Investment Rating - The report maintains a "Sell" rating for Huayou Cobalt with a revised target price of Rmb27.00, indicating a downside of 20.2% from the current price of Rmb33.82 [1][2]. Core Insights - Huayou Cobalt reported a net profit of Rmb4.2 billion for 2024, reflecting a 24% year-over-year increase, primarily driven by higher profits from nickel and lithium [1][20]. - The company is facing challenges in the ternary battery materials market, with market share declining to below 20% in Q1 2025 from 27% in 2024 and 32% in 2023, leading to lower shipments and margins [2][31]. - The earnings outlook remains cautious due to depressed prices for lithium, nickel, and cobalt, which are expected to cap earnings improvements [2][31]. Financial Summary - Revenue for 2024 is estimated at Rmb60.5 billion, down 8% from 2023, with a gross profit of Rmb10.1 billion, up 12% year-over-year [28]. - The earnings per share (EPS) for 2024 is reported at Rmb2.50, a 22% increase from the previous year [28]. - The company declared a cash dividend of Rmb0.50 per share, with a payout ratio of 23%, significantly lower than the 69% in 2023 [1][28]. Earnings Estimates - Recurring earnings estimates for 2025-2026 have been revised upward by 44-55% due to higher refined nickel sales volume and lower costs for lithium [2][31]. - The projected EPS for 2025 is Rmb1.89, down from the previous estimate of Rmb1.79, reflecting ongoing market challenges [2][28]. Market Dynamics - The ternary battery materials market is expected to continue facing pressure, with increased competition and declining unit profits anticipated [31]. - The report highlights that Huayou's earnings are likely to remain depressed in 2025 due to weak prices for nickel, cobalt, and lithium [31]. Valuation Analysis - A bottom-of-the-cycle valuation analysis suggests a theoretical valuation range of Rmb7.8 to Rmb14.1 per share for Huayou, compared to the current share price of Rmb33.8 [2][31]. - The report's sum-of-the-parts (SOTP) valuation methodology indicates a valuation of Rmb22.7 per share for the battery material business [26][32].

Investment Rating - The report maintains a "Buy" rating for Zhongji InnoLight with a target price reduced to CNY 125, implying a 54% upside from the closing price of CNY 81.19 on April 21, 2025 [5][26]. Core Insights - The company experienced significant revenue and earnings growth in FY24, with year-on-year revenue growth of 122.6% and earnings growth of 142.6%. However, 1Q25 revenue growth was subdued at 37.8% year-on-year due to a shortage of EML chips, while earnings rose 56.8% year-on-year, driven by better gross profit margins [1][2][19]. - Demand for 800G transceivers is expected to remain strong, while demand for 1.6T transceivers may slow down this year but is anticipated to ramp up next year. The easing of the EML chip shortage is expected to improve shipment volumes in the coming quarters [2][19]. - The report highlights that a temporary tariff exemption is currently easing margin pressure and may boost near-term shipments, although the risk of a tariff hike remains a concern [3][19]. Financial Summary - FY24 revenue was reported at CNY 23,862 million, with a projected revenue of CNY 37,228 million for FY25 and CNY 41,462 million for FY26. The normalized net profit for FY24 was CNY 5,171 million, with projections of CNY 8,202 million for FY25 and CNY 9,373 million for FY26 [4][10]. - The gross profit margin (GPM) is expected to improve slightly, with FY25-26F GPM raised by 0.1 percentage points due to a better product mix [16][19]. - The company is currently trading at a normalized P/E of 9.7x for FY26F, which is below the median P/E range of the China electronic/communication component companies [1][4][19].

