Investment Rating - The investment rating for Victory Giant Tech is "Buy" with a target price of Rmb407.0, indicating an expected share price return of 19.6% and a total expected return of 19.9% [5][9]. Core Insights - Victory Giant Tech (VGT) reported 3Q25 results that missed CitiE expectations, with revenue of Rmb5.1 billion, which is 10% below expectations. The gross profit was Rmb1.8 billion, also missing expectations by 12% [2][3]. - The fluctuation in 3Q25 results is attributed to the largest customer's product transition and a mismatch between new capacity coming online and the mass production of new AI orders. It is anticipated that 4Q25 will see a return to sequential growth supported by normalized production and order ramp-up [4][3]. Summary by Sections Financial Performance - 3Q25 revenue was Rmb5.1 billion, an 8% increase QoQ but 10% below CitiE estimates. Gross profit was Rmb1.8 billion, down 2% QoQ, with a gross margin of 35.2%, which is 3.6 percentage points lower QoQ [2][7]. - Operating profit for 3Q25 was Rmb1.3 billion, a decrease of 6% QoQ, with an operating margin of 26.2%, missing expectations by 12% [2][7]. - Net profit printed at Rmb1.1 billion, down 10% QoQ, with a net margin of 21.7%, hitting the low-end of investor expectations [2][7]. Market Outlook - The report suggests that the 2026 growth theme remains intact, driven by robust demand for GenAI-related PCB and potential improvements in average selling price and gross margin due to a favorable product mix [9]. - The expected earnings CAGR from 2025 to 2027 is projected at 96%, supported by growth in AI-related products and opportunities in datacenter switches and ASICs [9].

Investment Rating - The report indicates a positive outlook for the industry, suggesting potential investment opportunities due to favorable macroeconomic conditions and policy directions. Core Insights - The report highlights the likelihood of a short-term compromise in US-China tariff negotiations, which could alleviate market pressures [1][5] - Continuous foreign capital inflow into A-shares is noted, with an increasing allocation from active foreign investors [1][6] - The US CPI data falling below expectations strengthens the Federal Reserve's rate cut outlook, potentially leading to a positive market impact [1][7] - The trend of "deposit migration" into the market is evident, although a slight decline in September indicates that wealth effects have yet to materialize [1][8] - The report emphasizes the need to address structural issues to ensure sustainable capital market inflows, focusing on debt pressure resolution, technological innovation, and social security improvements [1][11][12] Summary by Sections Section: Market Impact of Policies - The Fourth Plenary Session and the upcoming Fifteen Plan are expected to significantly influence both short-term and long-term market trends, particularly in modern industries, technology, domestic demand, and employment [2] - The Fifteen Plan emphasizes technological autonomy, real estate adjustments, and geopolitical changes, with a focus on innovation and domestic demand expansion [4][17] Section: Foreign Capital Inflow - Active foreign capital allocation to China is increasing, with a notable reduction in the gap between active and passive funds [6] Section: Economic Indicators - The US CPI data has diminished inflation concerns, leading to a near 100% probability of rate cuts in October and December, which may positively affect the market [7] Section: Deposit Migration Trends - The trend of deposit migration into the market has been significant since July, although a slight decline in September suggests that the wealth effect is not yet fully realized [8] Section: Structural Issues and Policy Directions - Current policy directions aim to resolve structural issues, including debt pressure, promoting technological innovation, and enhancing social security systems to facilitate sustainable market inflows [11][12][13] Section: Real Estate Market Dynamics - The real estate market is in the early stages of stabilizing, with a focus on improving transaction volumes and price expectations to create a positive cycle [29][31][33] Section: Future Industry Focus - Future investment opportunities are identified in high-end manufacturing, digital technology, space economy, and biotechnology, alongside new consumer models and product upgrades [26][20] Section: Long-term Market Outlook - The long-term outlook for the capital market remains positive, supported by government focus on market development and favorable macroeconomic conditions [27]

