Core Insights - The report highlights that most primary industries in the A-share market are experiencing intense competition, particularly in the midstream manufacturing sector compared to upstream resource products [1] - It notes that the willingness to expand production has dropped to a low point across most industries, with over half showing strong capacity for expansion [1] - The report emphasizes different signals for capacity clearance in traditional versus emerging industries, focusing on improving expansion capabilities for traditional sectors and low expansion willingness for emerging sectors [1] Existing Capacity Utilization Levels - The methodology for measuring industry capacity utilization is based on the Cobb-Douglas production function, assessing the ratio of actual output to potential maximum output under given capital and labor conditions [8] - As of Q1 2025, most industries are at historical low levels of capacity utilization, with only the home appliance and electronics sectors showing upward trends [8][9] Potential Incremental Capacity Levels - The report evaluates potential new capacity based on two dimensions: willingness to expand and capacity to expand. The willingness is measured by the historical ratio of capital expenditures to depreciation, indicating active investment in expansion [9] - As of Q1 2025, most industries are at historical low levels of expansion willingness, with only utilities, coal, and non-ferrous metals showing relatively strong willingness [9] - The capacity to expand is primarily determined by current cash reserves and cash flow conditions, with most primary industries at historical mid-high levels of expansion capacity [9] Historical Capacity Clearance Patterns - Emerging industries signal clearance through cash capability and low expansion willingness. The report references the solar industry's overcapacity from 2011 to 2015, where capacity utilization rapidly declined and remained low until cash capability and expansion willingness dropped to zero [10][12] - Traditional industries signal clearance through improvements in cash capability. The steel and coal industries experienced a prolonged decline in potential incremental capacity, with capacity utilization showing a "V" shape trajectory [12] Current Capacity Clearance Trajectories - In the current cycle, the lithium battery and solar sectors have reached low capacity utilization levels, with both showing expansion willingness near the 0% percentile over the past decade, while cash capability remains around historical median levels [25] - Traditional resource sectors are not facing severe overcapacity issues as seen in previous cycles, with steel and coal industries nearing 2019 low points in capacity utilization, although signs of cash capability improvement are emerging in basic chemicals and steel [25]

Investment Rating - The industry is rated as "Buy" [5] Core Views - The long-term logic remains solid, with expectations for supply and demand in natural rubber to recover [2] - Recent policy guidance indicates a positive shift in pig prices, with a long-term view suggesting the industry may enter a prolonged profit upcycle [4][70] - The agricultural sector is experiencing a mixed performance, with animal health and aquaculture sectors showing positive trends, while feed and poultry sectors face challenges [14][18] Summary by Sections 1. Market Review - The agricultural sector outperformed the market, with the agricultural index down 0.14% while the Shanghai Composite Index rose 0.69% [14] - Key sub-sectors showed varied performance, with animal health up 5.13% and feed down 0.71% [14][18] 2. Key Data Tracking - Pig prices decreased to 14.27 yuan/kg, down 3.65% week-on-week, while chicken prices increased to 6.4 yuan/kg, up 2.56% [22][34] - Natural rubber prices rose to 14,840 yuan/ton, up 3.16% week-on-week, driven by tight supply and recovering demand from the tire industry [61] 3. Investment Recommendations - Focus on pig farming sector with recommendations for companies like Muyuan Foods and Wens Foodstuffs [4][70] - Attention to post-cycle sectors, particularly in feed and animal health, with companies like Haida Group and Reap Bio [4][70] - In the planting chain, investment opportunities are highlighted for companies such as Suqian Agricultural Development and Beidahuang [4][70] - The pet food sector is also recommended due to ongoing growth and price increases, with companies like Guibao Pet and Zhongchong Co. [4][70]

