Group 1 - In 2024, China's crude steel production is projected to reach 1.005 billion tons, accounting for over 50% of global output, solidifying its position as the world's largest producer [1] - Despite high production levels, Chinese steel companies lag significantly in profitability compared to Japanese firms, with the top four Chinese steel companies' net profits combined being less than that of Nippon Steel [3] - Nippon Steel, despite producing only 39.64 million tons of crude steel in 2024, has managed to achieve higher profits than Chinese counterparts, highlighting a stark contrast in profitability [3] Group 2 - Cost control is a critical factor, with iron ore accounting for 40% to 50% of steelmaking costs; Nippon Steel has secured long-term low-price contracts with major miners, while Chinese companies rely heavily on imported iron ore, leading to higher costs [5] - Japanese steel companies focus on high-value specialty steel, with over 20% of Nippon Steel's production being specialty steel, while Chinese companies have only 12.31% of their production in this category, primarily producing lower-margin ordinary steel [5] - Chinese steel companies are making efforts to innovate, with advancements in producing specialized steel products, supported by government initiatives aimed at improving the industry [7] Group 3 - The current situation of "large but weak" and low profits in the Chinese steel industry indicates a need for transformation, emphasizing the importance of profitability over sheer production volume [8] - To compete effectively in the global steel market, Chinese steel companies must learn from Nippon Steel and transition from being "large producers" to "profit-making experts" [8]

Summary of Coal Industry Conference Call Industry Overview - The coal industry in China is projected to produce 4.74 billion tons in 2024, with imports reaching a historical high but accounting for less than 10% of total supply [1][2] - The cyclical nature of the coal industry is expected to weaken starting in 2024, moving towards a tight balance due to supply-side reforms [1][5] - Coal consumption in China remains high, exceeding 55%, with the power sector being the largest consumer [1][6] Key Points and Arguments - **Production and Demand**: In the first half of 2025, domestic coal production is expected to grow by 7% year-on-year, reaching approximately 2.4 billion tons, but a decrease in production is anticipated in the second half [2][3] - **Price Trends**: The average coal price is expected to be between 680-700 RMB per ton in the first half of 2025, with a peak not exceeding 720-750 RMB per ton in late summer [3][12] - **Investment Outlook**: The coal sector is currently at a low point, but there is potential for improvement in the coming years. Investors are encouraged to focus on high-quality leading companies in a low-interest-rate environment [1][7] Additional Insights - **Supply-Side Reforms**: The reforms have led to a significant increase in industry concentration, with large coal mines now accounting for over 85% of production and the CR8 concentration exceeding 50% [3][11] - **Seasonal Fluctuations**: The coal industry experiences seasonal demand fluctuations, with summer and winter being peak seasons, while March-April and September-October are typically off-peak [1][8] - **Long-Term Energy Structure**: China's energy structure is characterized by a high reliance on coal, with expectations that coal will maintain a significant share of over 45% in the next 5-10 years [6][10] Conclusion - The coal industry is undergoing significant changes influenced by supply-side reforms and shifting demand dynamics. While the current environment presents challenges, there are opportunities for strategic investments in leading companies as the market stabilizes and demand for coal remains robust in key sectors like electricity generation.

