Core Viewpoint - The new energy sector is currently in a low-efficiency state of repeated games, with expectations for either continued growth or a cyclical reversal. However, there are signs of positive changes in various dimensions such as prices, performance, policies, and industrial ecology, indicating potential shifts in market dynamics [1] Solar Energy - Demand has been front-loaded, and the effectiveness of supply-side reforms needs to be monitored. The industry requires significant demand growth to drive market expansion, but limited absorption capacity and mismatches between overseas demand and Chinese production capacity complicate recovery. Policy support is essential for the solar industry to return to a positive trajectory [1][2] - The report suggests that achieving a 30-40% clearance of existing capacity is necessary, but multiple factors could hinder this, including increased costs and potential demand issues leading to a situation where prices rise but transactions remain low [2] Energy Storage - The demand for energy storage remains robust, with a focus on changes in market dynamics. Investors are increasingly cautious about low-priced products, emphasizing the need for comprehensive system integration solutions. The competitive landscape is expected to improve, with reasonable gross margins projected to settle between 20-25% [3] - The distributed energy storage market is undergoing significant changes, with new entrants emerging while established companies struggle to adapt to new market conditions. The competitive environment is likely to see further reshuffling as companies navigate these challenges [4] Lithium Battery - The industry faces challenges in pricing and demand, with key segments like iron lithium and negative electrodes not achieving expected price increases. The actual supply-demand dynamics have not met market expectations, leading to low utilization rates of around 60-65% across the lithium battery supply chain [5][6] - Battery manufacturers are increasingly focused on controlling upstream supply chains and forming strategic partnerships, which may delay the cyclical recovery of material costs. The competitive landscape is expected to evolve, with a need for continuous cost reduction and technological advancement among material suppliers [6]

Core Viewpoint - The article discusses the performance of the Chinese stock market in July, highlighting that A-shares outperformed Hong Kong stocks due to various factors, including government policies and market dynamics [4][5]. Group 1: Market Performance - In July, major Chinese stock indices such as the Wind All A, CSI 300, and Hang Seng Index saw increases of +4.75%, +3.54%, and +2.91% respectively, indicating a stronger performance of A-shares compared to Hong Kong stocks [4]. - The article notes that small-cap stocks in A-shares showed stronger performance than large-cap stocks during this period [4]. Group 2: Factors Influencing A-share Performance - The central government's "anti-involution" supply-side reform measures announced on July 1 are believed to have positively impacted investor sentiment, particularly in cyclical industries that are expected to recover [5]. - The high market activity and significant gains in individual stocks have improved risk appetite among investors, leading to increased market participation [5]. Group 3: Bull Market Dynamics - The article explores how bull markets form, emphasizing that economic improvement is not a prerequisite for a bull market; rather, market valuations and investor sentiment play crucial roles [8][14]. - Historical data shows that the Producer Price Index (PPI) can reflect macroeconomic conditions, and past bull markets have occurred even during periods of negative PPI growth [9]. Group 4: Investor Behavior in Bull Markets - The article identifies common reasons why many investors fail to profit during bull markets, including selling stocks during market lows out of fear and missing out on subsequent gains [15][16]. - It highlights the psychological barriers and decision-making challenges investors face, such as fear of missing out and the difficulty in identifying the right stocks to buy [17][18]. Group 5: Current Market Strategy - The article suggests that the current market may be characterized as a structural bull market, with potential for cyclical recovery in certain sectors due to government policies [21]. - It advises investors to avoid perfectionism in their investment strategies and to focus on achieving reasonable returns rather than waiting for the perfect entry point [22].

Group 1 - The core viewpoint is that the raw milk price continues to decline, and the industry is expected to enter a supply-demand balance in the second half of 2025, benefiting the leading company in the livestock industry due to its cost advantages and potential for performance elasticity [1][2] - The company is projected to have revenues of 13.35 billion, 14.60 billion, and 16.35 billion yuan for the years 2025-2027, with year-on-year growth rates of 0.7%, 9.4%, and 12.0% respectively, and a net profit of -580 million, 438 million, and 1.58 billion yuan [1] - The company holds a 7% market share in the livestock industry in 2024, with a significant portion of raw milk sourced from its own production, which is over 90% [2] Group 2 - The company has implemented a cost-leading strategy across its entire supply chain, which includes grass planting, feed processing, and dairy farming, aiming to reduce procurement costs through economies of scale [3] - The company has seen a 13.6% increase in sales volume to 2.89 million tons in 2024, with a projected 10% increase in sales volume for the first half of 2025 due to structural optimization of the cattle herd [2] - The company has successfully reduced the cost of milk sales by nearly 9% year-on-year in the first half of 2025, alongside a continuous decline in financing costs due to debt structure optimization [3]