Summary of Conference Call Notes Industry or Company Involved - The discussion primarily revolves around the A-share market and its earnings performance, particularly focusing on the financial sector and real estate industry Core Points and Arguments 1. The profit growth turning from negative to positive in Q1 2025 is attributed to a low base effect rather than internal improvements, as the A-share market has experienced a historically long period of negative profit growth [1][2] 2. The return on equity (ROE) has been on a downward trend, with the current down cycle lasting approximately 7 to 8 quarters, significantly longer than previous cycles, indicating structural pressures on operational capabilities [2][3] 3. The real estate sector has seen a continuous decline in leverage since 2020, with a 3% drop in financial leverage and about a 1% drop in non-financial real estate, which has directly suppressed ROE recovery [3][4] 4. The improvement in profit growth is primarily due to low accumulation effects, enhanced operational performance, and a temporary stabilization of profit data from the longest negative growth cycle [4][5] 5. The Q1 2025 gross profit margin increased by 0.05 percentage points, while net profit margin improved by 0.06 percentage points, driven by reduced operating costs and expenses [4][5] 6. The fixed asset investment in the financial real estate sector remains low, indicating weak corporate confidence and a lack of willingness to expand production [4][6] 7. The positive profit growth in Q1 2025 is not a true inflection point, as structural differentiation exists among industries, with the financial sector contributing 51.4% to the profit growth, followed by the non-ferrous metals sector at 33.4% [5][6] 8. The intrinsic profit growth for A-shares is expected to materialize no earlier than Q3 of the current year, based on the recovery of corporate balance sheets and the leading indicators of long-term loans [6][7] 9. The leading indicators suggest that the recovery of corporate balance sheets and the increase in long-term loans will positively influence industrial enterprise profits by the end of this year or early next year [7][8] 10. The top five performing sectors in Q1 2025 include agriculture, computer technology, steel, construction materials, and non-ferrous metals, with several sectors expected to maintain over 20% growth [8][9] Other Important but Possibly Overlooked Content 1. Investment strategies should focus on domestic certainty and expected growth amidst global geopolitical risks, with recommendations for sectors such as consumer goods, technology, and stable dividend stocks [9][10] 2. The discussion emphasizes the importance of avoiding excessive exposure to U.S. market risks, suggesting a cautious approach to investment in sectors with high volatility [9][10]

Investment Rating - The report maintains a "Buy" rating for the agriculture, forestry, animal husbandry, and fishery sector [4] Core Viewpoints - Recent policy guidance has led to a rapid decline in post-slaughter weight, allowing for a rebalancing of volume and price, with positive expectations for pig prices [3] - The long-term perspective indicates that the bottom of the production capacity cycle is becoming clearer, suggesting a potential long-term profit upturn for the sector [3] - The report highlights investment opportunities in various segments, including pig farming, feed, and planting chains, as well as the pet food sector [3] Summary by Sections Pig Farming Sector - In June, 13 listed pig companies collectively slaughtered 16.2681 million pigs, a month-on-month increase of 2.65% and a year-on-year increase of 47.55% [2][13] - The average selling price of pigs decreased by approximately 3% month-on-month and about 20% year-on-year, with prices ranging from 13.23 to 15.57 yuan/kg [14][15] - The average weight of slaughtered pigs in June was 125.06 kg, down 0.77 kg from May, indicating a trend towards reducing weight [17] Market Dynamics - The national average price for live pigs was 14.81 yuan/kg as of July 11, reflecting a week-on-week decline of 3.52% [28] - The demand for pork is weakening due to high temperatures affecting consumption and rising storage costs, leading to a gradual loosening of supply-demand dynamics [28] Investment Recommendations - The report recommends focusing on leading companies such as Muyuan Foods, Wens Foodstuff, and Juxing Agriculture, as well as companies in the feed and animal health sectors like Haida Group and Ruipu Biological [3] - In the planting chain, opportunities are highlighted for companies like Suqian Agricultural Development and Beidahuang [3] Other Segments - The pet food industry is experiencing growth, with increasing recognition of domestic brands and continuous growth of leading companies [3]

Macro Environment - The report highlights the Chinese government's initiatives to enhance financial support for the Greater Bay Area's high-quality development, including measures to promote financial integration with technology industries [6][11][12] - The manufacturing PMI for June increased to 49.7%, indicating a slight improvement in manufacturing activity, with production and new orders showing positive trends [13][14] - Social financing in June reached 2.29 trillion yuan, a year-on-year increase of 11%, with significant growth in government bond issuance [26][28] Market and Industry Performance - In June, the equity market favored growth stocks, with the small-cap growth index rising by 5.52%, while value indices lagged behind [44] - The bond market showed upward trends, supported by liquidity measures from the central bank, although uncertainty regarding economic recovery persists [50] - The top-performing sectors in June included telecommunications (14.09%), defense (10.89%), and non-ferrous metals (9.26%), while transportation and coal sectors experienced declines [55][56] July Allocation Recommendations - The report recommends focusing on the consumer sector due to evident policy support and recovering demand, with an emphasis on domestic circulation [62] - The technology growth sector is noted for its long-term potential, but short-term valuation and economic conditions should be monitored [62] - Investment opportunities are also suggested in the petrochemical and electric power sectors [62]

