influencing demand growth [1][32]. - Insufficient capital expenditure (CAPEX) is expected to limit supply additions, with capacity growth forecasted to decelerate to approximately 20% CAGR from 2024 to 2026E, lagging behind the demand growth [1][36]. Summary by Sections Demand Outlook - Strong demand is anticipated from both BESS and NEV, with LFP cathode demand projected to grow at a CAGR of 31% from 2024 to 2026E, driven by 30% CAGR from NEV and 34% CAGR from BESS [1][20][21]. - BESS demand is expected to grow significantly, with a revised CAGR of 35% for 2024-2026E, indicating a robust outlook for energy storage solutions [14][29]. - LFP penetration in NEV is expected to reach 90% in China by 2030E, reflecting a growing trend among major automotive manufacturers to adopt LFP technology [15][29]. Supply Dynamics - A significant decline in LFP cathode CAPEX, down 70% from 2Q23 to 1Q25, is expected to constrain capacity additions, with a forecasted CAGR of only 21% from 2024 to 2026E [36][39]. - The report estimates that a price increase of Rmb3k/t is necessary to bring tier 2 LFP manufacturers back to EBIT break-even levels, which is crucial for reactivating capacity expansion [2][42]. Financial Projections - Hunan Yuneng's unit gross profit is expected to increase from Rmb2.4k/t in 2024 to Rmb5.4k/t in 2026E, reflecting the anticipated recovery in pricing and demand [3][54]. - The report projects a volume CAGR of 24% for Yuneng from 2024 to 2030E, indicating a strong market position with an expected market share of approximately 30% [3][54].

Investment Rating - The report maintains a "Buy" rating for Apple Inc. (AAPL) with a 12-month target price of $253.00, reflecting a potential upside of 22.3% from the current price of $206.86 [1][19]. Core Insights - The upcoming WWDC 2025 is expected to showcase Apple's advancements in AI integration within its operating systems, including developer access to AI models for app development and potential Gemini AI integration on iPhones [1][2]. - Despite concerns regarding the delayed rollout of Apple Intelligence, the report highlights incremental improvements in user experience through iOS 19 and anticipates AI-enhanced features for Siri and other applications in the future [2][18]. - The report emphasizes Apple's strong brand loyalty and the growing installed base, which provides visibility into revenue growth and reduces customer churn, thereby supporting the company's premium valuation [25][26]. Financial Projections - Revenue is projected to grow from $391.04 billion in FY 2024 to $466.26 billion by FY 2027, with a compound annual growth rate (CAGR) of approximately 6.8% [13]. - EBITDA is expected to increase from $134.66 billion in FY 2024 to $160.78 billion in FY 2027, indicating a positive trend in operational profitability [13]. - EPS is forecasted to rise from $6.75 in FY 2024 to $8.80 in FY 2027, reflecting a growth trajectory that supports the investment thesis [13]. Market Position and Competitive Landscape - Apple is positioned as a leader in the technology sector, with a market capitalization of $3.1 trillion and a strong enterprise value of the same amount, indicating robust financial health [4]. - The report notes that while Apple faces competition across various segments, its unique ecosystem and brand strength provide a competitive advantage that is expected to drive future growth [25][26]. Upcoming Developments - Key features expected to be announced at WWDC 2025 include design updates for iOS 19, convenience-oriented features like AI-driven battery optimization, and Gemini integration for enhanced user experience [16][17]. - The report anticipates that Apple will open its large language models (LLMs) to app developers, which could enhance the adoption of Apple Intelligence features and drive further innovation [18].

Investment Rating - The report assigns a "Buy" rating to ZTO Express (Cayman) Inc. with a 12-month price target of US$27 or HK$210, indicating a potential upside of approximately 54% from the current price levels [2][19]. Core Insights - ZTO Express is experiencing solid share gains in reverse parcels, despite intense competition in the express delivery industry. The company aims for above-industry volume growth while maintaining service quality for sustainable long-term growth [1][2]. - The competitive landscape is characterized by increasing price competition and a higher mix of low-weight small parcels, which are putting pressure on the industry-wide average selling price (ASP). However, ZTO believes there is limited downside to ASP due to the profitability challenges faced by competitors [3][9]. - ZTO plans to invest between Rmb5.5 billion and Rmb6 billion in capital expenditures to ensure that the majority of its land is self-owned, with expectations for a reduction in capex levels by FY26 [1]. Competitive Landscape - The company notes that the competitive landscape remains intense, particularly during peak seasons like the June 18 shopping festival, where ASP is expected to remain pressured as players focus on higher asset utilization [11]. - ZTO has observed increasing pressure on network partners across the industry, which is a key factor in tracking the progress of price competition [9]. Operating Strategies - ZTO is focusing on regaining order volume share while balancing service quality and profitability. The company emphasizes ecosystem sustainability by improving the financial health and efficiency of network partners [1][16]. - The company is also working on cost optimization potentials, particularly in labor costs and automation, to enhance last-mile efficiency [13]. Financial Performance - In the first quarter of FY25, ZTO reported parcel volumes of 8.539 million, representing a year-over-year growth of 19%. However, net revenues were Rmb10.892 million, which was 11% lower than expected [15]. - The revenue per parcel decreased to Rmb1.25, down by Rmb0.11 compared to the previous year, indicating pressure on profitability [15][17]. EBIT Outlook - The EBIT per order is expected to face continued pressure from competition, although the positive contribution from reverse parcels is noted as a mitigating factor [14].

Investment Rating - The report maintains a "Buy" rating for EHang with a 12-month price target of $29.10, indicating an upside potential of 62.1% from the current price of $17.95 [8][11]. Core Insights - EHang is positioned as a leader in the eVTOL (electric vertical take-off and landing) market, with an expanding model portfolio and increasing pre-orders, supported by a recovering post-pandemic tourism market and developing regulatory framework [10]. - The company has received necessary certifications, including the Type Certification (TC) in October 2023 and the Airworthiness Certificate (AC) in December 2023, which are crucial for its profitability in the coming years [10]. Summary by Sections Commercial Operations - EHang's subsidiaries have obtained the Operator Certificate (OC) necessary for commercial operations, allowing them to start selling tickets for aerial tourism in Guangzhou and Hefei, with plans to expand into air shuttle and intra-city air travel [2][4]. Manufacturing Expansion - EHang is expanding its manufacturing capacity, with plans to increase production at its Guangdong Yunfu factory from 600 units per year to 1,000 units by 2025. Additionally, a new manufacturing base is being established in Hefei through partnerships, and further expansion is planned in Shandong Weihai [3][4]. Order Acceleration - The management anticipates an accelerated ramp-up of eVTOL orders as more companies receive their OC, enabling them to leverage the EH216-S for revenue generation [7].