Core Viewpoint - The article emphasizes the importance of free cash flow as a more reliable indicator of a company's financial health compared to traditional profit metrics, highlighting the need for investors to focus on cash generation capabilities rather than just profit figures [2][4][14]. Summary by Sections Investment Philosophy - Warren Buffett's investment philosophy stresses the analysis of financial health and competitive advantages, particularly focusing on the efficiency of free cash flow usage, sustainable competitive advantages, gross margins, liquidity ratios, capital expenditure needs, debt levels, and return on equity (ROE) [2][4]. Free Cash Flow ETF - The Fangzheng Fubon CSI All-Index Free Cash Flow ETF is designed to track the CSI Free Cash Flow Index, filling a gap in investment tools focused on cash flow factors. The ETF selects companies based on criteria such as positive free cash flow, consistent cash flow generation over five years, and high profitability quality [4][5][15]. Historical Performance - The free cash flow index has outperformed broad market indices, achieving an annualized return of 14.1% since December 31, 2013, which is 9.9% higher than the Shanghai Composite Index and 9.5% higher than the CSI 300 Index. The total return index, including reinvested dividends, boasts an annualized return of 18.8% [6][9][11]. Comparison with Other Indices - The free cash flow index has a total return of 326.9% over the specified period, with a maximum drawdown of -45.0% and a Sharpe ratio of 0.68, indicating a better risk-adjusted return compared to other indices like the Shanghai Composite and CSI 300 [7][11]. Dividend Yield - The free cash flow index offers a dividend yield of 4.8%, which is attractive in the current low-interest-rate environment, making it appealing for income-focused investors [12][15]. Market Context - The article discusses the changing global economic landscape and the increasing importance of free cash flow as a measure of a company's resilience and ability to navigate uncertainties, especially in the context of China's economic transition [14][15]. Regulatory Environment - Recent regulatory changes emphasize the quality of corporate earnings and sustainable dividends, aligning with the principles of the free cash flow strategy, which focuses on long-term value creation [15][16].

Investment Rating - The investment rating for the company is "Buy" and is maintained [9] Core Views - The company reported a revenue of HKD 79.258 billion for the fiscal year 2024/25, a decrease of 2.6% year-on-year, while the net profit attributable to shareholders was HKD 3.252 billion, an increase of 2.1% year-on-year. The free cash flow for the year reached HKD 4.66 billion, up 8.7% year-on-year. The annual dividend per share remained unchanged at HKD 0.50, resulting in a current dividend yield of approximately 6.8% [2][6] Summary by Sections Revenue and Profitability - The company's revenue for the fiscal year 2024/25 was HKD 79.258 billion, down 2.6% year-on-year, while the net profit attributable to shareholders was HKD 3.252 billion, up 2.1% year-on-year. The free cash flow increased to HKD 4.66 billion, reflecting an 8.7% year-on-year growth [2][6] Dividend Policy - The company maintained its annual dividend at HKD 0.50 per share, consistent with the previous year, resulting in a payout ratio of 83.3% and a current dividend yield of approximately 6.8% [2][6] Business Segments Performance - Natural gas sales revenue was HKD 49.05 billion, down 6.5% year-on-year. Gas connection revenue was HKD 3.63 billion, down 9.6%. Engineering design and construction revenue increased by 14.7% to HKD 1.76 billion. Liquefied petroleum gas sales revenue rose by 8.9% to HKD 19.58 billion, while value-added services revenue increased by 2.1% to HKD 3.73 billion [9] Sales Volume and Pricing - The sales volume of town gas showed a slight increase of 0.02% year-on-year, with residential gas usage down 2.1% and industrial gas usage up 1.0%. The average residential gas price increased from HKD 2.71 per cubic meter in 2022 to HKD 3.00 per cubic meter in 2024, with a potential for further increases in the 2025/26 fiscal year [9] Margin Recovery - The company's gross margin improved from HKD 0.50 per cubic meter in the 2023/24 fiscal year to HKD 0.537 per cubic meter in the 2024/25 fiscal year, with expectations for further improvement to HKD 0.55 per cubic meter in the 2025/26 fiscal year [9] Connection Projects - The company added approximately 1.4 million new residential connections in the 2024/25 fiscal year, with guidance for 1.0 to 1.2 million new connections in the 2025/26 fiscal year [9] Value-Added Services - The value-added services segment achieved a pre-tax profit of HKD 1.75 billion, accounting for 26.2% of total profits, with a year-on-year growth of 10.6% [9] Financing Costs - The company optimized its debt structure, reducing the proportion of foreign currency loans to 0.5%, with the average financing cost decreasing from 4.83% to 3.84% year-on-year [9] Cash Flow - The free cash flow for the fiscal year reached HKD 4.66 billion, with expectations for further improvement due to a slowdown in capital expenditures related to connection projects [9]