Core Viewpoint - In 2024, China's crude steel production reached 1.005 billion tons, accounting for 53.38% of global output, maintaining its position as the world's largest steel producer for five consecutive years [1] Group 1: Production and Market Position - China dominates the global steel production landscape, with six out of the top ten steel companies being Chinese [1] - Despite the high production volume, Chinese steel companies face challenges such as overcapacity and low profitability [2] Group 2: Profitability Comparison - The combined net profit of China's four most profitable listed steel companies (Baosteel, CITIC Special Steel, Nanjing Steel, and Huazhong Steel) in 2024 is still lower than that of Japan's Nippon Steel [3][8] - Nippon Steel's net profit for 2024 is approximately 110.4 billion yen (around 5.61 billion RMB), significantly higher than the combined profits of the top Chinese steel firms [3][7] Group 3: Historical Context and Lessons - Japan's steel industry faced overcapacity issues in the late 20th century but successfully turned around by focusing on high-value products and strategic resource management [9][22] - Japan's Nippon Steel implemented significant reforms, including shutting down inefficient production lines and focusing on high-margin products, leading to a rapid recovery from losses [30][44] Group 4: Future Directions for Chinese Steel Companies - Chinese steel companies are encouraged to learn from Japan's experience, particularly in enhancing product quality and profitability [58] - The Chinese steel industry is making strides in producing high-value steel products, indicating potential for future growth and competitiveness [59]

Investment Rating - The report rates the industry as "Overweight" [1] Core Viewpoints - Supply-side structural optimization is expected, with a focus on selecting elastic and advantageous sectors. Domestic policies frequently mention supply-side requirements, while rising raw material costs and capacity shocks in Asia have led to shutdowns and capacity exits among European and American chemical companies. In the short term, geopolitical tensions increase uncertainty in overseas chemical supply, but in the long term, China's chemical industry chain has a clear competitive advantage, rapidly filling gaps in the international supply chain and potentially reshaping the global chemical industry landscape [4][14] Summary by Sections Industry News and Events - South Korea plans to cut 25% of its naphtha cracking capacity, shifting towards higher value-added products. This restructuring involves reducing excess capacity and improving financial health while minimizing economic and employment impacts. The government will support proactive industry measures with relaxed regulations and fiscal policies [5][12] - Glyphosate prices are rising again, with domestic factory inventory significantly decreasing. As of August 24, 2025, the inventory was 27,800 tons, down 60.34% year-on-year and 2.46% month-on-month. The market anticipates a slight price increase due to strong domestic demand and export orders [6][13] Chemical Sector Performance - For the week of August 18-22, 2025, the CSI 300 index rose by 4.18%, while the Shenwan Oil and Petrochemical Index increased by 2.92%, underperforming the market by 1.26 percentage points. The Shenwan Basic Chemical Index rose by 2.86%, also underperforming the market by 1.32 percentage points [16][17] - The top five performing sub-sectors included Other Rubber Products (8.53%), Polyurethane (6.34%), Titanium Dioxide (5.69%), Other Petrochemicals (5.05%), and Fluorochemicals (4.79%) [17] Key Product Price Trends - The top price increases for the week included Light Soda Ash (8.25%), Soft Foam Polyether (6.04%), Heavy Soda Ash (5.97%), TDI (4.99%), and Caustic Soda (4.50%). Conversely, the largest price drops were seen in Polytetrafluoroethylene (-26.19%), Methyl Acrylate (-7.16%), and Vitamin E (-7.14%) [27][28] - The price spread for key products showed significant increases for products like Adipic Acid-Pure Benzene (16.78%) and Propylene Oxide-0.8*Propylene (15.60%) [30][31] Investment Recommendations - Focus on sectors with significant supply-side reform potential, such as organic silicon, membrane materials, chlorine-alkali, and dyes. Key companies to watch include Hoshine Silicon Industry, Xingfa Group, and Zhejiang Longsheng [4][14] - In the agricultural chemicals sector, companies like Yangnong Chemical and Guangxin Co. are highlighted for their relative advantages [14][15]

