Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - The current trading logic involves the spread of anti - involution across all commodities, the shift from deflation to inflation expectations in the macro - economy, and the narrative of commodities exiting the low - price cycle. Whether prices continue to follow the macro - logic or return to industrial reality depends on inflation transmission in the industry chain and terminal consumption capacity [4][14]. - The strong rise of lithium carbonate is due to the expectation of anti - involution spreading upstream and the bet on Jiangxi mine shutdowns. Attention should be paid to potential "expectation gaps" [5][36]. - Speculative demand - driven price fluctuations in the commodity market show a "spring effect", including three stages: macro - narrative igniting speculative enthusiasm, supply elasticity lag leading to over - price increase, and expectation falsification with a stampede - style decline [17]. Summary by Directory First Part: Preface Summary Trading Logic - The current trading logic includes the spread of anti - involution, the shift from deflation to inflation expectations, and the end of the low - price cycle for commodities. After price increases, whether to continue the macro - logic or return to industrial reality depends on inflation transmission and terminal consumption [4][14]. Market Outlook - The strong rise of lithium carbonate is due to anti - involution expectations and bets on mine shutdowns. If mines are shut down without a license, prices can rise; if the mine risk is removed, the over - supply problem may worsen, and prices may hit new lows [5]. Strategy Recommendation - For unilateral trading, follow the trend in the short term as there are no signs of a trend reversal. For arbitrage, wait and see. For options, sell put options [6]. Second Part: Review of Lithium Carbonate Market - The lithium carbonate main contract 2509 has risen 27% from the lowest 58400 to the highest 74680. After reaching around 65,000, the upward movement was driven by the strong expectations of the market, with 100,000 more lots added in 7 days from July 14, and a gain of over 15% [11]. Third Part: Speculative Demand Driving Price Fluctuations First Stage: Macro - Narrative Igniting Speculative Enthusiasm - Speculative demand is initiated by macro - factors such as policy changes and geopolitical events. Speculators hoard goods based on the expectation of future supply shortages, leading to a situation where speculative demand far exceeds actual consumption demand. Prices rise sharply, and the spot premium structure expands, driving futures - cash arbitrage. Technical signals show a strong upward trend [18][22]. Second Stage: Supply Elasticity Lag Leading to Over - Price Increase - The price increase is not based on real supply - demand improvement. At high prices, there are structural contradictions, with actual consumption demand being suppressed. New production capacity is gradually released, but speculators still hold positions based on macro - narratives. Any "expectation gap" may lead to a trend reversal [23]. Third Stage: Expectation Falsification with a Stampede - Style Decline - The end of speculative demand is due to factors such as policy falsification or speculative capital profit - taking. When the market sentiment reverses and the supply peak arrives, there will be a stampede - style decline [24]. Lithium Carbonate's Current Stage - Lithium carbonate is in the initial stage of the first and second phases, and it is necessary to observe when the third stage starts. The proportion change of the hoarding group can be used to judge the stage. High - price consumption suppression is affected by multiple factors [25][26]. Fourth Part: Impact of Anti - Involution on Lithium's Upstream and Downstream Anti - Involution Mainly Targets New - Energy Vehicles - Anti - involution in the lithium - battery industry chain mainly targets new - energy vehicles. The policies aim to improve inventory turnover and eliminate false sales, but stimulating consumption may face challenges [27]. No Anti - Involution Policies for the Upstream - There are currently no anti - involution policies for the upstream. The mining license issues in Qinghai and Yichun have led to market expectations of upstream anti - involution, but this may be unfounded. Mining license problems are mainly related to regulatory actions [28][30]. Fifth Part: Future Outlook and Strategy Recommendation Supply Focus and Market Disagreements - The disagreement over lithium carbonate prices above 65,000 mainly concerns whether large mines in Jiangxi can renew their licenses on time. If 8 large mines in Yichun stop production, it is estimated to affect 75,000 tons of LCE production in the second half of the year. The renewal of the Jiaxiaowo mine's license is a key focus, and the shutdown of two Qinghai salt - lakes may affect 20,000 tons of LCE production [32][34]. Uncertainty in the Second - Half Balance Sheet - In July, there was a surplus of 500 tons. From August, there is high uncertainty. If mines stop production, there may be a large supply gap. High prices will stimulate production from domestic and overseas mines, but they cannot fully compensate for the short - term reduction [35]. Trading Logic and Strategy Suggestions - The strong rise of lithium carbonate is due to anti - involution expectations and bets on mine shutdowns. Pay attention to "expectation gaps". If mines shut down, prices may rise; if the risk is removed, prices may hit new lows [36].

