Investment Rating - The report maintains a "Recommended" rating for the company [1] Core Views - The company achieved record high performance in Q2, with significant revenue growth driven by strong demand for PCB in AI servers and high-speed network infrastructure [4] - The company's PCB business generated revenue of 81.52 billion yuan in H1 2025, a year-on-year increase of 57.2% [4] - The company is actively investing in capacity expansion, including a 4.3 billion yuan project for high-end PCB related to AI chips, expected to start trial production in H2 2026 [4] Financial Performance Summary - In H1 2025, the company reported revenue of 84.94 billion yuan, up 56.59% year-on-year, and a net profit attributable to shareholders of 16.83 billion yuan, up 47.5% year-on-year [4] - Q2 2025 alone saw revenue of 44.56 billion yuan, a 56.91% increase year-on-year, with a net profit of 9.20 billion yuan, reflecting a 47.01% growth [4] - The company's gross margin for PCB declined by 1.49 percentage points due to increased stock incentive costs and losses from the Thailand plant [4] Segment Performance - The enterprise communication board revenue reached 65.32 billion yuan in H1 2025, a 70.63% increase, with AI server and HPC-related PCB products growing by 25.34% [4] - High-speed network switch and related PCB products saw a remarkable growth of 161.46%, becoming the fastest-growing segment, accounting for 53% of the revenue [4] - The automotive board business generated 14.22 billion yuan in H1 2025, a 24.18% increase, with new automotive products growing by approximately 81.86% [4] Future Financial Projections - The company is projected to achieve revenues of 182.08 billion yuan, 235.69 billion yuan, and 293.77 billion yuan for the years 2025, 2026, and 2027, respectively, with growth rates of 36%, 29%, and 25% [4][5] - Net profit attributable to shareholders is expected to reach 37.32 billion yuan, 48.75 billion yuan, and 61.19 billion yuan for the same years, with growth rates of 44%, 31%, and 26% [4][5] - The projected EPS for 2025, 2026, and 2027 is 1.94 yuan, 2.53 yuan, and 3.18 yuan, respectively, corresponding to PE ratios of 29, 22, and 17 times [4][5]

Investment Highlights - In the second week of August, the compulsory insurance for vehicles reached 429,000 units, with a week-on-week increase of 14.4% and a month-on-month increase of 10.5% [2][50] - The performance of segmented automotive sectors this week ranked as follows: SW commercial trucks (+6.2%) > SW passenger cars (+4.9%) > SW auto parts (+4.8%) > SW automobiles (+4.7%) > SW passenger buses (+2.74%) > SW motorcycles and others (+2.71%) [2][12] - The top five stocks covered this week with significant gains include NIO-SW, Songyuan Safety, Top Group, Xpeng Motors-W, and Fuyao Glass [2][12] Team Research Outcomes - The team released mid-term reports for Huayang Group, Songyuan Safety, Xpeng Motors, Leap Motor, Jifeng Co., and BAIC Blue Valley, along with a monthly report for buses in August [3] Core Industry Changes 1. Xpeng Motors reported Q2 revenue of 18.27 billion yuan, a year-on-year increase of 125.3% and a quarter-on-quarter increase of 15.6%. The gross margin was 17.3%, up 3.3 percentage points year-on-year and 1.7 percentage points quarter-on-quarter, with automotive gross margin at 14.3% (compared to 10.5% in Q1), marking eight consecutive quarters of growth [4] 2. The Li Auto i8 is set to be delivered on August 20, with VLA also being launched [4] 3. The launch of the Aito M8 pure electric version is scheduled for August 25 [4] 4. Dongfeng's subsidiary, Lantu Motors, will be listed on the Hong Kong Stock Exchange through an introduction, while Dongfeng Group will simultaneously complete its privatization [4] 5. The Shanghai Stock Exchange's M&A Review Committee is scheduled to review the acquisition of Zhaolubo on August 25, 2025 [4] Current Market Focus - The automotive sector has shown positive performance in both A-shares and H-shares, with various sub-sectors experiencing different degrees of rebound, particularly commercial trucks [5][13] - Key changes this week include the compulsory insurance data meeting expectations, Dongfeng's H-share privatization, Xpeng's Q2 performance aligning with expectations, NIO's new ES8 pricing exceeding expectations, Changan's Q2 performance slightly below expectations, and strong orders for Great Wall's Tank/Haval new vehicles [5][13] Automotive Sector Configuration - The automotive industry is perceived to be at a new crossroads, with the electric vehicle (EV) dividend nearing its end and the smart vehicle sector entering a "dark before dawn" phase. Historical references to the automotive industry's transitions in 2011 and 2018 suggest opportunities for structural market positioning [6][13] - Recommendations for the second half of 2025 include increasing the allocation weight for "dividend style" investments, focusing on buses (Yutong Bus), heavy trucks (China National Heavy Duty Truck A-H/Weichai Power), two-wheelers (Chunfeng Power/Loncin General), and auto parts (Fuyao Glass, Xingyu Co., Xinquan Co., Jifeng Co.) [6][13] - For AI and smart vehicles, preferred stocks include Hong Kong-listed companies (Xpeng Motors-W, Li Auto-W, Xiaomi Group-W) over A-shares (Seres, SAIC Motor, BYD), with a focus on parts suppliers like Horizon Robotics-W, China Automotive Research, Desay SV, Bertley, and Heisima Intelligent [6][13] - In the AI robotics sector, preferred parts suppliers include Top Group, Precision Forging Technology, Fuda Co., Xusheng Group, and Aikodi [6][13]