Core Viewpoint - The A-share market has seen accelerated upward momentum since late June, with the Shanghai Composite Index surpassing 3,800 points, reaching a ten-year high, driven by improved market sentiment and increased foreign institutional interest in Chinese stocks [1]. Group 1: Market Uptrend Sustainability - The sustainability of the current market rally is a key topic among institutions, with overseas entities attributing the rise to several factors, including improved macroeconomic expectations and targeted consumption policies [4]. - The 10-year and 30-year government bond yields have been on the rise since June, indicating a more optimistic outlook among investors, which has facilitated a shift of funds from the bond market to the stock market [4]. - The focus on micro-level structural highlights, such as AI computing power, innovative pharmaceuticals, robotics, and smart driving, is seen as crucial for supporting overall market profitability [7]. - Significant inflows of incremental capital have contributed to liquidity, with long-term funds like insurance capital entering the market, resulting in over 1 trillion yuan in new capital [10]. - Upcoming policy catalysts, such as the Fourth Plenary Session of the 20th Central Committee and the next five-year growth plan, are expected to provide clearer insights into the "anti-involution" policy and its implications for economic rebalancing [10]. Group 2: "Anti-Involution" Policy Focus - The "anti-involution" policy has gained significant attention from foreign institutions, with discussions centered on its timing, similarities and differences with the 2016-2018 supply-side reform, and key areas of focus [14]. - The policy aims to alleviate supply chain financing risks, curb excessive investment expansion, enhance product quality, and optimize resource allocation, thereby strengthening the long-term resilience of the Chinese economy [14]. - The current economic recovery foundation is still fragile, leading to expectations that the impact of this policy on economic growth may be less significant than that of the previous supply-side reform [15]. Group 3: Foreign Investor Sentiment - Foreign investor interest in the Chinese stock market has reached a near-high level, driven by factors such as the need to diversify risks from the U.S. market and the potential for renminbi appreciation [16]. - In July, net inflows from foreign capital into the Chinese stock market accelerated to $2.7 billion, up from $1.2 billion in June, primarily led by passive funds [17]. - As of late July, passive funds had accumulated a total inflow of $11 billion into the Chinese stock market for the year, surpassing the $7 billion for the entire year of 2023 [17]. - The trend of capital inflows has continued into August, with hedge funds net buying Chinese stocks at the fastest pace in seven weeks [19]. - Despite the recovery in foreign capital sentiment, active funds remain underweight in their allocation to Chinese stocks, indicating potential for further inflows [21].

Investment Rating - The report maintains a "Buy" rating for the company, Junda Co., Ltd. (002865 CH), with a target price raised to RMB 57.70, indicating a potential upside of 16.1% from the current price of RMB 49.68 [9][10][14]. Core Insights - The company reported a slight loss exceeding the forecast median, with a 2Q25 loss of RMB 158 million, attributed to a decline in battery prices and a decrease in overseas revenue share [2][10]. - The government has increased the certainty of supply-side reforms in the photovoltaic industry, aiming to regulate competition and eliminate below-cost sales practices [10]. - The company is positioned to benefit from the U.S. market due to its unique production capacity in the Middle East, with a joint venture expected to commence exports to the U.S. early next year [10]. Financial Overview - Revenue projections for the company show a significant decline in 2024 to RMB 9,952 million, followed by a gradual recovery to RMB 15,397 million by 2027 [16]. - The net profit is expected to turn positive in 2026, reaching RMB 1,427 million, with a projected earnings per share of RMB 4.88 [16]. - The company’s market capitalization is approximately RMB 11,085.10 million, with a 52-week high of RMB 80.40 and a low of RMB 34.80 [4]. Performance Metrics - The company’s gross margin is projected to improve significantly by 2026, with a net profit margin of 11.2% anticipated [18]. - The price-to-earnings ratio is expected to decrease from 13.9 in 2023 to 8.4 by 2027, indicating a more attractive valuation over time [16]. - The company’s return on equity (ROE) is projected to recover to 25.8% by 2027, reflecting improved profitability [18].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - "Anti - involution" related convertible bonds are cost - effective absolute - return assets. The position and bond selection of "anti - involution" sector convertible bonds are the "decisive factors" for the future market due to three reasons: large capital capacity, high cost - performance of underlying stocks, and low bond prices with debt - bottom value support [1][9]. - Five convertible bonds are recommended: Youfa Convertible Bond, Wankai Convertible Bond, Keshun Convertible Bond, Feng 22 Convertible Bond, and Tian 23 Convertible Bond [3][11]. 