Investment Rating - The investment rating for Accelink Technologies is "Sell" with a target price of Rmb24.6, indicating an expected share price return of -46.7% [2][5]. Core Insights - Accelink Technologies expects a net profit growth of 55%-95% YoY for 1H25, with guidance of Rmb323 million to Rmb407 million, driven by strong optical transceiver demand and an improved product mix [1][4]. - The mid-point of the 2Q25 earnings guidance at Rmb215 million is slightly below expectations, suggesting potential downside risk to the share price, which is currently trading at a high valuation of 37x FY25 PE compared to peers at around high-teens [1][5]. - The valuation of Accelink is considered demanding due to lower profitability in the domestic transceiver market and relatively lower earnings growth compared to competitors like Innolight and Eoptolink [1][5]. Summary by Sections Earnings Guidance - For 2Q25, Accelink's net profit guidance is Rmb215 million, a 64% increase from Rmb131 million in 2Q24, while for 1H25, the guidance is Rmb365 million, a 75% increase from Rmb209 million in 1H24 [4]. Valuation - The target price of Rmb24.6 is based on a P/E multiple of 20.0x 2025E EPS, which is one standard deviation below the stock's five-year historical forward PER [5]. Market Capitalization - Accelink Technologies has a market capitalization of Rmb37,228 million (approximately US$5,196 million) [2].

Investment Rating - The report upgrades SMIC's H/A shares to Buy/Buy from Reduce/Hold, with target prices raised to HKD64.00/RMB148.00 from HKD35.00/RMB92.00, implying upside of approximately 46%/73% [4][8]. Core Insights - SMIC is positioned to benefit from the localization trend in China, emerging as a key player in the semiconductor industry despite facing near-term ASP headwinds due to specific equipment yield issues [1][3]. - The company is expected to maintain margin stability in advanced nodes through a balance of pricing power and yield improvements, with an anticipated ASP premium of 57% under conservative yield assumptions [2][49]. - SMIC's market share in the China Foundry Total Addressable Market (TAM) is projected to grow from 25% in 2024, supported by a 13% capacity expansion from Q2 2024 to Q4 2024 [3][41]. Summary by Sections Financial Performance - Revenue projections for SMIC are estimated at USD 8,030 million for 2024, increasing to USD 13,210 million by 2027, reflecting a year-on-year growth of 27% in 2024 and 15% in 2025 [9][10]. - The net profit is expected to rise from USD 493 million in 2024 to USD 1,918 million in 2027, with EPS estimates increasing from USD 0.06 to USD 0.25 over the same period [9][10]. Valuation Metrics - The report raises the target price-to-book (P/B) multiples for SMIC to 2.9x/7.2x, reflecting a premium due to its strategic positioning and expansion into advanced nodes [4][64]. - The expected EV/sales ratio is projected to decrease from 5.9 in 2024 to 3.5 by 2027, indicating improving valuation as revenue grows [11]. Market Dynamics - The ongoing geopolitical tensions are expected to reinforce China's push for self-sufficiency, benefiting SMIC as it becomes the preferred foundry in China [21][39]. - The report highlights that despite short-term ASP declines, SMIC is likely to emerge as a major beneficiary of the localization trend, with expectations for improved ASP conditions in the second half of 2025 [38][41]. Capacity and Utilization - SMIC's capacity in advanced nodes is projected to reach 25K-30K wafers per month by the end of 2025, with utilization rates expected to improve from 86% in FY24 to 91% in FY25 [49][50]. - The company is anticipated to maintain a high utilization rate compared to peers, reaching full capacity by the first half of 2026 [22][41].