Core Insights - The report predicts that Brent crude oil prices will fluctuate around $65-70 per barrel in the second half of 2025, driven by tight supply and slow demand growth, with potential short-term spikes due to geopolitical factors [4][9] - The petrochemical industry is expected to gradually recover from its bottoming out phase, returning to a normal capacity cycle constrained by credit boundaries, leading to a slow recovery in profitability in 2025 and beyond [4][10] - Investment opportunities are highlighted in high-quality growth stocks, coal chemical equipment investments, and high-dividend sectors, emphasizing a bottom-up investment approach [4][10] Oil Price Trends - Oil prices experienced a two-phase trend in 2025: a decline from $74.64 to $60.23 per barrel (down 19.31%) until May 3, followed by a recovery to $77.01 per barrel (up 27.86%) after May 3 due to seasonal demand and geopolitical tensions [7][25] - The report indicates that global oil supply remains tight, with non-OECD countries contributing to demand growth, which will limit the extent of price declines [9][27] Industry Performance - Global refining capacity is projected to grow by 440,000 barrels per day from 2022 to 2028, with China contributing significantly to this increase [27][33] - The report notes that domestic refined oil demand is nearing its peak, with a decline in consumption due to economic weakness and competition from electric vehicles [39][45] - The petrochemical sector is experiencing a weak recovery, with some chemical products showing improved profitability despite high raw material costs [8][45] Investment Themes - The report emphasizes four main investment themes: 1. Quality growth and leading companies in the industry experiencing volume and price increases [10] 2. Opportunities in high-end materials and technology import substitution [10] 3. Investments related to the upcoming coal chemical investment cycle [10] 4. High dividend yielding state-owned enterprises benefiting from economic recovery [10][11] Recommendations - Key investment targets include leading companies in ethylene production, coal chemical leaders, and high dividend stocks such as China National Offshore Oil Corporation and China Petroleum [11][10] - The report suggests focusing on companies that are positioned to benefit from the recovery in domestic demand and the transition to high-end materials [11][10]

Investment Rating - The industry is rated as "Buy" [6] Core Viewpoints - The pig farming sector is expected to see a recovery in prices due to seasonal demand and a slight increase in the number of breeding sows, indicating a potential long-term profit cycle [5][70] - The recent increase in pig prices is attributed to supply constraints caused by seasonal weather conditions and reduced slaughtering activities [24] - The overall agricultural sector has shown resilience, outperforming the market indices in recent weeks [15] Summary by Sections 1. Industry Performance - The agricultural sector index rose by 2.55% in the week ending July 4, outperforming the Shanghai Composite Index by 1.15% [15] - The pig farming sub-sector saw a price increase of 4.28% for live pigs, while the average weight of pigs at slaughter reached 128.64 kg, up 0.50 kg week-on-week [24] 2. Key Data Tracking - As of the end of May, the number of breeding sows was 40.42 million, a slight increase of 0.1% month-on-month and 1.2% year-on-year [1] - The average price for live pigs decreased to 14.92 yuan/kg in May, down 0.9% month-on-month and 5.4% year-on-year [1] - The average profit per pig for large-scale farms dropped to 49 yuan per head in May, down from 86 yuan in April [1] 3. Investment Recommendations - The report recommends focusing on the pig farming sector, highlighting companies such as Muyuan Foods, Wens Foodstuff Group, and Juxing Agriculture as key investment opportunities [5][70] - The feed and veterinary sectors are also expected to benefit from the recovery in pig stocks, with companies like Haida Group and Ruipu Biological Products suggested for consideration [5][70] - In the planting chain, the upward trend in grain prices presents investment opportunities in companies like Suqian Agricultural Development and Beidahuang Group [5][70]

