Investment Rating - The report assigns a "Buy" rating to Lingyi (002600.SZ) with a 12-month price target of Rmb10.10, indicating an upside potential of 24.7% from the current price of Rmb8.10 [8]. Core Insights - Lingyi's management is optimistic about growth driven by the demand for precision components in consumer electronics and server cooling modules, particularly due to the shift in smartphone form factors and the rise of AI applications [1][2]. - The company is expanding its product offerings in foldable phones and AI glasses, targeting higher dollar content per device and anticipating increased shipments [3][6]. Summary by Sections Cooling / Thermal Modules for AI Smartphones - Lingyi provides over 200 SKUs of metal precision parts for major smartphone brands, focusing on high-end models using copper materials for 2025, with plans to introduce hybrid materials in 2026 [2]. - The company's factory in India is expected to meet client demand, contingent on the capacity expansion by assemblers in the region [2]. Foldable Phones - The company supplies metal middle frames and precision parts for foldable phones, with a positive outlook on the growing trend and plans to engage with global-tier smartphone brands [3]. AI Glasses - Lingyi manufactures structural parts and cooling components for AI/AR glasses, expecting significant upside as major global technology companies plan to launch their own versions [6]. Financial Projections - Revenue projections for Lingyi are Rmb44.21 billion in 2024, increasing to Rmb79.75 billion by 2027, with EPS expected to grow from Rmb0.25 in 2024 to Rmb0.73 in 2027 [8].

Investment Rating - The report maintains a Neutral rating for Maxscend with a 12-month target price of Rmb86, indicating an upside potential of 23.2% from the current price of Rmb69.81 [2][11]. Core Insights - Management is optimistic about the company's RF modules expansion, the ramp-up of in-house capacity utilization, and new growth opportunities in the long term [1][2]. - The smartphone market is anticipated to take time to transition to the next product cycle (6G), and the shift from fabless to fab-lite may also require time to enhance efficiency and profitability [2]. Summary by Sections 2025 Business Outlook - Management expects quarterly revenues and margins to increase sequentially in 2025, driven by RF modules expansion, improved smartphone seasonality in the second half of 2025, and normalizing depreciation as utilization rates rise [3]. - Inventory levels are projected to decline but remain relatively high due to geopolitical tensions [3]. Xinzhuo Project Development Progress - The 6" and 12" wafer production lines have commenced mass production, with the 12" production line currently achieving a capacity of 4,000 wafers per month, aiming for 5,000 wafers per month by the end of 2025 [4]. - As capacity increases, the depreciation cost per wafer is expected to decrease, leading to margin improvements [4]. New Growth Opportunities - Management is positive about the potential of LEO satellite direct-to-cell functions, which could create additional RF module opportunities for Maxscend [8]. - There are also long-term prospects in high-end markets such as AI and robotics, allowing the company to leverage its in-house capacity more effectively [8].

Investment Rating - The report assigns a "Buy" rating to several companies related to the foldable phone and AI device supply chain, including SZS, Fositek, Lingyi, AVC, AAC, and Huaqin [17]. Core Insights - The report highlights a positive outlook for Lens Technology Co. (300433.SZ) as it expands its product offerings from smartphone components to emerging markets such as AI glasses and automotive components, which is expected to enhance profitability through improved utilization rates and specification upgrades [1][4]. - There is an anticipated increase in global foldable phone shipments and a rising demand for AI devices driven by generative AI use cases, aligning with the company's optimistic view on AI glasses and foldable phones [2][4]. Summary by Sections 2025 Outlook - Management is optimistic about growth in 2025, supported by new smartphone model launches from major customers, which is expected to improve utilization rates during traditionally slow seasons [4][8]. Tariffs' Impact - Tariffs are expected to have a minor impact on growth due to the company's shipping practices and global production sites in Vietnam, Thailand, Mexico, and China, allowing for flexible capacity adjustments [8][9]. New Business Expansion - Lens Tech aims to penetrate the automotive components market, targeting major OEMs with higher dollar content per vehicle, and has formed a strategic partnership with Rokid in the AI glasses sector, anticipating growth as market demand increases [9][4].

Investment Rating - The report assigns a "Buy" rating to SICC (688234.SS) with a 12-month price target of Rmb75.50, indicating an upside potential of 24.7% from the current price of Rmb60.55 [10]. Core Insights - The management of SICC is optimistic about market demand driven by the increasing launch of 800V electric vehicles (EVs) and the growing need for EV fast charging. Additionally, the demand for SiC substrates in augmented reality (AR) glasses is expected to rise significantly [1][3]. - SICC is positioned well within the AD/ADAS trend, enhancing SiC's penetration in the EV market. The company is a local leader in SiC substrates, benefiting from local car OEMs diversifying their supply chains amid geopolitical tensions [1][3]. Summary by Sections Capacity Expansion - SICC's production facilities are located in Shanghai and Jinan, China. The Shanghai plant has a capacity of 300k units per year for phase 1 (6-inch or 8-inch SiC substrate) and an additional 300k units per year in phase 2, primarily for 8-inch SiC substrate. The Jinan site has a capacity of 100-150k units per year for 6-inch SiC substrate. The company plans to expand its 8-inch capacity to non-China markets to increase its market share among global SiC device manufacturers [2]. SiC Penetration in EVs - Management anticipates that the penetration rate of SiC in mainstream EV models will continue to rise as more 800V EV models are introduced in the coming years. The localization trend of SiC substrates is expected to support the company's growth, as local suppliers offer more cost-effective products, allowing customers to diversify their supply chains [3]. SiC Application in AR Glasses - SiC is identified as the optimal solution for AR glasses due to its superior reflection control and lightweight properties. Management projects that the demand for SiC substrates from AR glasses may eventually surpass that from EVs in the long term, presenting significant upside potential for SICC [7].