Investment Rating - The report initiates coverage of Topchoice with an Underweight (UW) rating and a price target (PT) of Rmb34 for December 2025 [1][8][23]. Core Insights - The dental services industry in China is facing both short- and long-term challenges, leading to profitability pressure for Topchoice. The company's earnings per share (EPS) estimates for FY25 and FY26 are projected to be 8% and 10% below consensus, respectively [1][8][21]. - Topchoice's revenue is heavily reliant on Zhejiang Province, which accounts for 90% of its total revenue, raising concerns about geographical concentration and expansion momentum [5][8][21]. - The report highlights that the dental services market is fragmented, with only about 3% of dental institutions operating as chains, limiting pricing power and growth potential [5][28][33]. Summary by Sections Company Overview - Topchoice operates 84 medical facilities and has approximately 3,100 dental chairs as of Q3 FY24 [1][8]. - The company has seen flat revenue growth from FY21 to FY24E, with a projected compound annual growth rate (CAGR) of 10% from FY24 to FY27 [5][8]. Financial Performance - Revenue for FY23 was Rmb2,847 million, with projections of Rmb2,938 million for FY24 and Rmb3,125 million for FY25 [7]. - The adjusted net income for FY25 is estimated at Rmb538 million, reflecting a growth of 7% from FY24 [7]. Market Dynamics - The dental services market in China is projected to grow at a CAGR of 7% from 2024 to 2028, reaching Rmb193 billion, but has faced fluctuations in revenue growth due to the pandemic and economic conditions [30][28]. - The report notes that the average price of dental implants has decreased significantly due to government-led procurement policies, but the expected increase in demand has not materialized as anticipated [45][50]. Valuation - The report uses a discounted cash flow (DCF) model to arrive at the price target of Rmb34, assuming a weighted average cost of capital (WACC) of 12% and a terminal growth rate of 2.5% [9][23][25]. - Topchoice's current P/E ratio of 35.5x for FY25 is considered a premium compared to peers, which raises concerns about the sustainability of such valuations given the company's growth outlook [21][8]. Risks and Challenges - The report identifies several risks, including the company's reliance on a single geographic region, challenges in expanding outside Zhejiang, and the competitive landscape of the dental services market [5][21][28]. - The orthodontics segment is also under pressure, with declining treatment volumes and a shift towards more cost-effective options among consumers [54][61].

Investment Rating - The investment rating for Wanhua Chemical is Underweight [2][8][76] Core Views - The report indicates that Wanhua Chemical is facing multiple geopolitical headwinds, including US export tariffs on MDI, China's import tariffs on ethane, and an anti-dumping investigation by the US, which are expected to negatively impact volume, price, and earnings [8][12][13] - The price target for Wanhua Chemical has been reduced to Rmb51.00, reflecting a 5% decrease based on updated financial data and a target multiple of 15x 2025e P/E [5][8][12] Summary by Sections Price Target and Earnings Estimates - The price target for Wanhua Chemical is set at Rmb51.00, down from Rmb54.00, based on a target multiple of 15x 2025e P/E [5][8] - The estimated EPS for 2025 is revised to Rmb3.42, down from Rmb3.61 [2][8] Financial Performance and Projections - The report projects a decline in net profit by 5% for 2025 and 6% for 2026, leading to a downward revision of earnings estimates [5][8] - MDI prices are expected to be Rmb12,305 per ton in 2025, with unit gross profit projected at Rmb2,892 per ton [16] Market Conditions and Risks - The geopolitical risks are anticipated to exert downward pressure on MDI prices and spreads, affecting overall earnings visibility for non-MDI products [8][12][13] - The report highlights that the valuation is no longer appealing, contributing to the Underweight rating [8][12]

Investment Rating - The investment rating for China TransInfo Technology is "Sell" with a target price of Rmb5.1, indicating an expected share price return of -38.0% and a total expected return of -37.6% [4][8]. Core Insights - In 4Q24, revenue decreased by 28% year-over-year to Rmb1.8 billion, which was 40% and 25% below CitiE and BBGe estimates respectively [2][6]. - The gross margin for 4Q24 fell by 5.4 percentage points year-over-year to 32.1%, which was 6.1 percentage points below CitiE but 4.5 percentage points above BBGe [2][6]. - Operating expenses increased by 3% year-over-year to Rmb796 million, leading to an operating loss of Rmb206 million compared to an operating profit of Rmb179 million in 4Q23 [2][6]. - The overall net loss for 4Q24 was Rmb1.2 billion, aligning with previous guidance [2][6]. - For FY24, revenue declined by 7% year-over-year, with net losses also at Rmb1.2 billion compared to a net profit of Rmb542 million in FY23 [2][6]. Segment Breakdown - In the second half of 2024, revenue from intelligent transportation fell by 54% year-over-year to Rmb798 million, while the overall FY24 revenue for this segment decreased by 26% year-over-year to Rmb2.2 billion [3]. - The gross margin for the intelligent transportation segment narrowed by 12 percentage points year-over-year to 19.5% in 2H24, and the FY24 gross margin decreased by 7.3 percentage points to 21.1% [3]. - Conversely, revenue from intelligent IoT increased by 7% year-over-year to Rmb2.9 billion in 2H24, with an overall FY24 revenue growth of 5% year-over-year to Rmb5.1 billion [3].