Investment Rating - The report maintains a "Buy" rating for AMEC, indicating a positive outlook for the company's performance in the semiconductor industry [1][7][10]. Core Insights - AMEC is experiencing solid order growth driven by clients' capacity expansion and increasing adoption of domestic equipment in China. The company is actively expanding its product offerings, which include deposition, etch, and metrology & inspection tools [1][6]. - Management projects a revenue growth of over 30% year-on-year, supported by strong bookings from both memory and logic customers. The local supply ratio for advanced technologies is expected to grow significantly [6][7]. - The company is accelerating its R&D cycle for new products, reducing the development time from 2-3 years to 1.5-2 years, which is attributed to improved design processes and increased client collaboration [6][7]. Revenue and Orders Outlook - AMEC's management is optimistic about achieving over 30% year-on-year revenue growth, with a strong operational performance in the first half of the year and a solid outlook for the second half [6]. - The company anticipates continued growth from the increasing adoption of local equipment by Chinese customers, with significant room for growth in the local supply ratio, especially in advanced technologies [6]. Product Expansion - AMEC plans to enhance its product coverage in deposition tools to approximately 80% by 2026, up from around 30% currently. The company has begun generating revenues from its WU series deposition products in 2024 [6][7]. - The company is also developing next-generation etching tools and expanding into metrology and inspection tools, including the launch of a Critical Dimension Scanning Electron Microscope (CDSEM) [6][7]. R&D Process Acceleration - The new product development cycle has been shortened to 1.5-2 years, compared to the previous 2-3 years. This improvement is due to platform product design, increased client trust, and the integration of AI technology in simulations [6][7]. Valuation and Price Target - The 12-month target price for AMEC is set at Rmb275, based on a P/E ratio of 29x for 2029 estimates, reflecting an attractive valuation as the company trades below its historical average [8][10]. - The report indicates a potential upside of 52.3% from the current price of Rmb180.58 [10]. Financial Projections - Revenue projections for AMEC are as follows: Rmb9,065.2 million for 2024, Rmb12,590.1 million for 2025, Rmb16,330.5 million for 2026, and Rmb20,477.2 million for 2027 [10]. - EBITDA is projected to grow from Rmb1,560.9 million in 2024 to Rmb6,244.6 million by 2027 [10]. Conclusion - AMEC is positioned to benefit from the ongoing expansion of the semiconductor industry in China, with a strong focus on product development and local market penetration, making it a compelling investment opportunity [1][7][10].

Investment Rating - The report maintains a Neutral rating for iFlytek (002230.SZ) with a 12-month price target of Rmb54.00, indicating an upside potential of 14.9% from the current price of Rmb46.98 [1][10][26]. Core Insights - iFlytek's 2Q25 revenue guidance is expected to grow by 10% to 15% year-over-year, with a midpoint growth of 11%, which is 7% below previous estimates. The company reported a net loss in 2Q25, attributed to increased spending on AI model development [1][18]. - The company has launched new AI models, including iFlytek Spark LLM V4.0 Turbo and a new reasoning model, which are expected to enhance its project wins in AI software [2][18]. - iFlytek secured a new project worth Rmb232 million from the QinHuangDao government for AI model training and management, indicating strong momentum in AI monetization [2][18]. Financial Summary - Revenue projections for iFlytek are revised downwards for 2025-2027, with expected revenues of Rmb28,797 million in 2025, Rmb32,648 million in 2026, and Rmb38,794 million in 2027, reflecting a decrease of 1%, 3%, and 5% respectively from previous estimates [19][20]. - The report anticipates a net income of Rmb1,100 million in 2025, Rmb2,029 million in 2026, and Rmb3,316 million in 2027, with a downward revision of 24%, 23%, and 27% respectively [19][20]. - The operating margin is expected to improve from 2.3% in 2025 to 5.2% in 2026, and further to 8.1% in 2027, indicating a gradual recovery in profitability [11][20]. Valuation Metrics - The report sets a target price based on a valuation of 4.1x 2026E EV/Sales, which aligns with peer averages in the software sector. The implied 2026E P/E ratio is projected at 60x, consistent with the company's trading range since 2019 [20][26]. - Key financial ratios include a projected P/E of 98.7x for 2025, decreasing to 32.7x by 2027, and a P/B ratio of 5.8x in 2025, declining to 4.7x in 2027 [10][11].