Group 1 - The article highlights the rebound of high dividend assets, with the Cash Flow ETF (159399) rising by 0.89% during trading, indicating active market participation [1] - The Cash Flow ETF (159399) utilizes free cash flow as a stock selection factor, closely tracking the FTSE China A-Share Free Cash Flow Focus Index, excluding financial and real estate sectors, and selecting the top 50 stocks with the highest free cash flow rates, thus identifying "cash cow" companies in the A-share market [1] - The long-term performance of the FTSE Cash Flow Index is notable, with an annualized return exceeding 18% since the base date (December 31, 2013), and a cumulative increase of 568.15%, significantly outperforming the CSI 300's 114.88% and the CSI Dividend's 285.62%, consistently beating the CSI Dividend Index for nine consecutive years [1] Group 2 - According to Shenwan Hongyuan Securities, free cash flow has a timing effect on cyclical stocks, suggesting that during an upcycle, the free cash flow rate of cyclical stocks is higher compared to recession periods, allowing for the identification of cyclical stocks in an uptrend through free cash flow rates, demonstrating strong applicability to economic cycles [1]

Core Viewpoint - The Chinese public fund industry is undergoing significant changes, with a shift from actively managed equity funds to index-based investments, leading to the rise of Smart Beta strategies as a solution to industry pain points [2][15]. Group 1: Industry Changes - The halo of actively managed equity funds is fading, and star managers are struggling to regain investor trust [2]. - Index-based investments are experiencing explosive growth due to their transparency and low costs, surpassing actively managed equity funds in scale [2]. - Smart Beta strategies, particularly dividend strategies, are emerging as a popular solution to address the complexities of asset allocation for ordinary investors [2][9]. Group 2: Smart Beta Strategy Development - Smart Beta strategies incorporate effective stock selection logic into index construction to enhance performance or optimize risk-return characteristics [3]. - The Smart Beta concept is not new, with early products launched in the U.S. as far back as 2000 [3]. - The Smart Beta strategy matrix has rapidly expanded, with various factor-based ETFs emerging over the years, including momentum and low volatility strategies [4]. Group 3: Market Comparison - As of the end of 2024, the U.S. Smart Beta ETF market has grown to 364 products with a total management scale of $1,727.51 billion, a 23-fold increase over ten years [5]. - In contrast, China's Smart Beta ETF market is significantly smaller, with a total scale of only 120 billion yuan, accounting for about 3% of the domestic equity ETF market [8]. Group 4: Factor Strategies in China - In China, the dividend factor strategy dominates the Smart Beta ETF landscape, contrasting with the U.S. where growth, value, and quality factors lead in management scale [9]. - The demand for stable dividend assets has surged in a low-interest, high-volatility environment, reflecting a market preference for "certainty" [9]. Group 5: Free Cash Flow as a Key Indicator - Free cash flow is becoming an important metric for investors to assess corporate value, as it reflects a company's financial health and actual profitability [10]. - The CSI All Index Free Cash Flow Index has shown a historical annualized return of 7.77% over nearly ten years, significantly outperforming the CSI All Index's -3.95% return in the same period [10][13]. Group 6: Product Launches and Regulatory Support - As of June 18, 2025, 27 fund companies have launched 32 index funds related to free cash flow strategies, indicating strong market interest [11]. - The recent regulatory framework emphasizes addressing industry pain points and transitioning from a focus on scale to prioritizing investor returns, with Smart Beta strategies like dividends and free cash flow aligning with these goals [15][16].

