Summary of Key Points Overall Economic Insights - Manufacturing PMI has significantly declined, with production and new orders indices both showing downward trends, indicating a weakening demand in the manufacturing sector [7] - Non-manufacturing PMI remains in the expansion zone, with service sector performance being relatively stable despite a drag from the construction industry [7] Strategy and Performance Verification - The performance verification for Q1 2025 shows a recovery in net profit for the A-share market, with a year-on-year growth of 6.3%, contrasting with a significant decline in Q4 2024 [8] - The supply-demand dynamics in the manufacturing sector remain weak, with fixed asset turnover rates declining, which negatively impacts profitability [9] - The export chain is under pressure, with the performance of companies involved in overseas operations outperforming those reliant on exports [10] Industry-Specific Insights Financial Sector - Banks are expected to maintain stable performance with better-than-expected interest margins, focusing on high-dividend stocks [18] - Non-bank financial institutions are showing strong performance on the liability side, with profit differentiation influenced by fair value changes [19] - The real estate sector is under pressure but is expected to stabilize due to government policies aimed at boosting demand and maintaining property prices [20] Materials Sector - Oil prices are expected to enter a second bottoming process, with OPEC likely to increase production in June [23] - The chemical sector is showing signs of recovery, with Q1 2025 performance indicating a bottoming out of profitability [27] - The non-ferrous metals sector is experiencing price support from inventory reductions, particularly in copper and aluminum [29] Consumer Goods - The agricultural sector is facing challenges due to rising feed costs and potential supply constraints from the U.S. due to tariffs [35] - The food and beverage industry is focusing on health-oriented products and targeting younger demographics, indicating a shift in consumer preferences [35] - The pharmaceutical sector is emphasizing domestic production of key drugs and medical devices, highlighting a trend towards self-sufficiency [35] Manufacturing Sector - The machinery and equipment sector is expected to benefit from infrastructure investments and a focus on self-sufficiency [10] - The defense industry is seeing a positive impact from geopolitical tensions, leading to increased investment [10] - The home appliance sector is experiencing growth in exports and domestic sales, driven by consumer incentives [10] Policy and Market Trends - The government is focusing on expanding domestic demand through new consumption policies, particularly in the food and beverage sector [3] - The construction and decoration sectors are expected to benefit from increased infrastructure investment, with a focus on high-elasticity sectors [22] - The overall market sentiment is cautious, with expectations of a volatile market in the second quarter of 2025 due to potential economic pressures [11]

Core Viewpoint - The 137th Canton Fair showcased China's economic resilience and the confidence of Chinese enterprises amidst global trade disruptions caused by U.S. tariffs, with an intended export transaction volume of $25.44 billion [1]. Group 1: Company Insights - Li Hongmei, chairman of Mingyihu Group, highlighted the production and sales of 600 million mobile phone films annually, indicating a significant market presence [3]. - The mobile phone films produced cover hundreds of models, with production lines in Hunan adapting to market dynamics [5]. - Li's company has become a "national specialized and innovative small giant," supplying products to major Chinese smartphone brands like Huawei, Xiaomi, OPPO, and VIVO [5]. Group 2: Market Performance - Li's tempered glass film products hold a 30% share of the global market, with annual sales in the U.S. maintaining around 50 million units, peaking at 100 million units [7][18]. - The company completed transactions worth 12.65 million yuan during the Canton Fair, with new customer orders from five Central Asian countries on the way [18]. Group 3: Industry Challenges and Responses - Li expressed concerns about the impact of tariffs on employment and the manufacturing sector, emphasizing the need for innovation and resilience in the face of challenges [12][20]. - The South China Sea Port has been optimizing logistics and trade structures to mitigate the cost pressures from tariffs, with a reported 18% year-on-year increase in cargo volume expected in 2024 [30][36]. Group 4: Historical Context and Current Strategies - The historical context of customs and tariffs in China, particularly post-Opium War, serves as a reminder of the importance of trade sovereignty [25][28]. - The South China Sea Port's diverse logistics network aims to reduce reliance on single markets and enhance efficiency, which is crucial for navigating tariff impacts [41][45].