Investment Rating - The report initiates coverage on Tongce Medical with a "Reduce" rating and sets a target price of 34 CNY by December 2025 [1][3][7]. Core Insights - The oral healthcare service industry faces both short-term and long-term challenges, leading to pressure on profitability. The earnings per share (EPS) forecasts for 2025 and 2026 are 8% and 10% lower than market consensus, respectively [1][4][7]. - Tongce Medical's revenue is heavily reliant on Zhejiang Province, with 90% of its income generated from this region. The company has struggled with slow expansion outside the province and lower profitability in those areas [4][7][19]. - The report highlights that the industry is fragmented, with only about 3% of dental institutions operating in a chain model, limiting pricing power. Additionally, weak consumer spending has reduced demand for high-margin orthodontic and implant services [4][24]. Summary by Sections Company Overview - Tongce Medical operates 84 medical institutions and has approximately 3,100 dental chairs as of Q3 2024 [1][7]. - The company was founded in 1995 and is one of the leading dental chains in China [7]. Financial Projections - Revenue is projected to grow from 2,847 million CNY in FY23 to 3,125 million CNY in FY25, with a compound annual growth rate (CAGR) of 10% expected from 2024 to 2027 [6][13]. - Adjusted net profit is forecasted to increase from 500 million CNY in FY23 to 609 million CNY in FY26 [6][13]. Market Dynamics - The report anticipates a 7% CAGR for the domestic oral healthcare service market from 2024 to 2028, reaching 193 billion CNY [25][29]. - The market has seen a decline in growth rates due to the pandemic and changing consumer behavior, with a CAGR of only 0.5% from 2019 to 2023 [25][29]. Competitive Landscape - The report notes that the private sector dominates the oral healthcare market, accounting for over 70% of total revenue, with approximately 92.5% of dental institutions being privately operated [30][31]. - The competitive environment is characterized by price sensitivity among consumers, leading to increased competition from smaller clinics [24][25]. Valuation and Risks - The report finds Tongce Medical's valuation at approximately 35.5 times the expected 2025 earnings, which is considered high compared to peers [19][21]. - The report suggests that the company's growth visibility is low, making the premium valuation unjustifiable [19][21].

We are also watchful about Hainan's free-trade-zone policy and impact to duty-free operators. The Hainan government has not yet released any details, but we expect it to do so later this year as Central government targets opening the FTZ in 2025. Recap of March-2025 Hainan offline DF trends: Avg daily sales Rmb94mn (-5% YoY vs -13% YoY in 2M25); Daily shoppers 17.7K (-26% YoY) and spending per shopper Rmb6.5K (+28%). The ASP growth could be helped by more electronic product sales which might not translate t ...