证券研究报 告 【策略专题】 分红能力盘点：周期&公用篇 ——自由现金流资产系列 12 工业金属：25Q1 现金流比例 33%，具备较大股东回报提升空间 石化：25Q1 现金流比例 26%，盈利周期熨平、现金流稳定 港口： 25Q1 现金流比例 33%，市场或已充分认知其稳定现金创造能力 2）行业逻辑演变带来现金流改善：航运受益于近年来地缘事件频繁、运价 大波动的时代背景，农业则正发生开支周期转向平稳阶段的积极变化： 航运：25Q1 现金流比例 41%，地缘事件频繁、运价大波动时代 农业：25Q1 现金流比例 34%，开支周期进入平稳阶段 3）景气周期承压：虽然资本开支力度下降，但 EPS 压力较大，包括煤炭、 钢铁、建材、航空机场、地产： 煤炭：25Q1 现金流比例 25%，煤价下跌与开支高位持续矛盾 钢铁：25Q1 现金流比例 42%，去库影响显著 建材：25Q1 现金流比例 28%，股东回报提升空间有限 航空机场：25Q1 现金流比例 64%，盈利规模与疫情前接近 地产：25Q1 现金流阶段性修复，去库补充现金流 4）仍处高资本开支阶段：资本开支力度均在 2 以上，行业逻辑仍以扩张为 主，包括贵金属、能 ...

Group 1: Market Overview - A-share market showed a large consolidation platform in the first half of the year, with a deep V-shaped trend triggered by the tariff war. After the Middle East situation eased on June 24, the stock index rose rapidly [8]. - Due to the impact of DeepSeek and the US imposing reciprocal tariffs, international capital fled from US stocks on a large scale, with technology stocks being the hardest hit [10]. - After the rebound of US stocks in April, the main buyers were retail investors, while institutions withdrew one after another, and the short positions of hedge funds reached a record high [13]. Group 2: Market Outlook - A-shares are expected to transform into a capital-driven upward trend. After the Middle East situation eased, the risk appetite of A-shares quickly recovered, and the main indexes of the two markets rose rapidly. With the one-year deposit rate falling below 1%, the large-scale savings of the household sector are accelerating to flow into the stock market, preferring high-dividend sectors, which has driven the bank ETF to continuously reach new highs. The balance of margin trading has rebounded, and the financing balance has remained above 1.8 trillion yuan for 11 consecutive trading days (from June 9 to June 23). Global investors are increasingly focusing on China's innovation and leading position, and many foreign giants have suddenly collectively turned bullish on Chinese assets. Goldman Sachs maintains an overweight recommendation for A-shares and Hong Kong stocks, and Bank of America believes that global capital allocation is gradually shifting from the US to the Eurasian market. Since October 2024, A-shares have been consolidating on a large platform for more than 8 months and are facing an upward breakthrough [18]. Group 3: Trading Strategies - For stock index futures directional trading, A-shares have been consolidating on a large platform for more than 8 months and are facing an upward breakthrough. They are expected to transform into a capital-driven upward trend and evolve from a volatile recovery market to a trending upward market [19]. - For stock index option trading, after breaking through the large consolidation platform, investors can buy out-of-the-money long-dated call options on stock index options [19]. Group 4: Interest Rate and Market Impact - The one-year deposit rate was cut by 15 basis points to 0.95%, which will promote the continuous transfer of household savings and insurance funds to the stock market. The 1-year deposit rate breaking below 1% accelerates the transfer of household savings and insurance funds to the stock market, and the decline in deposit rates boosts the value style of the stock market [23][26]. - The issuance of free cash flow ETFs helps the value style. Free cash flow is an indicator of a company's moat in operation and development, and it can relatively truly reflect the company's financial health and profitability in terms of cash. Domestic free cash flow index ETFs were first launched by Huaxia Fund and Guotai Fund in January 2025, tracking the China Securities Free Cash Flow Index and the FTSE China A-share Free Cash Flow Focus Index respectively. The free cash flow strategy has certain growth potential on the basis of value investment, while the dividend strategy is more suitable for investors who prefer low valuations and stable dividends [29]. Group 5: Global Capital Allocation - Global large funds are collectively "de-Americanizing," reducing their allocation of US stocks, US bonds, and the US dollar, and increasing their allocation of European and Asian stocks, gold, and non-US currencies. Institutions generally hold different views on US stocks, but the overall allocation has been reduced to a neutral level, making it the least favored market globally. "Buying Asia and Europe" has become a consensus among global large funds. European and Japanese stock markets have been upgraded, and emerging market stock markets remain overweight [30]. - Institutions generally reduce their holdings of US