Core Viewpoint - The Chinese liquor industry is entering a downward cycle, with some companies experiencing negative growth, and the market is characterized by shrinking competition and increasing concentration among leading firms [3][6]. Industry Status - The production of large-scale liquor companies peaked in 2016 and has been declining annually, with 2023 production at only 46.32% of 2016 levels [10]. - In 2023, the top six companies accounted for 13% of the industry's production but captured 53.85% of the total revenue, indicating a significant increase in industry concentration from 23.8% in 2017 [11]. - The liquor market is segmented into five price bands, with leading products dominating each segment, such as "Flying Moutai" in the above 2000 yuan category and "Wuliangye" in the 1000 yuan category [13][14]. Brand Dynamics - The success of a liquor brand hinges on having a flagship product with over 10 billion yuan in sales that can dominate a price segment [14]. - The liquor industry is characterized by strong brand loyalty, where high-end liquor is perceived as a cultural product rather than just a beverage, emphasizing social recognition and status [19][20]. Price Characteristics - The price of high-end liquor is closely tied to the income levels of consumers, with "Flying Moutai" prices fluctuating around half of the urban residents' disposable income [24]. - During economic downturns, the prices of premium liquors tend to decrease, impacting the market space for other brands [25]. Cycle Analysis - The liquor cycle is influenced by factors such as consumer wealth levels and short-term economic conditions, with the current economic environment contributing to the industry's downward trend [28][36]. - The inventory cycle plays a crucial role, where excess inventory can exacerbate price declines during economic downturns [38][44]. Investment Recommendations - The top investment choices in the liquor industry are "Guizhou Moutai" and "Wuliangye," both of which have established national and high-end market positions, making them less susceptible to competition [55]. - The timing for purchasing these stocks should be based on historical performance patterns, indicating that stock prices may recover before fundamental improvements are evident [59]. - Current valuations suggest that "Guizhou Moutai" has a price-to-earnings ratio of around 20, while "Wuliangye" is at approximately 14, with both companies expected to return to growth after the current downturn [62].

Group 1 - The core viewpoint of the articles highlights the significant attention on coking coal in the market, which is a crucial representative of the coal sector, influencing costs for all coal-based energy or raw material products [1] - In the short term, the coking coal futures market is primarily driven by capital speculation, with a notable increase in positions and a recent indication of short sellers exiting the market, leading to a price surge [1][2] - The supply-demand situation remains critical, with coking coal production decreasing since May, but low purchasing willingness from downstream sectors has resulted in sluggish transactions [2] Group 2 - The analysis indicates that the current inventory cycle is at a significant turning point, with the second inventory cycle expected to last until 2026 before transitioning to a third cycle [3][4] - The current economic environment is characterized by a weak second inventory cycle, with limited elasticity compared to previous cycles, and the potential for a rebound in industrial value added and social financing in late 2024 [3] - The articles suggest that the recent rebound in commodity and cyclical stocks can be viewed as a prelude to the reversal of the inventory cycle, with recommendations for hedging strategies in the futures market and a focus on low-valued cyclical stocks for asset allocation [4]