Core Viewpoint - The 137th Canton Fair showcased China's economic resilience and confidence amidst global trade disruptions caused by U.S. tariffs, with an intended export transaction volume of $25.44 billion [1] Group 1: Export Performance - The Canton Fair achieved an intended export transaction volume of $25.44 billion, reflecting the vitality of the Chinese economy [1] - A company led by Li Hongmei has established itself as a "little giant" in the specialized manufacturing sector, producing mobile phone protective films for major brands like Huawei, Xiaomi, OPPO, and VIVO [5][6] - Li's company has captured 30% of the global market share for tempered glass screen protectors, with annual sales in the U.S. market maintaining around 50 million units [6][13] Group 2: Innovation and Market Adaptation - The production of a mobile phone film involves at least 21 processes, indicating a complex supply chain that spans multiple industries [6] - Li emphasized the importance of innovation and internal capabilities as the foundation for confidence in facing market challenges [13] - The company completed transactions worth 12.65 million RMB during the fair, indicating strong demand despite tariff concerns [13] Group 3: Historical Context and Trade Dynamics - The Guangdong Customs Museum highlights the historical context of China's trade and customs evolution, reflecting on past challenges such as the "concessional tariff" system imposed by foreign powers [15] - The museum serves as a reminder of the importance of trade sovereignty, which is crucial for navigating current tariff challenges [15][16] - The Nansha Port has strategically positioned itself to mitigate the impact of tariffs through efficient logistics and diversified trade routes, with a reported 18% increase in import and export cargo volume in 2024 [19] Group 4: Cross-Border E-commerce - Nansha Port has developed a "one-stop" regulatory service model for cross-border e-commerce, leading the nation in e-commerce bonded warehousing for five consecutive years [20] - The port's diversified logistics network is expected to buffer the impact of U.S. policy changes on cross-border e-commerce, particularly the cancellation of the $800 tax exemption [20]

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 16.47 [7] Core Views - The company reported a revenue of RMB 16.82 billion for 2024, representing a year-on-year increase of 14.84%, and a net profit attributable to shareholders of RMB 1.05 billion, up 7.75% year-on-year. For Q1 2025, total revenue grew by 10.36% year-on-year, while net profit surged by 43.02% year-on-year [1][2] - The company is a leader in small appliance exports, benefiting from strong demand in Q1 2025, although it may face challenges in Q2 due to increased tariffs from the US [1][3] - The company has initiated a share buyback and declared a dividend of RMB 0.45 per share, enhancing shareholder returns [1] Summary by Sections Domestic Sales - The company's domestic sales faced significant pressure in 2024, with a revenue decline of 4.5% year-on-year, and continued to decline by 4.9% year-on-year in Q1 2025. The main brands, Mofei and Dongling, are less sensitive to the new subsidy policies, leading to a slower recovery compared to the industry [2] Export Business - The export revenue growth for the company was strong in 2024 and Q1 2025, with year-on-year increases of 29.7%, 25.1%, 20.3%, and 14.1% for each quarter of 2024. However, the growth rate is expected to be pressured in Q2 2025 due to rising tariffs imposed by the US [3][5] Profitability and Costs - The company's gross margin for 2024 was 20.91%, a decrease of 1.82 percentage points year-on-year, primarily due to the higher proportion of low-margin exports. In Q1 2025, the gross margin improved to 22.42%, an increase of 0.5 percentage points year-on-year. The company also optimized its expense ratios, with a decrease in the period expense ratio by 1.08 percentage points in 2024 [4] Earnings Forecast - The earnings per share (EPS) forecast for 2025-2027 is adjusted to RMB 1.43, 1.57, and 1.75, reflecting a downward revision of 5% and 7% for 2025 and 2026, respectively. The target price is adjusted to RMB 16.47, corresponding to a 2025 price-to-earnings (PE) ratio of 11.5x [5][10]