and Japanese bonds and turn to increasing their positions in UK, German, Italian bonds, and local bonds in emerging markets. In the foreign exchange market, the selling of the US is more obvious, and the US dollar continues to be underweighted, while the euro and the yen continue to be overweighted [31][32]. Group 6: Foreign Investment Views - Goldman Sachs maintains an overweight recommendation for Chinese assets, expecting the target point of the CSI 300 to be 4,600 and the target point of the MSCI China to be 84, implying an upside potential of about 10%. Goldman Sachs has recently upgraded the ratings of the banking and real estate sectors, mainly benefiting from domestic policy support, and continues to overweight consumer-related sectors, including medical devices, consumer services, media, and e-commerce retail [33]. - Overseas "smart money" is bullish on Chinese assets with real money. From the frequent due diligence of quantitative private equity funds by foreign investors to the aggressive layout of sovereign funds, overseas "smart money" has turned its attention to the Chinese market. Many international investment banks such as Morgan Stanley and Deutsche Bank have raised their growth forecasts for the Chinese economy. In the view of many foreign institutions, the continuous efforts of China's monetary and fiscal policies, the resilience of the service industry, and the technological breakthroughs driving the revaluation of assets will jointly support the recovery of the Chinese economy and the warming of the capital market [36]. Group 7: China's Economic Data - In May, China's export amount reached $316.1 billion, with a year-on-year growth rate of 4.8%, exceeding expectations. In April, China's export volume increased by 13.0% year-on-year and 8.5% month-on-month. The export structure continued to upgrade, with the export amount of mechanical and electrical products reaching $181.9 billion in May, a year-on-year increase of 7.2%. The export volume of general equipment and special equipment continued to grow rapidly, indicating the continuous upgrading of the export structure [38][41][44]. - In May, China's export to ASEAN reached $58.3 billion, with a surplus of $27.1 billion, reaching a record high. China's export to the EU reached $49.5 billion in May, hitting a new high in nearly three years, with a year-on-year growth rate of 12.0% [50][53]. - In May, Vietnam's export amount reached $39.5 billion, a record high, with a year-on-year growth rate of 20.7%, indicating an acceleration of trade transfer [56]. - In May, China's manufacturing fixed asset investment reached 2.93 trillion yuan, with a year-on-year growth rate of 7.8%. China continues to make large-scale investments in emerging and future industries. Infrastructure investment reached 2.26 trillion yuan in May, with a year-on-year growth rate of 9.3%, maintaining a medium-to-high growth rate [59][62]. - The monthly values of new housing starts and commercial housing sales areas have stabilized. In May, the total retail sales of consumer goods reached 3.67 trillion yuan, with a year-on-year growth rate of 6.5%, indicating a continuous improvement in consumption. The monthly volume of express delivery services by large-scale enterprises in China reached 17.32 billion pieces in May, the second-highest in history, with a year-on-year growth rate of 17.2%. The output of industrial robots reached 69,000 units in May, at a high level, with a year-on-year growth rate of 34.1%. The output of integrated circuits reached 42.4 billion pieces in May, the second-highest in history, with a year-on-year growth rate of 19.6%, indicating an acceleration of domestic chip substitution. China's passenger car exports reached 591,000 units in May, including 332,000 electric vehicles, both reaching new highs [65][68][71]. Group 8: US Economic Data - In May, the US manufacturing PMI and service industry business activity index showed certain trends. The prices of the US manufacturing and service industries continued to rise rapidly. The US retail and food sales reached $715.4 billion, at a high level, with a year-on-year growth rate of 3.3%, indicating strong consumer demand [83][85][88]. - In April, the US consumer goods import amount reached $69.8 billion, returning to normal, with a year-on-year growth rate of 5.2%. The US capital goods import amount reached $90.5 billion in April, second only to March, with a year-on-year growth rate of 18.2%, indicating an acceleration of the reshoring of the US manufacturing industry and the "re-industrialization" of