Report Industry Investment Rating - The investment view on the rubber industry is "oscillation" [1] Core Viewpoints of the Report - The long - term logic of rubber has been falsified, and new driving factors need to be awaited. The overall price range is adjusted from the initial forecast of 15,000 - 19,000 yuan/ton to 12,500 - 16,500 yuan/ton. The upward trend may be driven by supply - side factors such as weather and policies, while the downward trend may be dragged by macro factors like tariff policies and global economic recession expectations [8][86] Summary by Directory 1. Market Review 1.1 Review of the performance of Shanghai rubber and No. 20 rubber - In the first half of 2025, the natural rubber market fluctuated sharply. In Q1, it remained in a high - level sideways pattern, and in Q2, prices dropped from the high level due to factors such as increased exports from overseas rubber - producing countries, a significant increase in domestic imports, and US reciprocal tariffs. In Q1, the RU index oscillated between 16,600 - 18,000 yuan/ton. In January, prices fluctuated, with raw material prices dropping significantly compared to Q4, and increasing domestic imports and seasonal inventory accumulation suppressing prices. In February, prices rose after the Spring Festival due to seasonal production cuts overseas. In March, the rumored state reserve purchase had limited impact on the market. After the Tomb - Sweeping Festival in Q2, the "reciprocal tariff" in the US affected the market, and the increase in import data in March (18% month - on - month and 20.6% year - on - year) also influenced prices. The significant increase in exports from rubber - producing countries and domestic imports in the first half of the year falsified the previous long - term logic, and prices fell back to the level of the same period in 2024 [14][15] 1.2 Review of spreads and price differences - In the first half of the year, state reserve purchases and capital actions strongly disturbed the spreads of Shanghai rubber and No. 20 rubber. In mid - April, after the rumor of the state reserve purchasing 2024 full - latex warehouse receipts, the 9 - 5 and 1 - 9 spreads of Shanghai rubber narrowed rapidly. The 9 - 5 spread even reached a negative level, and the 1 - 9 spread dropped from over 1,000 yuan/ton to below 700 yuan/ton. Later, the 9 - 5 spread gradually recovered, but the 1 - 9 spread remained at a relatively low level at the end of June. For No. 20 rubber, in Q1, the spot was tight, and the spreads showed a backwardation structure. In Q2, although imports increased, capital actions led to the cancellation of warehouse receipts, and the spreads strengthened again. By the end of June, the spreads weakened but still showed a slight premium. In the third quarter, as production increased, the spreads may return to the previous premium pattern [19][23] 2. Macro - fundamentals 2.1 The Fed lowers economic expectations, raises inflation and unemployment expectations, and internal differences widen - The Fed has paused rate cuts for the fourth consecutive time, maintaining the federal funds rate target range at 4.25% - 4.50% and the monthly balance - sheet reduction limit at $40 billion. Due to the uncertainty caused by tariffs, the Fed remains cautious. The June economic forecast solidifies the "stagflation" expectation, with economic growth being lowered and unemployment and inflation being raised. The Fed believes that tariffs will have a "one - time" impact on inflation. The internal differences in the Fed are mainly due to the uncertainty of US tariff negotiations and the geopolitical risks in the Middle East [24][27] 2.2 Geopolitical situation and tariff policies disrupt the global economy, increasing uncertainty - US tariff policies disrupt global trade, causing a 0.2% year - on - year decline in global merchandise trade volume in 2025, a 2.9 - percentage - point drop compared to before the tariff war. Multiple international institutions have lowered their global economic growth forecasts for 2025. The recent escalation of the Israel - Iran conflict in the Middle East has raised concerns about oil supply disruptions, pushing up oil prices. This has put central banks in a dilemma between fighting inflation and stabilizing growth [28][34] 3. Upstream and downstream of the industrial chain 3.1 Upstream supply and raw materials - The total planting area of ANRPC is at a high level with a slight downward trend. The new planting area has increased in some countries but cannot offset the reduction in the original planting area. The supply - side output price elasticity still exists. In 2024, global natural rubber production increased by 2.8% year - on - year. Emerging rubber - producing countries such as Côte d'Ivoire have seen rapid growth, partially offsetting concerns about the decline in traditional rubber - producing countries. The second half of the year is the peak production season for natural rubber, and the supply is expected to increase [35][47] 3.2 Imports and inventories - In the first half of 2025, domestic imports of natural and synthetic rubber increased significantly. In May, the total imports of natural and synthetic rubber (including latex) were 607,000 tons, a 25.2% increase compared to the same period in 2024, and the cumulative imports from January to May were 3.476 million tons, a 23.5% increase. As of June 15, 2025, the total inventory of natural rubber in Qingdao increased slightly. The absolute value of domestic inventory is still at a moderately high level. With the increase in new rubber supply in the second half of the year, imports are expected to rise, and the inventory reduction in the middle - stream may slow down before the third quarter [50][52] 3.3 Downstream demand - Tire production growth is slowing down. In May 2025, the output of Chinese tire casings decreased both month - on - month and year - on - year. The production of both all - steel and semi - steel tires declined. The all - steel tire market was supported by policies and exports, but the replacement market was weak. The semi - steel tire market faced increasing production and sales pressure due to rising inventory and new production capacity coming online. In the automotive market, production and sales increased in the first five months of 2025, with the passenger car and new - energy vehicle markets performing well. The heavy - truck market showed a slight increase in sales, mainly due to the implementation of the old - for - new policy [57][68] 4. Cost - profit and spread analysis 4.1 Cost - profit analysis - The losses of Thai latex and No. 20 rubber production have been partially repaired. Since May, continuous rain in the Thai production area has affected tapping, leading to an increase in raw material prices. Factories are stocking EUDR raw materials, and the price difference between EUDR raw materials and general raw materials has narrowed compared to last year [72] 4.2 Futures - spot spread analysis - In 2025, the non - standard arbitrage spread has fully returned. Since the fourth quarter of 2024, the price of dark - colored rubber has been strong, and the spread between dark - and light - colored rubber has widened. In May 2025, NR was significantly stronger than RU, and the spread between them reached a multi - year high. The spread between RU2509 and mixed rubber also fully returned, with RU2509 trading at a rare discount to the mixed - rubber spot in late May. Later, attention should be paid to the spread trading opportunities such as going long on RU2601 and short on RU2509, and going long on RU and short on NR [75][85]