Investment Rating - The investment rating for the TDI industry is "Outperform the Market" (maintained) [1] Core Viewpoints - The TDI price is rapidly increasing due to supply constraints caused by overseas incidents and recent maintenance of some TDI facilities [3][4] - Global TDI production capacity is accelerating towards China, with Wanhua Chemical maintaining its leading position [3][19] - China's TDI exports have significantly increased, enhancing international competitiveness [3][24] - The current TDI inventory cycle may have transitioned to a passive destocking phase, with a potential shift towards an active restocking phase in the future [3][29] - The retail sales of furniture in China have shown a high year-on-year growth rate, driven by consumption stimulus policies such as "old-for-new" [3][33] Summary by Sections Incident Impact - An electrical fire at Covestro's Dormagen plant in Germany on July 12 caused a supply contraction of TDI due to the interruption of key raw materials like chlorine [2][4] - The affected TDI production capacity includes a 300,000 tons/year facility, with the duration of the force majeure event currently uncertain [2][4] Price Trends - TDI prices have surged, with European producers raising prices by €500/ton (approximately RMB 4,160/ton) on July 17 [5] - Domestic prices in East China for TDI rose from approximately RMB 13,800-14,100/ton to RMB 14,800-15,200/ton within a few days, indicating a daily increase of about RMB 700-1,000 [5] Production Capacity and Market Dynamics - Global TDI capacity is currently 3.367 million tons, with Asia accounting for 2.427 million tons (72.1%), and China's capacity reaching 1.64 million tons (48.7% of global capacity) [18] - By 2026, global TDI capacity is expected to increase to 3.767 million tons, with China's share rising to 2.11 million tons (55.9% of global capacity) [18][19] Company Focus - Wanhua Chemical is highlighted as a key player, with current TDI capacity of 1.11 million tons (33% of global capacity), projected to reach 1.52 million tons (40.4% of global capacity) by 2026 [3][19] - Recent overseas capacity reductions and the exit of several foreign producers have further solidified Wanhua's competitive edge [19] Export Trends - China's TDI exports have transitioned from a net import state to a net export state since 2012, with net exports exceeding 300,000 tons annually from 2021 to 2024 [24][26] - In the first five months of 2025, net exports reached 220,000 tons, a year-on-year increase of 97% [26] Inventory and Demand Outlook - The TDI inventory cycle is currently in a passive destocking phase, with expectations of transitioning to an active restocking phase if demand recovers in line with capacity releases [29] - The demand for TDI is supported by strong retail sales in the furniture sector and growth in the automotive industry, particularly in the context of new energy vehicles [33]

Core Viewpoint - The article emphasizes the importance of systematic thinking in analyzing commodity markets, highlighting the need to consider both macroeconomic factors and industry-specific dynamics to understand price movements and investment opportunities [9][10][21]. Group 1: Systematic Thinking - Systematic thinking involves a comprehensive approach that considers the broader context and main contradictions in commodity markets, rather than focusing on isolated targets [8][9]. - The article contrasts goal-oriented thinking with systematic thinking, using weight loss as an analogy to illustrate the difference between short-term goals and long-term behavioral changes [5][6]. Group 2: Commodity Price Dynamics - Commodity prices are influenced by a combination of valuation and driving factors, with macroeconomic conditions affecting long-term price expectations [10][13]. - Recent trends show a contradiction where prices are rising despite weak demand and increasing inventories, leading to confusion among industry participants [15][20]. Group 3: Tools for Analyzing Market Contradictions - The article identifies two key tools for resolving contradictions between macroeconomic and industry perspectives: inventory cycles and basis [22][24]. - A focus on basis is crucial for understanding the direction of commodity prices, particularly in the context of macroeconomic trends [25][28]. Group 4: Historical Analysis of Commodity Bottoms - Historical analysis reveals that significant price bottoms are often preceded by rising industrial profits and subsequent inventory replenishment cycles [46][49]. - The article discusses three historical bottoms (2008, 2015, 2020) and their characteristics, emphasizing the role of demand-driven price increases [44][46]. Group 5: Current Market Conditions - The current market does not exhibit strong demand signals, but there is potential for demand to emerge as prices become more attractive [85][86]. - The article suggests that while macroeconomic factors are important, industry-specific analysis is necessary to navigate current market conditions effectively [86].