3. Summary According to the Directory 3.1 Overall Logic and Layout Ideas - **Large capital capacity**: "Anti - involution" sector has a large number of convertible bonds. Industries such as power equipment and basic chemicals have many convertible bonds in existence. If "anti - involution" progresses beyond expectations, it may drive up the underlying stocks and the convertible bond index [1][9]. - **High cost - performance of underlying stocks**: Some industries' underlying stocks, like those in steel, basic chemicals, and power equipment, are under pressure. But "anti - involution" may improve supply - demand, and the leading enterprises may have stronger profit elasticity after industry clearance. Also, the stock prices are low, so there is potential for valuation repair [2][10]. - **Low bond prices with debt - bottom value support**: Most "anti - involution" related convertible bonds have conversion values below 120 yuan, and many are in the 60 - 90 yuan and 90 - 120 yuan ranges. Debt - type/balanced convertible bonds have better debt - bottom protection, suitable for absolute - return funds [2][10]. 3.2 Individual Bond Selection 3.2.1 Youfa Group/Youfa Convertible Bond - Youfa Group is the largest domestic welded - steel pipe enterprise. In 2025, the welded - pipe price declined. With the improvement of downstream demand and the new supply - side reform in the steel industry, the company plans to expand its domestic and overseas layouts [14][15]. 3.2.2 Wankai New Materials/Wankai Convertible Bond - Wankai New Materials is a leading domestic polyester material enterprise. In 2024, the domestic polyester bottle - chip market had increased production but decreased prices. New applications may bring new demand. Many enterprises in the industry are reducing production, which may optimize the supply - demand pattern and increase the company's profitability [20][23]. 3.2.3 Keshun Co., Ltd./Keshun Convertible Bond - Keshun focuses on building waterproofing solutions. The domestic waterproofing industry is highly fragmented, but the new regulations may benefit leading enterprises. Keshun will expand its retail, non - real - estate, and overseas businesses, and improve profitability through R & D and cost reduction [26][31]. 3.2.4 Xin Fengming/Feng 22 Convertible Bond - Xin Fengming is a major player in the polyester fiber industry. The upstream raw material supply is abundant, which is beneficial for the polyester end. Due to environmental policies and industry integration, some small enterprises are being eliminated, and the industry structure is being optimized [32][33]. 3.2.5 Trina Solar/Tian 23 Convertible Bond - Trina Solar is involved in photovoltaic products, energy storage, and system solutions. The Chinese photovoltaic industry faces challenges, but the "anti - involution" action and policy support may bring price recovery, technology premium, and industry integration, and improve the company's profitability and stock valuation [38][39].

Core Viewpoint - The recent market trend in July revolves around the theme of "anti-involution," with the non-ferrous metal sector showing significant gains, particularly in response to government policies aimed at enhancing product quality and phasing out outdated production capacity [1][2]. Group 1: Market Performance - In July, the non-ferrous index achieved a growth rate of 5.7%, ranking 8th among all industries, with small metals and energy metals performing exceptionally well [2]. - The central government's focus on establishing a unified national market and addressing low-price competition is expected to drive improvements in product quality and industry standards [1][2]. Group 2: Policy Context - The Central Financial Committee's sixth meeting on July 1, 2025, emphasized the need for regulatory measures to combat disordered competition and promote high-quality development [1][2]. - The Ministry of Industry and Information Technology announced a new round of growth stabilization plans for key industries, including non-ferrous metals, on July 18, 2025 [2]. Group 3: Supply-Side Reform Analysis - The analysis of supply-side structural reforms indicates that the non-ferrous index's performance is closely tied to policy announcements, with historical data showing significant correlations between policy implementation and index fluctuations [2][3]. - The current "anti-involution" movement is set against a backdrop of global restructuring, aiming not only for price stabilization but also for sustainable high-quality growth [3][4]. Group 4: Comparative Insights - Japan's experience with anti-involution reforms in the cement industry serves as a reference, highlighting the importance of industry consolidation and capacity coordination to enhance market efficiency [3][4]. - The anticipated outcomes of the current anti-involution efforts may lead to increased mergers and collaborations within the industry, potentially raising market concentration and fostering high-quality development [4].