Core Viewpoint - Multiple Mercedes-Benz dealerships have been closed due to the termination of their authorization by the company, impacting customers' ability to use purchased maintenance packages [3][5][8]. Group 1: Dealership Closures - Several Mercedes-Benz dealerships, including those in Beijing and Zhejiang, have been reported as closed, with the official termination of authorization set for various dates in 2025 [5][6]. - The closures are part of a broader strategy by Mercedes-Benz to reduce its dealership network, with plans to cut over 100 dealerships in China [13]. Group 2: Impact on Customers - Customers who purchased maintenance packages from the closed dealerships will not be able to use these services, which poses a significant inconvenience [8]. - Similar issues are being faced by Audi and BMW customers, indicating a wider trend in the automotive industry regarding dealership closures and service availability [9][12]. Group 3: Financial Performance - Mercedes-Benz reported a decline in both revenue and profit for 2024, with total revenue at €145.59 billion, down 4.5%, and net profit at €10.4 billion, down 28.4% [17]. - In the first half of 2025, the company experienced an 8.6% drop in sales revenue, totaling €66.38 billion, and a 55.8% decrease in net profit [19]. Group 4: Market Challenges - The CEO of Mercedes-Benz highlighted intense competition in the Chinese automotive market, describing it as "Darwinian" with over 100 participating companies, leading to aggressive price reductions that harm all manufacturers [20]. - The sales of electric vehicles remain low, with pure electric vehicles accounting for only 8.4% of total sales, indicating challenges in meeting electrification targets [19].

Group 1 - The 2025 Haibao Group Autumn Auto Show will be held from September 11 to September 14 at the Hainan International Convention Center, featuring a high participation rate of new energy vehicles, indicating a trend towards electrification and intelligence in the automotive industry [1][2] - This year's auto show innovatively combines the auto exhibition with a home appliance exhibition, allowing consumers to purchase both vehicles and various home products in one location [2] - The auto show has prepared a series of consumer benefits, including significant discounts from car dealers and a large rest area with diverse dining options to enhance the visitor experience [2] Group 2 - Established in 2007, the Haibao Group Autumn Auto Show has developed into one of the most influential auto shows in Hainan, with nearly 3 million attendees and over 99,000 vehicles sold, generating a transaction amount of 12.5 billion yuan over 19 years [3]