the US. The US service export reached $98.8 billion in April, hitting a new high this year, indicating the strength of the US service industry [91][94][97]. - In May, the US core CPI increased by 2.8% year-on-year, the same as the previous value, and increased by 0.2% month-on-month. The market expects the Federal Reserve to start cutting interest rates in September. In April, the number of job openings in the US reached 7.39 million, and the number of hires reached a new high in a year, indicating a tightening labor market. The US wholesalers' inventory increased by 2.3% year-on-year in April, and the manufacturers' inventory increased by 0.9% year-on-year, indicating an active inventory replenishment state [100][103][106]. Group 9: Eurozone and Indian Economic Data - In May, the manufacturing PMI in the Eurozone and Germany showed certain trends. India's manufacturing and service industry PMIs also showed certain trends [113][116]. Group 10: Strategy Recommendations - After the Middle East situation eases, the risk appetite of A-shares quickly recovers, and the main indexes of the two markets rise rapidly. The brokerage ETF, known as the "bull market flag bearer," closed with a long positive line on June 25. Driven by the continuous inflow of funds, A-shares are expected to shift from a volatile recovery market to a trending upward market, and investors are bullish on the four major stock index futures contracts [120][122][125]. - Affected by quantitative capital hedging, the 2509 contracts of the CSI 1000 and CSI 500 indexes still have relatively deep discounts. With limited downside risks, investors can earn the discount income. After the market breaks through the large platform upwards, investors are bullish on the out-of-the-money long-dated call options on stock index options [128][131].

Group 1 - The A-share market showed mixed performance on June 26, with the Guozheng Free Cash Flow Index rising, led by stocks such as Zhenhua Heavy Industries, Luoyang Molybdenum, and Taiji Industry [1] - Foreign institutions like Goldman Sachs and UBS expressed optimism about the Chinese stock market, citing resilient macroeconomic conditions, improving corporate profits, supportive incremental policies, and a weak dollar trend as key factors for their positive outlook [1] - According to Shenwan Hongyuan Securities, free cash flow has a timing effect on cyclical stocks, indicating that during upturns, the free cash flow rate of these stocks is higher compared to downturns, making it a useful metric for identifying cyclical stocks in an uptrend [1] Group 2 - The Free Cash Flow ETF (159201) closely tracks the Guozheng Free Cash Flow Index and selects stocks with positive and high free cash flow after liquidity, industry, and ROE stability screening, indicating high quality and strong risk resistance, suitable for long-term investment [1] - The fund management fee is set at an annual rate of 0.15%, and the custody fee at 0.05%, both of which are the lowest in the market, maximizing benefits for investors [1]

Group 1 - The cash flow ETF from Southern (159232) has risen by 0.29%, marking its fifth consecutive increase, with a turnover of 6.76% and a transaction volume of 38.3043 million yuan [1] - The index it tracks, the CSI All Share Free Cash Flow Index, increased by 0.21%, with notable gains from constituent stocks such as Yiming Pharmaceutical (up 3.42%), Bohai Ferry (up 2.95%), and Western Mining (up 2.77%) [1] - The fund aims to reflect the overall performance of listed companies with strong cash flow generation capabilities by focusing on the key financial indicator of free cash flow [1] Group 2 - Approximately 350 A-share companies are set to implement annual report dividend distributions this week, with a total dividend amount exceeding 200 billion yuan [1] - CITIC Securities suggests that after June, dividend assets may present a favorable timing for investment, recommending investors to maintain focus on dividend and new sectors [2] - The top ten weighted stocks in the CSI All Share Free Cash Flow Index include Midea Group, China Shenhua, and China National Offshore Oil Corporation, indicating a concentration in high cash flow generating companies [2]