Summary of Conference Call Company/Industry Involved - The conference call primarily discusses the macroeconomic environment, trade policies, and their impact on various industries, particularly focusing on the automotive and manufacturing sectors. Core Points and Arguments 1. **Uncertainty from Tariffs** The ongoing uncertainty surrounding U.S. tariffs is highlighted, with references to recent court rulings and potential changes in tariff rates that could affect trade dynamics [4][6][19]. 2. **Impact on Automotive Industry** The automotive sector, particularly in the Yangtze River Delta, is noted for its stability compared to other industries. However, the sector has faced challenges due to tariff changes and the lingering effects of COVID-19 lockdowns, which have impacted production rates [5][6][13]. 3. **Production Rates Fluctuations** The production rates for semi-steel tires dropped significantly during lockdowns, from 70% to 40%, and have not fully recovered post-lockdown, indicating a long-term impact from both the pandemic and tariff uncertainties [5][6]. 4. **Consumer Behavior and Inventory Management** U.S. consumers are observed to be cautious in their purchasing behavior due to tariff uncertainties, leading to a decline in durable goods orders in April, suggesting a shift from aggressive inventory replenishment to a more measured approach [8][10][19]. 5. **Industrial Product Imports** There has been a notable increase in imports of industrial products, with a year-on-year growth of 53%. However, energy imports did not see a similar increase, indicating a selective approach to inventory management in response to tariff pressures [11][12][13]. 6. **Economic Growth Projections** Economic growth is projected to be moderate, with expectations of a slight decline in GDP growth rates in the coming months. The overall economic data suggests a need for supportive policies to maintain growth [20][32]. 7. **Manufacturing PMI Trends** The manufacturing PMI for May showed a slight increase but remained below the neutral level, indicating ongoing challenges in the manufacturing sector. The impact of tariffs and seasonal factors continues to weigh on production [29][30][32]. 8. **Sector-Specific Performance** The performance of various sectors is mixed, with upstream mining profits declining while midstream equipment manufacturing profits are improving due to export policies. Consumer demand remains weak, affecting overall profitability [25][28][32]. 9. **Future Outlook and Policy Recommendations** The call emphasizes the need for further supportive measures to stabilize the economy and manufacturing sector, particularly in light of ongoing tariff uncertainties and global economic pressures [32][33]. Other Important but Possibly Overlooked Content 1. **Historical Context of Economic Cycles** The discussion includes references to historical economic cycles and the potential for a prolonged downturn, drawing parallels to past economic events [23]. 2. **Consumer Goods and Seasonal Effects** The impact of seasonal factors on consumer goods demand and production is noted, with specific mention of how holidays and weather can influence manufacturing output [30][31]. 3. **Investment Sentiment** There is a cautious sentiment regarding investments in certain sectors, particularly in light of inventory management strategies and the potential for demand weakening in the near term [14][19].

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]

Group 1 - The core viewpoint of the article highlights the positive impact of the "anti-involution" policy on the mining and steel industries, aiming to prevent homogeneous competition and promote high-end and green transformation [1] - Mining ETFs, including the mining ETF (561330) and non-ferrous 60 ETF (159881), have seen an increase of over 2.5% [1] - The "anti-involution" policy is expected to enhance market sentiment and stimulate the long-dormant inventory cycle, leading to potential trading opportunities and improved supply-demand dynamics in the steel industry [1] Group 2 - Steel inventory has shown a continuous reduction, indicating a passive adjustment characteristic [1] - From 2021 to 2024, the steel industry's ROE and ROA are projected to decline to historical lows due to the downturn in the real estate market [1] - The concentration of capacity in the steel industry and the transition to high-quality green products may further optimize the supply-demand structure, aiding in the recovery of profitability [1]

