Investment Rating - The report maintains a "Positive" investment rating for the industry [8] Core Insights - Recent guidance from the Ministry of Finance emphasizes the need for local governments to fulfill payment obligations for existing PPP projects, which is expected to improve cash flow for waste incineration and water services [4][14] - As of August 22, 2025, 95% of the 2 trillion yuan quota for replacing hidden debts has been implemented, accelerating the issuance of local government special bonds [5][19] - The National Development and Reform Commission has reiterated the importance of adjusting public utility prices, with water and waste disposal fees being gradually increased across various regions [30][29] Summary by Sections Government Payment Implementation - The recent guidance on existing PPP projects highlights the necessity for local governments to include related expenses in their budget management and ensure timely payments [4][14] - The funding sources for these projects can include local government special bonds, central transfer payments, and local self-owned funds, which may strengthen the repayment guarantees for future PPP projects [15][14] Debt Replacement and Special Bonds - The issuance of special refinancing bonds has significantly accelerated, with 1.91 trillion yuan issued from January to August 2025, primarily aimed at replacing hidden debts [5][19] - Local governments are actively addressing existing hidden debt issues, which is expected to enhance liquidity for affected parties [19][22] Public Utility Price Adjustments - The report notes that many regions have been slow to adjust water and waste disposal fees, leading to financial losses for water supply companies [30][29] - Recent adjustments in water prices have been observed in cities like Guangzhou and Shenzhen, with average increases of 15.8% for residential water rates [30][34] Investment Logic - The combination of government payment implementation, debt replacement, and price adjustments is expected to positively impact cash flow in the waste incineration and water sectors [36][38] - The industry is experiencing stable growth, with improved cash flow and increased dividends, driven by market reforms and a shift towards direct sales to industrial and commercial clients [38][39]

Group 1: Public Utilities Price Reform - The core policy breakthrough is the implementation of the "Price Law Amendment Draft," which aims to eliminate the "loss-subsidy" cycle, leading to market-oriented pricing for gas and electricity, with significant adjustments expected by 2025 [1] - Beneficial pathways include residential gas price increases and expanded industrial demand for gas [2] - For electricity, compensation for coal power capacity and premium pricing for green energy are anticipated [3] Group 2: Semiconductor/Chip Industry - The chip design sector is experiencing a triple resonance of policy, demand, and supply [4] - Cambricon's core logic involves addressing safety concerns leading to a surge in domestic GPU orders, alongside advancements in process capacity and packaging solutions [4] - Chipone's collaboration with ByteDance on ASIC projects highlights the uniqueness of domestic ASIC customization, with a market value of hundreds of billions seen as just the starting point for order fulfillment and valuation shifts [4] Group 3: Servers and Networking - China Mobile's procurement validates the industry's prosperity [5] - ZTE has secured the largest share of China Mobile's procurement for 264,500 PC servers and 7,000 AI inference servers, dominating 70% of high-performance card packages, driven by the expansion of AI infrastructure and increased domestic production [5] - The Scale Up switching network is set to reach a significant milestone in 2026, with the domestic switching chip and switch market projected to be worth 21.4 billion and 66.9 billion respectively by 2028, indicating a clear market structure and simultaneous price and volume growth [5] Group 4: New Consumption - Pop Mart has raised its full-year revenue guidance to 30 billion, significantly up from the initial 20 billion, driven by confidence in overseas channel expansion, particularly in North America, and synchronized supply chain capacity growth [6] - Laopuhuang's luxury product strategy has resulted in a net profit of 2.35 billion in H1, a 291% increase, with price increase expectations materializing, supported by a 77% overlap with luxury consumer demographics and high store efficiency [7] Group 5: Chemical Industry - The Ministry of Industry and Information Technology's assessment of outdated production facilities over 20 years old is expected to accelerate the elimination of backward capacity, optimizing the competitive landscape [8] - Companies with advanced integrated facilities and significant cost advantages, as well as engineering service providers capable of upgrades, are likely to see a revaluation of their worth [9]