Investment Rating - The report does not provide a specific investment rating for Huace Navigation (300627.SZ) as it is categorized as "Not Covered" [1]. Core Insights - Huace Navigation is a leading provider of MEO satellite navigation, positioning, and mapping services in China, focusing on enterprise clients and expanding applications into various sectors including autonomous driving and robotics [1][3]. - The global LEO satellite market is expected to grow significantly, with a total addressable market (TAM) projected to increase from US$15 billion in 2024 to US$108 billion by 2035, indicating a favorable environment for companies like Huace [2]. Summary by Sections Product Development - Huace is expanding its product line to capture new use cases, including the launch of the AA10 airborne measuring system that integrates LiDAR and industrial cameras, enhancing its geospatial information offerings [4][7]. - The company is also developing autonomous driving solutions, such as the P-Box for Baidu Apollo Go's robotaxi, which provides accurate geospatial data for vehicles [7]. Market Expansion - Huace aims to expand its satellite navigation solutions into overseas markets, having established a strong distribution network across regions including Southeast Asia, Europe, and South America [8]. - In 2024, revenues from non-China markets increased by 30% year-on-year to RMB 937 million, accounting for 29% of total revenue, with expectations for continued growth in overseas contributions [8]. Competitive Advantages - Huace's competitive edges include in-house algorithm development, competitive pricing, and accumulated expertise in MEO applications, which enhance its market position [9]. - The company's GNSS analysis platform offers high precision and data compatibility, further solidifying its competitive stance in the satellite navigation market [9].

Investment Rating - The report maintains a neutral/cautious outlook on the near-term performance of the China market due to earnings risks and unattractive valuations, while remaining structurally bullish on China's long-term turnaround [1]. Core Insights - The China market outperformed in 1Q25 but traded sideways in 2Q25, with MSCI China showing a flat performance of +0.7% compared to significant gains in global indices [2][16]. - The report emphasizes a focus on bottom-up earnings stories, particularly in mid-small-cap stocks, while avoiding sectors heavily reliant on policy stimulus or exports [1][4]. - Key macroeconomic indicators show signs of weakness, with credit growth modestly increasing but insufficient to drive meaningful GDP recovery [3][12]. Market Performance - In 2Q25, MSCI China lagged behind global peers, with a P/E valuation of 11.4x, near long-term averages [2][9]. - Best-performing sectors included Healthcare (+11.5%), Financials (+11.1%), and IT (+9.5%), while Consumer Discretionary (-11.2%), Real Estate (-3.1%), and Consumer Staples (-1.6%) underperformed [2][16]. Macro Environment - Credit growth rose from 8.0% YoY in 2024 to 8.7% in May 2025, but loan growth declined from 7.0% to 6.7% [3][54]. - The property market showed recovery in late 2024 but declined again in 2Q25, indicating ongoing challenges in the real estate sector [3][15]. - The report anticipates nominal GDP growth to decelerate to 3-4% in 2H25 amid trade tensions and insufficient credit growth [47][48]. Sector Model Portfolio - For 3Q25, the report favors sectors focused on domestic demand, such as financials and internet, while downgrading liquors and real estate due to earnings risks [4][14]. - The model portfolio includes banks and brokers for better downside protection, while tech hardware and gold sectors are upgraded [4][14]. Valuation and Earnings Revision - The average 12-month forward P/E valuation for the CSI 300 rebounded to 13x, while the MSCI China Index remained above 11x, indicating a discount to long-term averages [38][39]. - In 2Q25, consensus earnings for MSCI China were revised down by 0.9% QoQ, with significant downgrades in Real Estate, Utilities, and Energy sectors [42][42].