Summary of Conference Call Records Industry Overview - The conference call primarily discusses the **black commodity sector**, particularly focusing on **steel and coal** markets, and the implications of the **anti-involution policy** on these industries [1][5][7]. Key Points and Arguments 1. **Market Conditions**: The black commodity sector may face downward pressure in Q4 due to weakening favorable factors, with steel and steel billet inventories accumulating rapidly and terminal demand not showing significant recovery [1][2][3]. 2. **Supply and Demand Dynamics**: Initial optimistic expectations for iron ore supply growth have not materialized, with actual increases limited to **10 million to 15 million tons**. Coal supply has been restricted due to overproduction checks, leading to short-term price stability for raw materials [1][3][4]. 3. **Profit Distribution Shift**: The implementation of the anti-involution policy has shifted profit distribution from downstream to upstream, with steel mills maintaining strong production despite coal supply constraints [5][6]. 4. **Investment Opportunities**: Investors are advised to consider buying iron ore and coking coal on dips, while closely monitoring changes in demand, particularly from exports and manufacturing sectors [6][8]. 5. **Policy Risks**: Accumulating policy risks, especially regarding domestic long-term orders, are significant. The marginal effects of policies like trade-in programs are diminishing, and corporate long-term loans are not optimistic, suggesting a potential slowdown in manufacturing demand in Q4 [7][9]. 6. **Future Price Trends**: The future trajectory of black commodities will be influenced by the expansion of raw material supply curves. Recent price increases in iron ore and coking coal have stimulated marginal supply releases, with expectations of new production from major projects in Q4 [8][9]. Additional Important Content - **Steel Industry Performance**: The steel industry has shown complex performance under the anti-involution backdrop, with initial expectations of reduced crude steel output not materializing due to improved profit margins from lower raw material prices [5][6]. - **Long-term Outlook**: The long-term outlook for the black commodity sector remains cautious, with a need to focus on demand-side changes and the effective implementation of policies to manage potential risks [1][4][6]. This summary encapsulates the critical insights from the conference call, highlighting the current state and future expectations of the black commodity sector, particularly in relation to steel and coal markets.

Investment Rating - The report maintains a "Buy" recommendation for the photovoltaic industry [1] Core Views - The significant increase in procurement prices for photovoltaic components by China Resources and Huadian strengthens the expectation of price transmission, which is likely to enhance industry confidence and solidify profitability across the supply chain [2][14] - The domestic photovoltaic installation in July 2025 saw a decrease, attributed to the end of the "531" policy's rush for installations, but the overall annual growth in installations is expected to continue [13][14] - Export volumes for battery components and inverters remained stable, with a slight increase in export value for battery components in July 2025 [15][31] Summary by Sections Section 1: July Domestic Photovoltaic Installations and Exports - In July 2025, domestic photovoltaic installations were 11.04 GW, a year-on-year decrease of 48% and a month-on-month decrease of 23% [13] - Battery component exports in July amounted to 158.9 billion yuan, a year-on-year decrease of 14% but a month-on-month increase of 0.5% [15] - Inverter exports in July totaled 65.1 billion yuan, showing a year-on-year increase of 16% but a month-on-month decrease of 1% [31] Section 2: Market Performance Review - The overall market performance for the photovoltaic industry has shown resilience, with a projected increase in global installations expected to reach 570-630 GW in 2025 [13] - The report highlights the performance of various regions, noting that exports to Europe and Asia have seen growth in July [20][24] Section 3: Photovoltaic Industry Chain Prices - The average prices for key materials such as polysilicon and solar cells remained stable, indicating a balanced supply-demand situation in the market [4] - The report details the procurement prices from major companies, indicating a trend towards higher prices which may impact future profitability [14]