Investment Rating - The report maintains a strong buy rating for SF Holding (002352) [1] Core Views - The report emphasizes the sustainable optimization of free cash flow as a reflection of the company's evolving business and operational models [1][10] - Key drivers identified include the upward trend in EBIT and the stabilization of capital expenditures leading to steady depreciation and amortization [12][35] Summary by Sections Revenue Growth - The company has implemented a comprehensive organizational restructuring to activate operations, aiming to unleash employee potential while maintaining the advantages of a direct sales model [2] - Initial results show that from March 2025, the volume growth rate has surpassed the industry average, with growth rates of 25.4%, 30.0%, and 31.8% in March to May respectively [2][53] - The structure of time-sensitive packages is shifting from business packages to consumer and industrial manufacturing sectors, becoming a major growth driver [2][67] - The number of monthly settled customers reached 2.3 million by the end of 2024, an 18% year-on-year increase, while individual users grew to 730 million, a 10% increase [2][67] Cost Management - The company is pursuing a large operational model transformation to support ongoing cost reductions, with a focus on four major areas, ten links, and twenty-one measures [2] - The introduction of "cages" is seen as a key tool for transforming the last-mile delivery process [2] Future Business Volume - The report raises questions about the sustainability of accelerated business volume growth, particularly regarding the impact of "unmanned vehicles + cages + flexible urban capacity" [3][11] - The use of unmanned vehicles and cages is projected to significantly reduce costs in the last-mile delivery segment, with estimated savings of 2,200 yuan per month per route [3][11] Capital Expenditure and Depreciation - The peak of capital expenditure has passed, with total capital expenditures decreasing from 289 billion yuan in 2021 to an estimated 107 billion yuan in 2024, leading to a stabilization in depreciation and amortization [12][43] - The effective tax rate has been declining, contributing to improved cash flow [46] Profitability Forecast - The report adjusts profit forecasts for 2025-2027, projecting net profits of 12.09 billion, 13.99 billion, and 15.91 billion yuan respectively, with corresponding EPS of 2.42, 2.80, and 3.19 yuan [13] - The target price for the stock is set at 62.7 yuan, reflecting a 24% upside from the current market value [14]

Market Overview - The market experienced a broad decline, with sectors such as textiles, beauty, non-ferrous metals, and pharmaceuticals leading the losses, while the oil sector saw an increase. The Shanghai Composite Index fell by 0.79%, and the Shenzhen Component Index dropped by 1.21% [1] - Dividend assets showed resilience during the market pullback, with the Cash Flow ETF (159399) and Dividend State-Owned Enterprise ETF (510720) both declining by less than 0.8%. Notably, the Cash Flow ETF (159399) saw a net inflow of 41 million yuan today [1] Geopolitical and Economic Context - The escalation of the Israel-Palestine conflict may lead to a broader regional crisis, impacting global shipping and economic conditions. The Chinese government is actively organizing the evacuation of its citizens from Iran and Israel, while the U.S. has begun withdrawing military personnel from the Middle East [3] - Although the current tariff situation has improved significantly since April's "reciprocal tariffs," uncertainties remain high. The recovery of global economic momentum may be hindered by the impact of tariffs on exports and growth in non-U.S. regions. While major equity markets have largely recovered from the declines following the imposition of tariffs, the pressure on corporate earnings may persist due to delayed effects on costs and consumer spending [3] Domestic Economic Data - Recent economic data from the National Bureau of Statistics indicates weak demand, with industrial value-added growth at 5.8% and fixed asset investment growth at 2.9%, both lower than previous values. This suggests a marginal decline in investment willingness among manufacturing enterprises [6] Investment Insights - As economic growth slows, the marginal returns on corporate investments are also decreasing. Companies unable to achieve excess returns through increased capital expenditure may continue to favor returning dividends to investors. In the context of ongoing tariff uncertainties, slowing overseas economic growth, and geopolitical tensions, dividend cash flow assets are likely to stabilize portfolio volatility [8] - The Cash Flow ETF (159399) focuses on large and mid-cap stocks, with a higher proportion of central state-owned enterprises compared to similar cash flow indices, providing a higher margin of safety and warranting investor attention [8]