Summary of the China Logistics Sector Conference Call Industry Overview - **Industry**: China Logistics Sector - **Focus**: Impact of autonomous driving (AD) technologies on logistics, particularly through the use of robovans and robotrucks [1][3] Key Insights - **Market Potential**: The logistics industry in China is expected to see a significant transformation due to the adoption of autonomous driving technologies, with estimates suggesting a potential 200 basis points (bp) increase in net profit margin (NPM) [1] - **Fleet Expansion**: The total fleet size of robovans and robotrucks is projected to grow from approximately 5,000 units to around 40,000 units by the end of 2025, indicating a three to six-fold increase [3][4] - **Cost Reduction**: The integration of robovans and robotrucks is anticipated to lower parcel logistics costs by about 10% from 2024 to 2030, which could enhance NPM by 2% and return on equity (ROE) by 5% [3][5][7] Technological Advancements - **Robovan Deployment**: Robovans are currently being tested in over 100 cities in China, with a focus on short-haul transport. They have achieved a 45% cost saving compared to traditional minivans [4][5] - **Robotruck Capabilities**: Robotrucks are equipped with commercialized Level 2+ AD functions, which are expected to reduce costs by 10% compared to traditional trucks [4][5] Financial Metrics - **Profitability Outlook**: The combination of robovans and robotrucks could lead to profit increases of 17% to 130% for parcel firms compared to 2024 levels [5][7] - **Current Valuation**: Parcel companies are trading at a price-to-earnings (PE) ratio of 14x for 2026 estimates, reflecting a recovery in pricing since the recent price war [5][7] Market Dynamics - **Cost Structure**: Transportation accounts for over 54% of logistics costs in China, with short-haul and last-mile deliveries comprising 60% of total costs [10][12] - **Labor Challenges**: The logistics sector faces labor shortages, with couriers working long hours for low wages, complicating efforts to reduce delivery fees [19][24] Regulatory Environment - **Policy Support**: The Chinese government is promoting the integration of AI and autonomous driving in logistics, with several policies aimed at facilitating the deployment of unmanned vehicles [61][62][63] Competitive Landscape - **Preferred Companies**: J&T Global Express and STO Express are highlighted as preferred investments due to their potential for larger profit increases from AD solutions [3][5][7] - **Market Share**: Major parcel firms like ZTO and SF are rapidly expanding their fleets of robovans, with ZTO planning to introduce an additional 10,000 units [58][59] Challenges and Risks - **Technological Bottlenecks**: Despite advancements, robovans still face challenges such as the need for manual loading and unloading, and the requirement for detailed route mapping [60] - **Compliance Risks**: The operation of robovans is currently limited by road access rights, which are still being developed across various cities [61] Conclusion The China logistics sector is on the brink of a significant transformation driven by autonomous driving technologies, with substantial cost-saving potential and profitability improvements expected. However, challenges related to technology, labor, and regulatory compliance remain critical factors to monitor.

Investment Rating - The report maintains a "Buy" rating for several A-share stocks, including PetroChina, Yangtze Power, and NAURA Technology, among others, indicating a positive outlook for these companies [5]. Core Insights - The report anticipates a 6% year-over-year growth in CSI 300 A-share EPS for 2025, driven by a low base effect and potential policy easing, despite deflationary pressures limiting upward revisions [2][27]. - A-share valuations are expected to remain range-bound in the near term due to uncertainties surrounding US-China trade relations, but medium-term catalysts could arise from stronger policy easing and structural reforms [2][40]. - The "national team" (Central Huijin) has played a significant role in stabilizing the A-share market, particularly during periods of market correction, with substantial investments in CSI 300 ETFs [3][60]. Fund Flows and Market Styles - The report identifies five types of fund flows impacting market styles amid macro uncertainties, including significant inflows from the "national team," medium/long-term investors favoring high-dividend stocks, and retail investors driving small-cap outperformance [3][60]. - The report notes that high-dividend stocks have attracted long-term investors, particularly insurers, as they seek to mitigate risks associated with falling risk-free rates [65][66]. Sector Preferences and Investment Themes - The report outlines sector preferences based on different macro scenarios, suggesting that export-oriented sectors may benefit from trade friction de-escalation, while defensive sectors could be favored in adverse conditions [4]. - It highlights that consumption and property sectors may see the most benefit from stronger policy stimulus, while AI and services sectors could attract inflows under modest easing conditions [4]. Top A-share Picks - The report lists top A-share picks within UBS-S coverage, including PetroChina, Yangtze Power, and NAURA Technology, with respective price targets and expected upside percentages [5].

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies [1]. Core Insights - The report highlights a tentative US-China détente following a call between Trump and Xi, with discussions on trade and potential sanctions [1]. - The HSCEI index increased by 2.5% and the CSI 300 by 0.9% during the week [1]. - China is considering a RMB500 billion investment to accelerate infrastructure projects in AI, digital economy, and consumption [1]. - The report notes that the IT, Communication Services, and Broadline Retail sectors outperformed, while Industrials, Consumer Staples, and Energy sectors underperformed [1]. Key Themes Update - The report identifies key themes in the China market, focusing on index-heavy stocks with high dividend yields and local champions expanding globally [12]. - High yield stocks listed include CCB, ICBC, and PetroChina, with dividend yields ranging from 5.1% to 7.1% [12]. - Local champions going global include companies like BYD and Great Wall Motor, which are less impacted by US/EU tariffs [12]. Market Movements and Capital Flows - The report indicates that the A-share market saw a 22.9% year-over-year increase in new account openings in May [3]. - Preliminary data shows that May passenger vehicle wholesales increased by 14% year-over-year, with NEV sales up by 38% [3]. Earnings Revisions - The report does not provide specific details on earnings revisions for the industry or companies [1]. Recovery Trends - The report notes that the top 100 developers' home sales decreased by 8.6% year-over-year in May [3]. - Average new home prices in 100 cities increased by 0.3% month-over-month in May, while secondary home prices decreased by 0.7% [3]. Key Events - The report mentions that the US made tough requests to Vietnam in trade talks, including reducing reliance on Chinese industrial goods [2]. - The PBOC is set to inject RMB1 trillion via outright reverse repos in June [2]. Key News - The report highlights that the EU voted to limit China's access to its medical device procurement [1]. - China is reportedly considering a major deal to order hundreds of Airbus jets during EU leaders' visit [1].