Investment Rating - The report maintains a "Buy" rating for CMOC Group (3993.HK) with a 12-month price target of HK$19.00, representing an upside of 17.3% from the current price of HK$16.20 [1][2]. Core Insights - CMOC reported a net profit of Rmb5.61 billion for 3Q25, reflecting a year-on-year increase of 96%, with earnings per share (EPS) rising to Rmb0.262, up 98% year-on-year [1]. - The recurring profit growth is expected to continue, driven by rising copper prices and volume growth, with a projected compound annual growth rate (CAGR) of 38% for 2025-26E [2]. - The company has revised its earnings estimates upward by 8-32% for 2025-27E, reflecting a positive outlook on copper prices and the impact of new cobalt export quotas from the DRC [2]. Financial Performance - For the first nine months of 2025, CMOC's recurring net profit reached Rmb14.1 billion, accounting for 75% of the full-year estimate [1]. - The company expects to achieve a copper output target of 1 million tons by 2028, supported by the Cangrejos gold/copper project, which is anticipated to further enhance earnings growth [2][29]. - The report indicates that CMOC's current H-share price implies a copper price of US$8,500/t, which is lower than the spot price of US$10,900/t, suggesting potential for price appreciation if targets are met [2]. Production and Operations - CMOC's copper output in the DRC reached 543kt in 9M25, a 14% increase year-on-year, while cobalt output was 88kt, up 3.8% year-on-year [26]. - The DRC government has introduced a cobalt export quota system, allowing CMOC to export 6.5kt for the remainder of 2025 and 31.2kt annually for 2026-27E, which is expected to improve gross profit for cobalt significantly despite lower sales volume [27]. - The acquisition of Lumina Gold for C$581 million is expected to enhance CMOC's net profit by 13.1% by 2030, with significant gold and copper reserves identified at the Cangrejos project [28]. Valuation Metrics - The report provides updated revenue and earnings estimates, with total revenue projected at Rmb213,028.7 million for 2024 and Rmb192,354.5 million for 2025E [6]. - The price-to-earnings (P/E) ratio is forecasted to be 9.2 for 2024 and 15.5 for 2025E, while the price-to-book (P/B) ratio is expected to be 1.8 for 2024 and 3.7 for 2025E [12]. - The report indicates a free cash flow yield of 19.6% for 2024, which is expected to decrease to 6.6% in subsequent years [12].

CHINA METALS & MINING Growth outlook reiterated - feedback from Zijin and CMOC in LME Week GS Global Metals & Mining Conference We hosted Zijin Mining and CMOC C-level management fireside chats and investors groups on Oct 14-15th in London, during the LME week GS Global Metals & Mining Conference. The discussions were centered around 1) production growth outlook for copper and gold, 2) thoughts around their M&A strategy and preference, and 3) factors driving their operational strength. Zijin and CMOC has de ...

Investment Rating - The report rates Han's CNC Technology (HC) as "Buy/High Risk" due to its strong positioning to benefit from the AI PCB super cycle [20]. Core Insights - Han's CNC reported a significant earnings surprise in 3Q25, with net profit reaching Rmb228 million, representing a 282% year-over-year increase and a 56% quarter-over-quarter increase, driven by higher contributions from AI-related products [1][2]. - The target price for Han's CNC has been raised to Rmb140, reflecting a 13% increase, based on a 50x P/E ratio for 2026E, which is considered not aggressive given the company's projected earnings CAGR of 98% for 2025-26E [4][21]. - The company is expected to continue benefiting from strong demand for AI PCB equipment, with forecasts indicating net profit growth of 134% and 67% for 2025 and 2026, respectively [20]. Summary by Sections Earnings Performance - In 3Q25, Han's CNC achieved record revenue of Rmb1.52 billion, a 95% increase year-over-year and a 7% increase quarter-over-quarter, with a gross profit margin (GPM) of 34.0%, up 8.6 percentage points year-over-year [2][11]. - The revenue contribution from AI-related PCB equipment increased from approximately 15% in 1H25 to over 30% in 3Q25, significantly impacting profitability [1][2]. Forecasts - For 4Q25, net profit is estimated to reach Rmb213 million, reflecting a 117% year-over-year increase, driven by a 64% year-over-year sales growth and GPM expansion of 5.8 percentage points [3]. - Earnings forecasts for 2025 and 2026 have been revised upward by 16% and 13%, respectively, indicating strong growth potential [1][12]. Valuation - The target price of Rmb140 is based on a 50x P/E for 2026E, which aligns with the average P/E over the past three years, suggesting a favorable valuation given the expected earnings growth [4][21]. - The report highlights a positive implication for Han's Laser (HL), which owns 83.6% of Han's CNC, due to the strong performance of HC [4].