Investment Rating - The report maintains a "Buy" rating for Foxconn Industrial Internet (FII) with a revised target price of Rmb31.11, reflecting an upside potential of 17.9% from the current price of Rmb26.38 [16][17]. Core Insights - FII's 2Q25 net income guidance is between Rmb6.7 billion and Rmb6.9 billion, with a midpoint of Rmb6.8 billion, representing a 31% quarter-over-quarter increase and a 50% year-over-year increase [1]. - The company is experiencing significant growth in cloud computing revenues, projected to exceed 50% year-over-year, and AI server revenues are expected to grow over 60% year-over-year [1]. - FII's revenues from cloud service providers (CSPs) increased by over 150% year-over-year in 2Q25, and revenues from 800G switches are projected to be three times higher than in 2024 [1]. - The report anticipates a compound annual growth rate (CAGR) of 29% for net income from 2025 to 2027, with AI server revenues expected to rise from 29% in 2024 to 68% by 2027 [1]. Financial Projections - The report revises net income estimates upward by 3%, 4%, and 6% for 2025, 2026, and 2027 respectively, due to higher revenue expectations [5]. - FII's revenue projections for 2025E, 2026E, and 2027E are Rmb850.1 billion, Rmb1,130.6 billion, and Rmb1,274.5 billion respectively, reflecting increases of 5%, 10%, and 9% from previous estimates [8]. - The gross profit (GP) for 2025E is revised to Rmb49.9 billion, with operating profit (OP) at Rmb31.4 billion and net income at Rmb27.6 billion [8]. Market Position and Competitive Analysis - FII is positioned as a leading supplier in the AI server market, particularly in rack-level AI servers, supported by a comprehensive supply chain and global production capabilities [5][9]. - The target price is based on a price-to-earnings (P/E) multiple of 16x for 2026E, reflecting a market re-rating on AI servers [10][15].

Investment Rating - The investment rating for HG Tech is "Buy" with an updated 12-month target price of Rmb56, revised from Rmb53, based on a 22x 2026E P/E [1][2][14]. Core Insights - HG Tech pre-announced its 2Q net profit range of Rmb480 million to Rmb540 million, with a mid-point of Rmb510 million, representing a 52% year-over-year increase and exceeding expectations [1]. - The strong profit performance is expected to alleviate investor concerns regarding the profitability of optical transceivers, with key catalysts anticipated in the second half of 2025, including progress in penetrating US markets and domestic demand outlook [1][14]. - The company is positioned for robust long-term growth driven by the AI infrastructure cycle, overseas expansion, and new market penetration [1]. Revenue and Profit Estimates - Revenue estimates for 2025-2026 have been revised upward by 3% to 4.6%, leading to a net profit estimate increase of 4% to 8% [2]. - New revenue projections for 2025, 2026, and 2027 are Rmb15,815 million, Rmb19,233 million, and Rmb22,971 million respectively, reflecting a 4.6% increase for 2025 and 2026, and a 3.0% increase for 2027 compared to previous estimates [6]. - Net income estimates for 2025, 2026, and 2027 are Rmb1,830 million, Rmb2,579 million, and Rmb3,130 million respectively, with increases of 8%, 6%, and 4% compared to prior estimates [6]. Business Segments and Growth Drivers - HG Tech's business segments include optical transceivers, sensors, telecom equipment, and laser tools, with a focus on high-end optical transceivers (800G and 400G modules) expected to drive margin improvement and net profit growth [14]. - The revenue mix for 2024 is projected to be 34% from laser tools, 3% from networking, and 63% from sensors, with shifts expected in 2025 and 2026 [13][11]. - The company is expected to benefit from the increasing attach ratio of optical transceivers, supporting better growth sustainability [1].

