Core Viewpoint - China Lesso (02128.HK) reported a resilient performance in the first half of 2025, with a revenue of RMB 12.475 billion and a net profit of RMB 1.046 billion, reflecting effective cost control and operational improvements [1][2][3] Financial Performance - The overall revenue for the first half of 2025 was RMB 12.475 billion, with a gross profit of RMB 3.514 billion, resulting in a gross margin of 28.2% [1] - The profit before tax was RMB 2.467 billion, maintaining a net profit margin of 7.5% [1] - The net profit attributable to shareholders was RMB 1.046 billion, a slight increase of 0.27% year-on-year, with basic earnings per share at RMB 0.34 [1] Operational Highlights - The second quarter of 2025 saw significant improvements in sales and operations, particularly in May and June, attributed to flexible strategies and favorable policy impacts [1][2] - The number of independent exclusive distributors increased to 3,061 by June 30, 2025, compared to 2,891 in the first half of 2024 [1] - The South China market remained the primary revenue source, accounting for 46.3% of total revenue, up from 44.7% in the first half of 2024 [1] Strategic Focus - The company emphasized its resilience and flexibility in operations, focusing on core pipeline industries, enhancing product quality, and actively expanding market presence [2]

Core Insights - The resilience of Chinese enterprises continues in Q2 2025 despite external pressures from increased tariffs and a cautious domestic economic environment [1][2][3] Group 1: Current Business Conditions - The business condition diffusion index for Q2 2025 is 64, a slight decrease from 66 in the previous quarter, indicating overall resilience in enterprise operations [3][4] - Enterprises show stability with limited fluctuations, maintaining a high level of operational performance despite a slight decline compared to the same period last year (65) [5] - Key industries supporting this stability include coal mining, black metal mining, and water supply, with resource-based industries showing robust performance due to stable demand and pricing [5] - Regional disparities are evident, with provinces like Sichuan, Jilin, and Hunan showing notable resilience, attributed to stable energy and resource sectors as well as infrastructure investments [5] Group 2: Future Expectations - The expected business condition diffusion index rises to 50, up from 49, indicating a cautious optimism among enterprises regarding future operations [6][7] - There remains a significant gap between current operational stability (64) and future expectations, reflecting a slow recovery in confidence [7] - A majority of enterprises express concerns over insufficient domestic and international demand (74.41%) and intense competition (65.99%), which dampen optimism [8] Group 3: Investment Sentiment - The investment timing diffusion index falls to 49, down from 51, indicating a retreat in investment sentiment among enterprises [9] - Only 4% of enterprises view the current investment environment as favorable, a decrease from 9% in the previous quarter, with 89% considering it "average" [9] - Actual investment actions are contracting, with only 10% of enterprises engaging in fixed asset investments, down from 11% [9] Group 4: Supplementary Observations - Production and inventory show cautious recovery, with a production diffusion index of 46 and a finished goods inventory index of 45, indicating slight increases in production and inventory replenishment [10] - Cost pressures are easing, with the cost diffusion index dropping to 59 and price index to 47, reflecting a stabilization in commodity prices and reduced energy and transportation costs [10] - Financing remains cautious, with a high willingness from banks to lend (100), but only 2.8% of enterprises securing new loans, indicating a defensive stance in corporate financing [10] Group 5: Summary and Outlook - The overall sentiment among Chinese enterprises in Q2 2025 is characterized by a defensive and watchful approach, with the BSI index at 54, indicating slight declines in business conditions and cautious optimism for the future [11][12] - Future developments hinge on three key factors: the impact of tariff negotiations, the rollout of major infrastructure projects, and the resonance of domestic demand recovery with policy stimuli [12][13]

Core Viewpoint - Chinese enterprises are expected to transition from a defensive stance to a tentative offensive approach if external tariff policies, internal mega projects, and consumer stimulus converge [1][20] Group 1: Current Economic Environment - In the second quarter of 2025, the resilience of Chinese enterprises continues, with the operating conditions diffusion index at 64, slightly down from 66 in the previous quarter, indicating overall stability [4][5] - Domestic economic recovery post-Spring Festival has been slower than expected, with the real estate market's adjustment affecting confidence across sectors [2] - The Longjiang Business School's Industry Economic Prosperity Index (BSI) indicates a cautious sentiment among enterprises, characterized by stable yet slightly declining operating conditions [2][4] Group 2: Business Sentiment and Expectations - The expected operating conditions diffusion index rose to 50, indicating a cautious optimism among enterprises regarding future performance [8] - A significant portion of enterprises (74.41%) express concerns over insufficient domestic and international market demand, while 65.99% cite intense competition as a major pressure [9] - Enterprises focused on domestic demand remain relatively optimistic due to supportive policies in infrastructure, green energy, and digital economy [9][10] Group 3: Investment Climate - The investment timing diffusion index fell to 49, reflecting a cautious outlook on the current investment environment [11] - Only 4% of enterprises view the current investment climate as favorable, down from 9% in the previous quarter, indicating a retreat in investment activity [11] - The proportion of enterprises engaging in fixed asset investment decreased to 10%, highlighting a more conservative approach to capital expenditure [11] Group 4: Production and Cost Dynamics - Production volume diffusion index stands at 46, indicating slight production increases, while finished goods inventory diffusion index is at 45, suggesting marginal replenishment [14] - Cost pressures have eased, with the cost diffusion index dropping to 59, and price diffusion index at 47, reflecting a stabilization in commodity prices [14] - Financial institutions maintain a high willingness to lend, but the proportion of enterprises receiving new loans remains low at 2.8% [14] Group 5: Future Outlook - Three key factors will influence whether Chinese enterprises can shift from a defensive to a tentative expansion strategy: tariff negotiations, the implementation of mega projects, and the recovery of domestic demand [19][20] - The commencement of significant infrastructure projects, such as the Yarlung Tsangpo River hydropower station, is expected to provide long-term orders for related industries [19] - Government initiatives aimed at stimulating consumer spending are anticipated to enhance consumer confidence and translate into real consumption growth [19][20]