Investment Rating - The report indicates a cautious investment stance due to ongoing geopolitical risks and economic uncertainties, particularly in the context of U.S.-China trade relations and domestic consumption trends [1][3]. Core Insights - The report highlights that the recent surge in gold and base metal prices is driven by increased geopolitical risks and the potential for U.S. government shutdowns, suggesting that these factors will continue to support commodity prices in the near future [4][17]. - It emphasizes the importance of monitoring Japan's political changes, which could lead to both short-term asset price volatility and long-term structural economic reforms [5][23]. - The report notes that consumer spending data during the holiday period was weaker than expected, reflecting broader economic challenges, and suggests that high-valuation sectors are experiencing significant corrections [6][29]. Summary by Sections U.S.-China Trade Relations - The report discusses the impact of renewed U.S.-China tariffs, which have led to significant market volatility, particularly affecting U.S. stocks and Chinese concept stocks [3][10]. - It suggests that market sentiment has adjusted to these developments, potentially limiting asset declines [3]. Commodity Market Outlook - The report identifies a new bull market cycle for colored resources, driven by global supply chain adjustments and rising demand from emerging industries [2][15]. - It specifically highlights the bullish outlook for precious metals, basic metals, and strategic minor metals, with gold expected to benefit from declining real interest rates and de-dollarization trends [17][18]. Japanese Political Landscape - The report outlines the implications of recent political changes in Japan, which are expected to influence stock market performance and monetary policy [5][23]. - It notes that the new leadership may not pursue aggressive fiscal expansion, which could stabilize the yen and impact market expectations [24][27]. Consumer Trends - The report indicates that consumer spending during the recent holiday period was below expectations, with a notable shift in consumer preferences towards experience-based spending [6][29]. - It highlights that structural changes in consumer behavior, particularly among younger demographics, are shaping the retail landscape [29]. Market Valuation and Performance - The report assesses current market valuations as high, with both U.S. and Chinese markets showing signs of inflated valuations compared to historical levels [7][8]. - It notes that U.S. stock performance has been primarily driven by earnings revisions, while Hong Kong stocks have relied more on valuation increases [9]. Future Market Dynamics - The report expresses uncertainty regarding future market trends due to escalating unexpected events and the complexities of trade negotiations [10][11]. - It suggests that the credit cycles in both the U.S. and China are approaching a phase of recovery, with potential implications for asset prices [12][14]. Specific Metal Outlook - The report provides a positive outlook for silver, driven by industrial demand recovery and its correlation with gold price movements [20]. - It also highlights the potential for basic metals to enter a bull market due to supply disruptions and increasing demand from new industries [21][22]. Strategic Resource Management - The report emphasizes the growing importance of strategic resource management, particularly for critical minerals like cobalt, lithium, and rare earths, which are expected to maintain bullish trends [22].

Investment Rating - The report includes a selection of 81 A-shares and 56 overseas Chinese stocks, indicating a positive investment outlook for these sectors [2]. Core Insights - The report highlights the addition of Yutong Technology (裕同科技) to the A-share selection due to favorable short-term operational prospects, while Oppein Home (欧派家居) has been removed due to short-term performance pressures [2][4]. - For overseas Chinese stocks, China Taiping (中国太平) has been added, reflecting its successful early transformation in dividend insurance and low valuation, which is expected to yield alpha returns [4][6]. Summary by Sections A-Shares - Newly added stock: Yutong Technology (裕同科技), stock code: 002831.SZ, recommended for its short-term operational improvement [4]. - Removed stock: Oppein Home (欧派家居), stock code: 603833.SH, due to short-term performance pressures [5]. Overseas Chinese Stocks - Newly added stock: China Taiping (中国太平), stock code: 0966.HK, noted for its early completion of dividend insurance transformation and low asset base expected to drive future growth [4][6].

Investment Rating - The report suggests a "long-term" and "steady" investment outlook for the A-share market, indicating favorable conditions for sustained growth [8]. Core Insights - The A-share market has experienced a significant upward trend since last September, with the Shanghai Composite Index rising over 40% [2]. - Historical analysis of previous long-term upward phases in the A-share market reveals that these phases typically last 2-3 years, characterized by substantial overall gains and increased trading volumes driven by new capital inflows [2][3]. - The current market rally is supported by macroeconomic improvements and favorable liquidity conditions, alongside key industry trends such as AI, innovative pharmaceuticals, high-end manufacturing, and new energy [6][9]. Summary by Sections Historical Upward Phases - The report reviews past upward phases in the A-share market, noting that each phase began from significant market lows and was marked by investor pessimism, followed by a gradual increase in market volatility and investor behavior divergence [2][3]. - Key historical phases include 2005-2007, 2013-2015, and 2019-2021, each exhibiting distinct characteristics and driving factors [2][5]. Driving Factors - The report identifies macroeconomic recovery and liquidity improvements as primary drivers of the current market rally, with a focus on the growth of key industries [3][6]. - The ongoing capital market reforms and government policies are expected to enhance market vitality and support long-term growth [4][8]. Earnings and Valuation - The report anticipates a turnaround in earnings growth for A-share companies, projecting a 3.5% overall growth rate for the year, with non-financial sectors expected to exceed 8% growth [3][10]. - Current valuations of the A-share market remain reasonable, with the CSI 300 index trading at a PE ratio of approximately 14 times, which is relatively low compared to other global markets [10][11]. Market Characteristics - The report highlights that the current market phase is characterized by a clear focus on growth styles, particularly in technology and innovative sectors, with a rotation among leading industries [6][11]. - The report emphasizes the importance of policy support and fundamental improvements in driving market performance, suggesting that the current rally may have more sustainable characteristics compared to previous phases [8][9].