Group 1 - The Chinese imported automobile market is experiencing a continuous decline, with total imports expected to be only 220,000 units in the first half of 2025, a year-on-year decrease of 32% [1] - Since reaching a peak of 1.43 million imports in 2014, the market has been on a downward trend, with a 12% year-on-year decline in 2024, bringing imports down to 700,000 units [1] - The decline is attributed to the rise of the domestic automotive industry and the wave of electrification [1] Group 2 - Traditional luxury car brands, particularly the German trio (BMW, Mercedes-Benz, Audi), are facing significant challenges, with BMW deliveries down 15.5% to 317,900 units, Mercedes-Benz down 19% to 293,200 units, and Audi down 10.2% to 287,600 units [3] - In contrast, domestic new energy luxury vehicles are rising sharply, with Li Auto delivering 204,000 units and NIO delivering 74,000 units in the same period [3] - In the 300,000-400,000 yuan market, new energy vehicles achieved a market share of 52.5% in July, surpassing traditional fuel vehicles for the first time [3] Group 3 - Despite the challenges, traditional luxury brands still maintain a loyal customer base, with a market share of 58.7% in July, down from 60.2% in March [4] - The slow pace of electrification among traditional luxury brands is evident, with imported new energy passenger vehicles accounting for only 2% of the market in the first half of 2025, an 80% year-on-year decline [4] - Policy changes, such as the adjustment of luxury car tax thresholds, have led to a significant drop in sales for some models, with declines exceeding 20% [4] Group 4 - The future of the Chinese imported automobile market will be characterized by both challenges and opportunities, with the competition between traditional luxury and domestic luxury brands unlikely to end soon [5] - Domestic brands are leading in electrification, making it difficult for traditional ultra-luxury brands to catch up [5] - The market feedback indicates that high-end positioning now relies on technological strength and ecosystem development rather than solely on brand prestige [5]

Core Insights - Valeo has secured three key orders in the Chinese market, focusing on electrification, thermal management, and smart cockpit technologies, which has garnered significant attention in the industry [1][10] Company Overview - Founded in 1923, Valeo is a French automotive parts giant, ranked 13th among global suppliers in 2025, specializing in electrification, automation, and smart solutions, with annual sales exceeding €22 billion, and China contributing 17% of its revenue, making it the largest single market [2] Financial Performance - Valeo has faced challenges in recent years, with a 4.1% year-on-year decline in sales to €10.66 billion in the first half of 2025, and a 26% drop in net profit to €104 million, attributed to weak demand and a €750 million loss from currency fluctuations [3][4] - The company has revised its full-year sales forecast for 2025 from €21.5 billion to €20.5 billion due to market conditions, including declining automotive production and sales, currency weakness, and geopolitical uncertainties [4] Market Environment - The competitive landscape in China has intensified, with local competitors like Huawei and Horizon Robotics impacting Valeo's market share, leading to an 8% decline in sales to local OEMs in 2024, which is significantly lower than the growth rate of the Chinese new energy vehicle market [4][5] Technological Innovations - Valeo's recent projects include an external active grille shutter set to launch in July 2026, featuring a new 4Nm torque motor platform that enhances vehicle performance by optimizing airflow based on various parameters [6][10] - The "five-in-one integrated power electronic module" is another notable project, which integrates multiple technologies to achieve approximately 20% weight reduction, supporting the development of next-generation electric drive systems [6][7] Localization Strategy - The panoramic head-up display (P-HUD) system, developed in collaboration with a leading Chinese automaker, transforms the windshield into a virtual interactive screen, showcasing Valeo's ability to rapidly execute projects in the Chinese market [8][9] - Valeo's local R&D center in Jingzhou and its factory in Foshan play crucial roles in its supply chain, enabling efficient product development and collaboration with upstream partners, thus enhancing its competitive position in the fast-evolving automotive landscape [9][10]