Investment Rating - The investment rating for Hangzhou Hikvision Digital Technology is Neutral, with a target price adjusted to Rmb30 from Rmb33, reflecting a 5.7% expected return [4][21][22]. Core Insights - The company reported 4Q24 results that were in line with preliminary results, with a revenue decrease of 2% YoY to Rmb27.5 billion and a net profit decline of 26% YoY to Rmb3.9 billion [2][10]. - For 1Q25, revenue increased by 4% YoY to Rmb18.5 billion, although it was below expectations [1][11]. - Management plans to focus on higher-margin businesses and maintain strict control over operating expenses [8][21]. - There is an expectation of muted recovery in domestic business for FY25, while overseas and innovative business segments are anticipated to grow stronger [8][21]. Summary by Sections Financial Performance - 4Q24 revenue was Rmb27.5 billion, down 2% YoY, with a gross margin of 41%, down 1.9 percentage points YoY [2][10]. - 1Q25 revenue rose to Rmb18.5 billion, with a gross margin of 43.9%, down 0.8 percentage points [1][11]. - FY24 revenue for the PBG segment decreased by 12% YoY, while the innovation business grew by 21.2% YoY to Rmb22.5 billion [2][10]. Earnings Estimates - FY25-26 earnings estimates have been cut by 11-16% due to lower revenue and margin assumptions [9][13]. - The new revenue estimate for FY25 is Rmb98.986 billion, down 3.2% from the previous estimate [13][14]. Market Position and Strategy - Hikvision is the world's largest supplier of video surveillance products, focusing on innovation and expanding its overseas business [20][21]. - The company has ceased shipments to the US, which previously accounted for about 3-4% of sales, with limited expected impact on overall business [8][21]. Valuation Metrics - The target price of Rmb30 is based on a 20.2x NTM PE, which aligns with the company's 10-year historical average [4][22]. - Current market capitalization is Rmb261.946 billion [4].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The average tariff imposed by the US has surged from 3% to over 20%, marking the highest level in nearly a century, which has led to significant declines in stock and commodity prices, reminiscent of the Smoot-Hawley Tariff Act of the 1930s [1][2] - High tariffs disrupt global supply chains, forcing companies to adjust production layouts, which reduces global production efficiency and raises the US policy uncertainty index to its second-highest level in decades [1][5] - The imposition of tariffs is expected to push inflation higher, slow down economic growth in exporting countries, and suppress overall production, leading to a lasting negative impact on the macroeconomy [1][6] - The report predicts a potential recession or stagflation in the US economy, with GDP expected to drop sharply and both consumption and investment slowing down, contrasting with the prevailing belief in the resilience of the US economy [1][8] - Economic data in the US shows significant divergence, with soft data (like consumer confidence) not aligning with hard data (like sales figures), necessitating careful differentiation between core and auxiliary data to avoid reliance on distorted information [1][12] Summary by Sections Tariff Impact - The US government has announced a significant increase in tariffs, raising basic tariffs by 10% and imposing tariffs of 30% to 50% on countries with large trade deficits with the US, resulting in an average tariff increase to over 20% [2][3] - This tariff increase has led to a notable decline in US stock markets and commodity prices, indicating a substantial negative impact on the economy [4][5] Economic Outlook - The report suggests that the US economy may face a challenging future, with a high likelihood of recession or stagflation due to the adverse effects of tariffs and other policies [7][8] - The analysis indicates that the most resilient sectors, such as consumption and investment, are also showing signs of slowing down, confirming the overall downward trend in the economy [17][18] Global Economic Context - China's economy showed a GDP growth of 5.4% in the first quarter, but is expected to face challenges in the second and third quarters due to tariff impacts, with potential government measures to stabilize recovery [19][20] - The report emphasizes the importance of considering the contrasting policy environments between the US and China, with China having more room for counter-cyclical stimulus due to lower inflation [20][21] Asset Allocation Recommendations - In the current environment, the report recommends allocating to safe assets like gold and Chinese bonds, while advising caution regarding traditional safe assets like US dollars and bonds due to their diminished safety and resilience [44][38] - The report suggests that investors should maintain a cautious stance towards US equities, given the potential for recession or stagflation, and consider structural adjustments in their portfolios [39][42]

Investment Rating - The report maintains a "Buy" rating for Eoptolink, with a revised 12-month target price of Rmb123, indicating a potential upside of 51.5% from the current price of Rmb81.2 [9][17]. Core Insights - Eoptolink's revenue for 1Q25 reached Rmb4.05 billion, representing a 264% year-over-year increase and a 15% quarter-over-quarter increase, which aligns closely with Goldman Sachs' estimate of Rmb3.99 billion. The net profit of Rmb1.57 billion exceeded estimates by 11%, driven by strong margin expansion with a gross margin of 48.7% [1][2]. - The company is well-positioned to benefit from the ramp-up of 400G and 800G optical transceivers, particularly in AI infrastructure, which is expected to be a primary earnings driver in 2025 [15]. - Eoptolink's net profit has converged with that of its larger peer, Innolight, despite having a market capitalization that is only 65% of Innolight's, suggesting a potential narrowing of the valuation gap due to Eoptolink's strong profitability and growth momentum [1][12]. Summary by Sections Revenue and Profitability - Eoptolink's revenue growth has been robust, with sequential increases of 49%, 46%, and 15% quarter-over-quarter in 3Q24, 4Q24, and 1Q25, respectively. The company is expected to achieve a net profit of Rmb6.4 billion in 2025, reflecting a year-over-year growth of 126% [2][9]. - The gross margin has shown significant improvement, reaching 48.7% in 1Q25, which is well above peer levels, attributed to better cost efficiency and the ramp of 800G products [2][6]. Estimate Revisions - Revenue estimates for 2025-2027 have been revised upward by up to 10%, and net profit estimates have been increased by up to 40% due to the reversal of negative pricing impacts from tariffs and stronger-than-expected margin performance [8][9]. - The new revenue estimates for 2025E are Rmb17.12 billion, with a gross margin projected at 48.8% [10][17]. Market Position and Valuation - Eoptolink is trading near its historical trough level P/E, which is considered attractive given the expected growth and profitability [15]. - The report highlights that the stock's valuation is set in line with the company's trough level P/E during 2021-2025, reflecting uncertainties in the tariff and demand outlook [9][15].