Investment Rating - The report maintains an "Outperform" rating for the healthcare sector, indicating that it expects the sector to perform better than the market over the next 6 to 12 months [39]. Core Views - The report is optimistic about the long-term development trend of innovative drugs, supported by domestic engineering advantages, abundant clinical resources, and favorable policies. Domestic innovative drugs are transitioning from a follower to an innovator phase, with commercialization gradually increasing [6][7]. - The report highlights the potential for improved profitability for innovative drug companies due to policy reforms in payment systems, which are expected to enhance their earnings capabilities [6]. - There is an anticipated revival in investment and financing activities in the innovative drug sector, with a notable turnaround observed since the second quarter of this year. This is expected to benefit domestic contract research organizations (CROs) and upstream research sectors [6][7]. Industry Dynamics - In the past month (September 1 to September 30), the pharmaceutical sector index declined by 1.7%, while the Shanghai Composite Index rose by 0.6%, the Shenzhen Component Index by 6.5%, and the ChiNext Index by 12.0%. Among sub-sectors, chemical pharmaceuticals fell by 2.7%, medical devices by 0.2%, while medical services rose by 1.8% [5][11]. - The report notes that commercial medical insurance policies are being continuously promoted, which is expected to accelerate reforms in the medical payment system and alleviate supply-demand imbalances [7]. Valuation and Recommendations - The report recommends several stocks for investment, including: - A-shares: Bai Jie Shen Zhou, Heng Rui Yi Yao, Ke Lun Yi Yao, Yao Ming Kang De, Tai Ge Yi Yao, Xin Chan Ye, Hua Da Zhi Zao, Hui Tai Yi Liao, Di An Zhen Dui [8][17]. - H-shares: Ke Lun Bo Tai Sheng Wu, Shi Yao Ji Tuan, Zhong Guo Sheng Wu Zhi Yao, Kang Fang Sheng Wu, Yao Ming Sheng Wu, Jun Shi Sheng Wu, Zai Ding Yi Yao [8][17].

Investment Rating - The report indicates a positive outlook for the CDMO industry, with expectations for improved order flow, revenue growth, and profit margins by 2026, particularly benefiting from the recovery of Chinese funding and increased demand for early projects [1][4]. Core Insights - The CDMO industry maintains a high overall profit margin, driven by the growing demand for emerging therapies and higher quality requirements from clients [2][4]. - Chinese CDMO companies are more aggressive in capacity expansion and new model investments, with capital expenditures accounting for approximately 22% of sales, while Indian companies adopt a more cautious approach [1][5]. - New trends in the CDMO industry include overseas expansion, automation, digital investments, and the development of peptide drugs and antibody-drug conjugates (ADCs) [1][6]. Summary by Sections Current Demand Situation - The global CDMO industry demand remains stable, supported by CMO projects and emerging therapies, with a notable focus on GLP-1, peptide capacity, and ADCs [2]. - Despite some pressures, overall profit margins are high due to increased demand for emerging therapies and quality assurance [2]. Investment Strategies - Chinese CDMO companies are proactive in expanding capacity and investing in new models, while Indian companies are more conservative, linking investments to visible market demand [5][12]. - Indian CDMO companies focus on geopolitical diversification and maintaining a good RFP/RFQ momentum, although the conversion of orders to actual financial results is slower than expected [8][11]. Future Market Outlook - R&D investments are expected to fluctuate in 2025, but most companies anticipate improvements in order flow, revenue growth, and profit margins by 2026, particularly due to the recovery of Chinese funding [4][15]. - The performance of Chinese companies is currently superior to that of Indian companies, with Indian firms expected to see financial results materialize by the 2026 fiscal year [11]. New Trends in the Industry - Key trends include overseas expansion, automation, digital investments, and advancements in peptide drugs and ADCs, with Chinese companies accelerating facility construction in response to geopolitical uncertainties [6][10]. - Companies like Samsung Biologics have begun operating their ADC capacity and have received significant orders from major global clients [6][10]. Geopolitical Factors - The impact of geopolitical factors on the CDMO industry has diminished, with normal business operations continuing without major disruptions [7][14]. - Some clients still consider potential disruptions from political factors, but technical strength and execution capabilities remain paramount [7]. Performance Comparison - In the peptide formulation sector, Chinese companies significantly outpace Indian firms in capacity, while Indian companies express optimism in the ADC field [10][11]. - The financial commercialization results for Indian companies are expected to lag behind those of Chinese companies, with growth rates projected to be in the mid-single digits for 2026 [11].