Core Viewpoint - Valeo has secured three key orders in the Chinese market, focusing on electrification, thermal management, and intelligent cockpit solutions, which has garnered significant attention in the industry [1][4]. Company Overview - Founded in 1923, Valeo is a French automotive parts giant ranked 13th among global suppliers in 2025, specializing in electrification, automation, and intelligent solutions, with annual sales exceeding €22 billion, of which 17% comes from the Chinese market, making it the largest single market for the company [4]. - The company is currently facing challenges, including a 4.1% year-on-year decline in sales to €10.66 billion in the first half of 2025 and a 26% drop in net profit to €104 million, attributed to a weak dollar and reduced customer demand [4][5]. Market Environment - The automotive market is experiencing a downturn in production and sales, compounded by weak foreign exchange rates and geopolitical uncertainties, which have negatively impacted Valeo's revenue [5]. - In China, local competitors like Huawei and Huayu Vision are significantly squeezing Valeo's market share, with a reported 8% decline in sales to OEMs in the region [5]. Technological Breakthroughs - Valeo's recent projects include an external active grille shutter, which will be mass-produced by July 2026, featuring a new 4Nm high-torque motor platform that enhances vehicle performance and range by automatically adjusting the grille based on various parameters [7][9]. - The "five-in-one deep integration power electronic module" is another noteworthy project, which integrates multiple technologies to achieve approximately 20% weight reduction, supporting the development of next-generation electric drive systems [9][11]. - The panoramic head-up display (P-HUD) system, developed in collaboration with a leading Chinese automaker, transforms the windshield into a virtual interactive screen, enhancing driver safety by reducing the need for visual distraction [11][12]. Localization Strategy - Valeo's successful project execution is attributed to its early establishment in China and strong partnerships with upstream suppliers, enabling rapid commercialization of new technologies [12][14]. - The collaboration between Valeo's R&D center in Jingzhou and its factory in Foshan is crucial for optimizing product development tailored to the Chinese market, forming a robust supply chain network [12][14]. Industry Implications - The advancements made by Valeo reflect a significant shift in the role of component suppliers in the automotive industry, driven by the rapid iteration of local automakers and the need for suppliers to innovate quickly [14]. - Valeo's technological breakthroughs not only mark milestones for the company but also represent a slice of the broader transformation within the automotive industry as electrification and intelligent competition intensify [14].

Core Insights - South Africa's automotive industry is facing severe challenges, including declining sales, high import rates, and insufficient localization, leading to the closure of 12 companies and the loss of over 4,000 jobs in the past two years [2][4][6] - Despite these challenges, companies like Toyota, Stellantis, Chery, and BYD are increasing their investments in South Africa, driven by local policies promoting electrification and localization [3][10] Industry Challenges - South Africa's automotive market, once a leader in Africa, is now struggling with a 3% year-on-year decline in sales, projected at approximately 516,000 units for 2024 [6] - The import vehicle ratio is alarmingly high at 64%, while the localization rate remains stagnant at around 39%, significantly below the target of 60% [6][9] - The automotive production target of 1.4 million units by 2035 is far from the estimated production of 630,000 units in 2024, with over 60% of production aimed at export markets [6][10] Impact of External Factors - The recent U.S. tariffs on South African automotive exports, amounting to 28.7 billion South African Rand (approximately 11.7 billion RMB), are expected to exacerbate the industry's difficulties [6][9] - The automotive sector directly employs 115,000 people, with an additional 80,000 in parts manufacturing, facing risks of job losses due to the tariffs [7][9] Government Initiatives - The South African government is expanding local manufacturing incentives, particularly for electric vehicles and related components, to address industry challenges [10] - A tax reduction policy of 150% for investments in electric and hydrogen vehicles is set to take effect from March 2026, alongside a 1 billion South African Rand fund to support local electric vehicle and battery production [10][11] Market Developments - Chinese automakers such as BAIC, Chery, Great Wall, BYD, and others are competing with multinational giants like Toyota and Volkswagen in South Africa [11][13] - Chery has introduced hybrid models in South Africa, while BYD plans to establish a significant presence with multiple electric vehicle models by 2025 [11][13] - Stellantis is also pursuing local production, with plans to manufacture electric vehicles in South Africa, starting with the Landtrek pickup [13]