Summary of the Conference Call on the Textile and Apparel Industry Industry Overview - The textile and apparel industry has shown good performance since 2020, with the PETTM valuation currently at the 61st percentile over the past 17 years, indicating it is not absolutely undervalued [1][6] - A-share fund allocation in the textile sector is close to 0.5%, reflecting a decrease primarily due to reduced allocation in the textile manufacturing sector, while companies like HLA, Weigao Medical, and Li Ning have seen slight increases in allocation [1][6] Key Points and Arguments - **Manufacturing and Brand Performance**: - The manufacturing sector has continued its performance from last year, with a slight improvement in Q1 compared to Q4 of the previous year, driven by gross margin recovery and operational leverage [2][4][3] - The brand sector experienced a small recovery in retail, but profit margins declined due to increased expenses [2][4][5] - The outdoor manufacturing sector has shown resilience, particularly among small manufacturers benefiting from improved customer structures and growth in customer acquisition [1][5] - **Investment Strategy**: - The mid-term investment strategy should focus on inventory cycles, with brands currently undergoing a passive destocking phase, which may lead to a rebound if profit growth improves [1][7] - The second half of the year is expected to see a low base effect, making Q3 the most investable period for brands [2][26] - **Consumer Trends**: - Consumers are increasingly focused on quality-price ratios, shifting from brand premium to more cost-effective products [9] - The health trend is driving growth in the outdoor sector, with companies like Anta acquiring brands to deepen their presence in this market [10][11] - **Channel Developments**: - Domestic channel costs are improving, with a decrease in offline rental rates, which benefits discount retail formats like JD Outlet [14] - Online channels are transitioning towards quality improvement after rapid growth, with platforms like Douyin becoming more suitable for niche brands [16][18] Additional Important Insights - **Inventory and Valuation**: - The apparel industry is currently in a gradual destocking phase, with expectations of retail improvement in the second half of the year due to low retail baselines [15] - Historical data suggests that passive destocking phases often lead to significant retail and profit rebounds [7][8] - **Global Market Dynamics**: - The manufacturing sector faces challenges from tariff pressures and demand deterioration, with a cautious outlook on inventory replenishment [21][23] - Vietnam holds a competitive advantage in the current tariff environment, benefiting from established operations [24] - **Potential Investment Targets**: - Recommended companies in the textile manufacturing sector include Hualin and Weixing, which have significant capacity gaps and strong competitiveness [25] - In the brand sector, focus on companies like HLA and Anta, which are expected to see significant performance improvements in Q3 [26][27] - **Long-term Trends**: - The future of the textile and apparel industry is expected to center around the sports manufacturing segment, with leading companies actively expanding capacity and customer bases [27][28]

Group 1 - The report indicates that the domestic retail growth remains stable, supported by favorable policies such as tariff reductions and demand stimulation, with expectations of entering a destocking cycle in Q2-Q3 2025 [3][9] - The textile and apparel industry is expected to transition from a destocking to a stocking cycle, typically lasting 1-3 years, with the current accumulation phase lasting over a year [9][10] - The report highlights that premium manufacturing companies may find low-level investment opportunities, while long-term industry optimization will benefit leading companies [3][11] Group 2 - The report notes that the retail environment for brands is under pressure, with income declining and negative operating leverage affecting performance [28][30] - The manufacturing sector is currently facing challenges, with weak demand and inventory pressures leading to a passive accumulation phase [11][28] - Long-term, the report anticipates a restructuring of the industry, with quality manufacturers expected to gain market share due to competitive advantages [11][12] Group 3 - The report emphasizes the importance of quality-price ratio and health trends in consumer preferences, with domestic brands leveraging online platforms for targeted consumer education and product upgrades [10][12] - The report identifies key investment opportunities in brands that align with new consumption trends, such as Hai Lan Home and Semir Fashion, as well as undervalued stocks in the Hong Kong market [12][12] - The textile manufacturing sector is projected to face short-term challenges but is expected to see a turning point in the second half of the year, with a focus on quality leading companies [12][12]