Group 1 - The capacity and inventory cycles are expected to bottom out and recover, enhancing the momentum of enterprise profit recovery [1][6][53] - The current capacity cycle has been in a downward trend since the second half of 2021 and is nearing its end, while the inventory cycle is also expected to transition from a bottoming phase to a replenishment phase within the year [1][2][11] - The recovery of the capacity cycle is typically driven by strong fiscal support policies, as seen in previous cycles [8][14] Group 2 - The downstream capacity cycle is approaching a turning point, with upstream capacity utilization still declining and the mining industry requiring more time for capacity reduction [2][15] - The inventory cycle shows significant differentiation across upstream, midstream, and downstream sectors, primarily due to varying demand improvements [2][15] - Demand improvements are concentrated in sectors with strong policy support, emerging industries, and export-oriented industries, while traditional sectors like real estate remain weak [15][16] Group 3 - The manufacturing sector is currently in a dual bottom phase for both capacity and inventory cycles, with the manufacturing capital expenditure declining significantly since its peak in 2021 [14][40] - The industrial sector is experiencing a passive destocking phase, with inventory levels expected to gradually recover as revenue growth improves [14][17] - The midstream equipment manufacturing sector is showing signs of recovery, driven by policy support and increased consumer demand for electronics and vehicles [30][37] Group 4 - The downstream consumer manufacturing sector is also in a destocking phase, with revenue growth rebounding since the beginning of 2024 [40][48] - Specific industries within the downstream sector, such as agricultural and food processing, are entering active replenishment phases, indicating a positive outlook for inventory levels [48][49] - The overall economic recovery will depend on the strength of consumer and investment demand, which will gradually transmit to the production side [53]

Market Overview - The market experienced fluctuations this week, with only the ChiNext index showing an increase. The ETF market continued to see net outflows, primarily from large-cap ETFs. The market is transitioning from wide fluctuations to narrower ones, with increased trading volume during this process, indicating potential consolidation in a weak market [4]. Copper Industry - In May, domestic waste copper production was 92,000 tons, a year-on-year decrease of 20% but a month-on-month increase of 5%. The negative impact of trade conflicts on the economy has not fully materialized, which continues to suppress copper price increases. Supply-side disturbances in copper mining have increased, while demand is weakening due to reduced export stocking effects and the domestic off-season [5]. Metal Prices - The price of London gold has reached a historical high. Sunac China’s offshore debt-to-equity swap plan received support from 82% of bondholders. In May, Sunac's total sales amounted to 4.9 billion yuan, a year-on-year increase of 128%, indicating strong performance [6]. Chemical Industry - Recent safety incidents in chemical parks have led to stricter approval and production regulations for high-risk chemical reactions. Leading companies in the chemical industry, with better safety management and advanced production technologies, are expected to benefit from stable production amid limited growth in high-risk products [7]. Construction Materials - The market performance showed a decline, with the CITIC building materials index down 2.16% and the CITIC construction index down 1.27%. The average price of PO42.5 cement was 365.70 yuan/ton, a slight increase, while glass prices decreased by 20 yuan/ton [8]. Agriculture and Livestock - In the pig farming sector, the industry capacity cycle has bottomed out, but high inventory levels continue to impact market dynamics. Recent policy-driven efforts are accelerating the reduction of inventory, which may lead to a rebalancing of supply and demand. Long-term, the end of inventory reduction could signal the start of a prolonged profit upcycle for the sector [9]. Renewable Energy - The nuclear fusion sector, while far from full commercialization, is seeing increased investment and research due to global military competition. Recent data from May indicates a downward trend in overall renewable energy prices, highlighting ongoing pressures in power supply and demand. Wind power, virtual power plants, and energy storage are identified as promising investment opportunities [10].