Core Viewpoint - The automotive industry is entering a new crossroads phase, with the end of the electric vehicle (EV) dividend and the dawn of intelligent vehicle technology. The company suggests increasing the allocation weight of "dividend style" investments in the second half of 2025 [6][9]. Group 1: Weekly Review - In the first week of August, the compulsory insurance for vehicles reached 375,000 units, showing a week-on-week decrease of 18.8% but a month-on-month increase of 3.6% [12]. - The performance of sub-sectors this week ranked as follows: SW motorcycles and others (+6.9%) > SW auto parts (+3.5%) > SW automobiles (+3.1%) > SW passenger vehicles (+2.1%) > SW commercial cargo vehicles (+1.8%) > SW commercial passenger vehicles (+0.2%) [12]. - The top five stocks covered this week with the highest gains were Yinlun Co., Chuanfeng Power, Junsheng Electronics, Jingwei Hengrun-W, and Naisite [12]. Group 2: Industry Changes - The collaboration between Xiaopeng Motors and Volkswagen has been upgraded, with a joint development of an electronic and electrical architecture that will be integrated into Volkswagen's pure electric vehicle platform in China, as well as its fuel and plug-in hybrid platforms [5]. - Geely Automobile reported a revenue of 77.7 billion yuan for Q2 2025, with a year-on-year increase of 28.4% and a quarter-on-quarter increase of 7.3%. However, the net profit attributable to shareholders was 3.62 billion yuan, down 60.0% year-on-year and 36.2% quarter-on-quarter [5]. - BAIC Blue Valley's Q2 revenue was 5.744 billion yuan, with a year-on-year increase of 156.8% and a quarter-on-quarter increase of 52.2%. The net profit attributable to shareholders was -1.355 billion yuan [5]. - A strategic partnership was established between Obsidian Light and Horizon Robotics, as well as with Digua Robotics, to promote the intelligence of robots [5]. - Junsheng Electronics has formed a strategic partnership with leading intelligent driving algorithm company Momenta [5]. Group 3: Market Focus - The automotive sector performed well this week, with A-shares showing better performance compared to Hong Kong stocks. The motorcycle sub-sector continued to lead in performance [8]. - The core changes this week included the general performance of domestic demand being average, the upgrade of the Xiaopeng and Volkswagen collaboration, the strategic partnership between Junsheng Electronics and Momenta, and the Q2 performance of Geely and BAIC Blue Valley meeting expectations [8][13]. Group 4: Investment Recommendations - The company recommends increasing the allocation weight of "dividend style" investments in the automotive sector for the second half of 2025 [6][9]. - The main lines for investment include: - **Dividend & Good Pattern**: Buses (Yutong Bus), Heavy Trucks (China National Heavy Duty Truck A-H / Weichai Power), Two-wheelers (Chuanfeng Power / Longxin General), and Auto Parts (Fuyao Glass + Xingyu Co. + Xinquan Co. + Jifeng Co.) [9]. - **AI Intelligentization Main Line**: Preferred stocks in Hong Kong (Xiaopeng Motors-W / Li Auto-W / Xiaomi Group-W) > A-shares (Seres / SAIC Group / BYD); preferred auto parts (Horizon Robotics-W / China Automotive Research / Desay SV / Bertley / Hezhima Intelligent) [9]. - **AI Robotics Main Line**: Preferred auto parts (Top Group + Precision Forging Technology + Fuda Co. + Xusheng Group + Aikedi) [9].

Core Viewpoint - The Italian automotive industry, renowned for its luxury and sports car brands, is facing significant challenges due to the need for transformation towards electric and smart technologies, while maintaining its heritage of high-quality craftsmanship and design [10][11][12]. Industry Overview - Italy is home to a plethora of world-famous automotive brands such as Ferrari, Lamborghini, Maserati, and Alfa Romeo, making it a leading country in luxury and sports car production [3][5]. - The Italian automotive industry has a rich history, dating back to the establishment of Fiat in 1899, which marked the beginning of automotive manufacturing in Italy [7][8]. Market Performance - Recent data indicates a decline in new car sales in Italy, with 11.8493 million units sold in July 2025, a year-on-year decrease of 5.1%, and a total of 97.3396 million units sold from January to July 2025, down 3.8% [10]. - Stellantis, a multinational automotive group including Fiat Chrysler and Alfa Romeo, reported a nearly 27% year-on-year decline in automotive production in Italy during the first half of the year [10]. Technological Transformation - The industry is under pressure to adapt to stricter European emissions regulations, with electric and smart technologies becoming essential for future competitiveness [10][11]. - High-end brands like Ferrari and Maserati are exploring hybrid and electric models to maintain performance while transitioning to electric technologies [10]. Challenges in Transition - The shift to electric vehicles presents challenges, particularly in balancing driving experience and range, which are critical for sports car enthusiasts [10]. - Limitations in battery technology and inadequate charging infrastructure pose additional hurdles for the adoption of electric vehicles [10]. Educational Initiatives - Italian universities are collaborating to establish electric vehicle engineering programs to cultivate talent in the automotive sector, highlighting the importance of skilled professionals in the industry's transformation [11]. Competitive Strategy - The success of the Italian automotive industry is attributed to its focus on niche markets, innovation, quality control, and a strong emphasis on craftsmanship [11][12].