Investment Rating - The report assigns a "Buy" rating for Innolight with a 12-month price target of Rmb115, indicating an upside potential of 25.2% from the current price of Rmb91.87 [10][14]. Core Insights - Innolight is positioned as a leading supplier of optical transceivers in the datacom market, particularly benefiting from the growth in AI and data center expansions [10][11]. - The demand for 800G transceivers is expected to remain strong, driven by cloud service providers transitioning from 400G to 800G for AI inferencing applications [2][10]. - The company anticipates easing supply constraints by the third quarter of 2025 due to new capacity from laser suppliers, which should support shipment growth [7][10]. - Profitability is projected to improve due to a favorable product mix, particularly with an increase in silicon photonics modules, which have higher gross margins compared to traditional transceivers [8][10]. Summary by Sections Demand Outlook - The demand outlook for 2025 remains unchanged, with solid orders from customers. The transition to 800G is expected to ramp up in the second half of 2025, particularly for AI applications [2][10]. - The migration from 400G to 800G in traditional cloud datacenters is anticipated to gain momentum into 2026, although it currently accounts for less than 20% of overall 800G demand in 2025 [2][10]. Supply Constraints - Innolight's revenue growth has been flat over the past three quarters due to upstream component constraints, particularly with EML laser supply. Management expects improvements in supply conditions by 3Q25 [7][10]. Profitability and Margins - The company has reaffirmed its trend of profitability improvement, driven by a shift in product mix towards silicon photonics transceivers and enhanced manufacturing efficiency [8][10]. - The gross margin is expected to increase from 33.8% in 2024 to 38.3% in 2025, with net margins projected to rise from 21.7% in 2024 to 24.3% in 2025 [9][10]. Future Projections - The ramp for 1.6T transceivers is set for 3Q25, but the overall volume is expected to remain small compared to 800G. The mainstream adoption of 1.6T is anticipated in 2027 [3][10]. - The financial outlook shows significant revenue growth, with projections of Rmb29.3 billion in 2025 and Rmb33.6 billion in 2026 [9][10].

Investment Rating - The report initiates coverage on Shengquan Group with a "Buy" rating, indicating a positive outlook on the company's growth potential and valuation [1][7][4]. Core Insights - Shengquan Group is positioned as a unique player in the AI and EV materials sector, leveraging its advanced material platform to drive new growth opportunities. The company is expected to achieve a net profit CAGR of 28% from 2024 to 2027, significantly improving from a 0% CAGR from 2020 to 2024 [1][9][11]. - The report highlights the strong growth potential in the new materials segment, particularly in electronic and battery materials, driven by the rising demand for AI servers and electric vehicle batteries. The expected CAGR for these materials is projected at 52% from 2024 to 2027 [9][29][11]. Summary by Sections New Materials - Shengquan is one of the few manufacturers globally capable of mass-producing polyphenylene oxide (PPO) and other high-speed resins, which are critical for printed circuit boards (PCBs) in AI servers. The potential market size for PPO is expected to reach 4 billion RMB by 2027, doubling from 2024 [2][45]. - The company is also focusing on porous carbon materials for silicon-carbon anodes in battery applications, with a projected market size of 10 billion RMB by 2030, representing a 60-fold increase from 2024 [2][11]. Bulk Materials - Shengquan has maintained a leading market share of 20-30% in synthetic resin, particularly in phenolic and furan resins, with a forecasted gross profit growth of 10% annually. The company is expected to benefit from the recovery of resin prices and increased production capacity [3][10][25]. Valuation - The current stock price corresponds to an 18x PE ratio for 2025E, with a target price set at 36.00 RMB, indicating a 35% upside potential. The valuation is supported by a DCF analysis suggesting a 25x PE for 2025E [4][26][11]. Financial Projections - Revenue projections show a steady increase from 9.6 billion RMB in 2022 to 20.0 billion RMB by 2029, with net profit expected to rise from 703 million RMB in 2022 to 2.3 billion RMB by 2029 [5][11]. - The report anticipates a significant improvement in profitability, with the gross margin for new materials expected to rise from 14% in 2024 to 41% by 2027 [9][11][29].