Investment Rating - The report maintains a "Buy" rating for Horizon Robotics with a 12-month price target of HK$13.33, indicating an upside potential of 106.0% from the current price of HK$6.47 [11]. Core Insights - The management is optimistic about the growth of autonomous driving (AD) and advanced driver-assistance systems (ADAS) in China, particularly with local car OEMs pushing for urban Navigate on Autopilot features in the mainstream price segment of Rmb150,000 (approximately US$21,000) [2][3]. - Horizon Robotics is focusing on product mix upgrades from ADAS to AD, which is expected to drive an increase in average selling price (ASP) due to enhanced computing power [3]. - The company is committed to increasing its R&D investments, particularly in developing integrated software-hardware solutions, which will allow it to charge software fees based on car shipments rather than project-based fees [7]. Summary by Sections 1. Market Outlook - The total addressable market (TAM) for AD and ADAS is growing, with management highlighting the competitive landscape among local car OEMs as a key driver for increased demand [2]. - The Journey 6 product is identified as a significant driver for shipment increases in the AD solutions segment [2]. 2. Product Development - The transition from ADAS products (e.g., Journey 2 and 3) to more advanced AD products (e.g., Journey 6) is expected to enhance ASP due to the substantial increase in computing power from 4-5 TOPS to 560 TOPS [3]. - Future plans include the development of a higher computing power J7 platform, estimated at around 2000 TOPS, to meet the growing demand for advanced features [3]. 3. R&D Commitment - Horizon Robotics is allocating more resources to R&D, particularly in cloud computing, to develop stronger algorithms and enhance its software-hardware integration [7]. - The company aims to penetrate the majority of car OEMs in China that lack in-house algorithms for advanced ADAS/AD features [7]. 4. Strategic Partnerships - The joint venture with Volkswagen, Carizon, is expected to yield its first car model by the end of 2025, with management anticipating a significant share of Volkswagen's car models in the China market [8].

Investment Rating - The report maintains a "Buy" rating for Lingyi, with a 12-month price target of Rmb11.40, indicating an upside potential of 28.1% from the current price of Rmb8.90 [18][13]. Core Insights - Lingyi's revenues are expected to grow by 23% year-over-year in 2Q25, reaching Rmb11.5 billion, driven by new project contributions and improved seasonality in the second half of 2025 [1][3]. - The gross margin (GM) is projected to improve to 15.7% in 2Q25, up from 15.2% in 1Q25, although still below the 2022/2023 levels of 20.7% and 19.9% respectively [1][3]. - Lingyi's diversification into foldable phones, servers, and AI/AR glasses components is expected to increase revenue contributions to 14% and 18% in 2025 and 2026 respectively [1][2]. Revenue and Earnings Estimates - Revenue estimates for 2025 remain unchanged at Rmb54.5 billion, with net income expected to grow by 43% year-over-year [3][9]. - Earnings revisions indicate a decrease in net income estimates by 11% for 2025, primarily due to lower GM from the automotive and server segments [3][7]. - The report anticipates a compound annual growth rate (CAGR) of 21% in revenues from 2025 to 2027 [3][9]. Financial Metrics - The report projects gross margins to expand from 15.8% in 2024 to 16.6% and 18.2% in 2025 and 2026 respectively [3][11]. - Operating profit margins (OPM) are expected to improve from 6.0% in 2025 to 8.1% in 2027 [3][11]. - The net margin is forecasted to increase to 4.6% and 5.7% in 2025 and 2026 respectively [3][11]. Market Position and Competitive Landscape - Lingyi is expanding its business in foldable phones, servers, robotics, and AI/AR glasses components to reduce concentration risk and capture a larger market share [2][3]. - The company has established partnerships to provide comprehensive manufacturing solutions, which are expected to lower the bill of materials (BOM) costs for clients [2][3]. Valuation - The target price of Rmb11.4 is based on a target P/E multiple of 21.2x 2026E EPS, reflecting a positive correlation between P/E and EPS growth among peers [11][17]. - Lingyi is currently trading at a P/E of 17x for 2026E, which is considered attractive [13][17].