May 20, 2025 10:00 PM GMT China Autos & Shared Mobility: Investor Presentation | Asia Pacific Japan Summit – AI-Enabled Mobility & Humanoid Robotics | M | | | | --- | --- | --- | | | | Update | | May 20, 2025 10:00 PM GMT | | | | China Autos & Shared Mobility: Investor | Morgan Stanley Asia Limited+ | | | Presentation Asia Pacific | Tim Hsiao | | | | Equity Analyst | | | | Tim.Hsiao@morganstanley.com | +852 2848-1982 | | Japan Summit – AI-Enabled | Stanley Wang Research Associate | | | | Stanley.Wang@morgan ...

Investment Rating - The report maintains a "Buy" rating for several major Chinese banks, including China Construction Bank (CCB), China Merchants Bank (CMB), and Industrial and Commercial Bank of China (ICBC) [7][25]. Core Insights - Investors are currently underweight on Chinese banks due to a soft domestic economy and uncertainties related to trade conflicts, despite recognizing the strong performance of bank stocks [2][3]. - The report highlights the importance of dividend yields, with CCB and CMB being particularly attractive due to their relatively high yields and strong capital ratios [7][8]. - There is a growing interest in fintech, with investors focusing on regulatory changes and the relationship between fintech companies and traditional banks [6][4]. Summary by Sections Investor Sentiment - Approximately 50% of investors plan to hold their positions in Chinese banks, viewing them as a defensive play amid uncertainties, while the other half are considering taking profits or switching to other high-dividend sectors [2][3]. Recapitalization and Dividends - The recapitalization of large state-owned banks is seen as beneficial for both the banks and the government, providing sustainable support for the real economy and future dividend payouts [3]. - Concerns exist regarding the potential decline in interim dividends due to year-over-year profit declines observed in Q1 2025 for some banks [3]. Earnings and Asset Quality - The report anticipates a year-over-year decline in net profits for some large state-owned and joint-stock banks in H1 2025, which may impact dividend announcements [3]. - Asset quality remains a concern, particularly in the property and retail sectors, with a significant portion of risky debt identified in listed A-share companies [3]. NIM and Tariff Impact - The outlook for Net Interest Margin (NIM) is discussed, with a recent policy rate cut expected to have a mixed impact on banks' profitability [3]. - While banks have limited exposure to export-oriented businesses, indirect impacts from tariffs and macroeconomic slowdowns could be more significant [3]. Valuation and Performance - The report provides a valuation summary for various banks, indicating that CCB and CMB lead in dividend yield and capital ratios among their peers [7][8]. - Year-to-date performance shows that MSCI China banks have underperformed compared to the broader MSCI China index [9][10].

23 May 2025 | 4:38PM CST China Multi-Industry Tariff Impact - Feedback from Appliances, Autos, Industrial Tech & Solar Companies (week of May 23) We have conducted discussions with select companies in the appliances, autos, industrial tech and solar sectors to understand the latest management thoughts on the business outlook following the increase in US tariffs. Details inside. China Consumer Durables We have interviewed selected covered companies within the white goods, consumer electronics and furniture s ...

Investment Rating - The report upgrades LYC.AX from Underweight (UW) to Overweight (OW) and ILU from Equal Weight (EW) to Overweight (OW) [5] Core Insights - The humanoid market is projected to reach 0.9 million units and $0.02 trillion by 2030, 134 million units and $1.2 trillion by 2040, and 1,019 million units and $4.7 trillion by 2050, with each humanoid requiring significant amounts of critical minerals [4][11][40] - Cumulative incremental demand for critical minerals could reach up to $800 billion by 2050, with humanoids potentially adding 40% to 167% to the demand for rare earths (specifically NdPr) by 2040 to 2050 [4][16][63] - The report highlights that Chinese enterprises control a significant portion of the supply for critical minerals, necessitating supply chain diversification for western producers [4][21][66] Summary by Sections Humanoid Market Projections - Humanoids could create a market of 0.9 million units and $0.02 trillion by 2030, 134 million units and $1.2 trillion by 2040, and 1,019 million units and $4.7 trillion by 2050 [4][11][40] - Each humanoid is estimated to require approximately 0.9 kg of NdPr, 2 kg of lithium, 6.5 kg of copper, 1.4 kg of nickel, 180 g of cobalt, and 3 kg of graphite [4][11][40] Demand for Critical Minerals - Incremental demand from humanoids could add up to $800 billion across covered critical minerals by 2050, with significant increases in demand for NdPr, lithium, cobalt, and nickel [4][16][63] - By 2050, the annual added demand for critical minerals could be between $50 billion and $120 billion [4][16][63] Supply Chain Dynamics - Chinese enterprises currently control 65% of rare earths, 27% of lithium, approximately 70% of nickel, 55% of cobalt, and 82% of graphite, highlighting the need for diversification in supply chains [4][21][66] - The average lead time for new mines has increased to approximately 17.8 years, posing challenges for meeting rising demand for critical minerals [4][22][66] Price Forecasts and Market Opportunities - The report upgrades long-term price forecasts for rare earths, specifically increasing the NdPr price from $135 per ton to $209 per ton [30][66] - A list of 34 companies is provided for investors to capitalize on the thematic of incremental humanoid demand for critical minerals [5][30]