Investment Rating - The report assigns a "Buy" rating to the company, Modern Dairy, with a target price of HKD 1.59 per share, corresponding to a 1.09 times P/B ratio for 2025 [7][11][17]. Core Insights - The company is positioned as a leader in the dairy industry, benefiting from a cyclical recovery and demonstrating strong earnings elasticity. The report anticipates a rebound in raw milk prices and a return to supply-demand balance in the second half of 2025 [3][11][53]. - The company has implemented a cost leadership strategy across its entire supply chain, which includes feed production, dairy farming, and processing, aiming to reduce procurement costs and enhance operational efficiency [11][20][45]. Financial Summary - Total revenue projections for 2025-2027 are estimated at RMB 133.50 billion, RMB 145.99 billion, and RMB 163.47 billion, reflecting growth rates of 0.7%, 9.4%, and 12.0% respectively. The net profit for the same period is expected to be -RMB 5.80 billion, RMB 4.38 billion, and RMB 15.84 billion, with EPS of -0.07, 0.06, and 0.20 yuan per share [5][16][19]. - The gross margin is projected to improve from 26.0% in 2024 to 33.6% by 2027, driven by cost reductions and increased milk prices [5][19]. Industry Position - Modern Dairy holds a 7% market share in the dairy industry as of 2024, with a significant portion of its raw milk sales being secured by its major shareholder, Mengniu Dairy, which has consistently purchased over 90% of the company's raw milk [11][32][20]. - The company has expanded its operations through acquisitions and innovative leasing models, allowing for low-cost expansion and increased production capacity [20][32]. Operational Efficiency - The company has focused on optimizing its herd structure, increasing the proportion of productive cows, and enhancing milk yield through digital management systems. The average milk yield per cow is expected to exceed 13 tons in the first half of 2025 [60][11]. - Cost control measures have led to a significant reduction in feed costs, with the cost per kilogram of milk dropping by 16.7% year-on-year to RMB 1.95 in 2024 [45][46].

Core Viewpoint - The current anti-involution logic differs from supply-side reforms, focusing more on cost investigation and price monitoring to address low-price disorderly competition among enterprises. The anti-involution trend will evolve from "expected anti-involution" to "substantive anti-involution," with specific industries like agricultural chemicals and wind power equipment exemplifying this shift [1] Group 1: Wind Power Equipment Industry - The proportion of companies with negative operating cash flow (TTM) is decreasing, indicating that the industry is nearing a clearing phase, with a trend of increasing capital expenditure (CAPEX) expected from Q1 2025 [2] - The industry has seen a decline in CAPEX (TTM) growth rate, with a high proportion of companies experiencing a decrease in gross margin (TTM), suggesting a deepening clearing phase. However, profitability is improving, with a decrease in the proportion of companies with declining gross margins [2] - Revenue (TTM) has maintained positive year-on-year growth since Q1 2025, alongside inventory reduction [3] Group 2: Agricultural Chemicals Industry - The previous cycle peak in 2021 was characterized by proactive inventory accumulation in the agricultural chemicals market, leading to high prices and increased revenues for pesticide companies [4] - From the second half of 2022 to 2023, the industry faced continuous inventory accumulation, with a supply-demand turning point occurring post-H2 2022, leading to a phase of inventory clearance from 2023 to Q3 2024 [4] - The cyclical reversal logic reflected in financial reports operates on a quarterly basis, distinct from the phase of merely speculating on expectations in the anti-involution context. The industry’s quadrant analysis is complex but fundamentally revolves around traditional indicators like CAPEX, gross margin, and inventory [4]

Summary of Key Points from the Conference Call Industry Overview - The mechanical industry is experiencing a cyclical recovery, benefiting from the release of real estate risks and export growth, with engineering machinery expected to see both replacement and new demand driven by major projects like the Yarlung Tsangpo River downstream hydropower project [1][4] - Emerging industries led by technology, such as photovoltaics and lithium batteries, are promising, with upstream equipment benefiting from increased capital expenditure due to improved profits and cash flow [1][4] - Chinese leading companies are benefiting from the trade war, with export-related companies showing a growth rate exceeding 14% [1][6] Core Insights 1. **Cyclical Recovery**: The engineering machinery sector is expected to transition from export demand to replacement and then to new demand, aided by a significant decline in the real estate market that has released substantial risks [4][6] 2. **Emerging Growth**: New industries driven by technology, particularly in photovoltaics and lithium batteries, are anticipated to thrive, with both upstream and downstream sectors benefiting from improved financial conditions [4][6] 3. **Export Breakthrough**: Despite international market concerns about overcapacity, leading Chinese companies have made significant progress in the trade war, achieving a growth rate of over 14% in export-related sectors [6] 4. **Military Trade Boom**: The military industry is poised for growth due to changes in valuation systems and increasing geopolitical tensions, enhancing the international competitiveness of Chinese military enterprises [1][6] Additional Important Insights - The anti-involution policy aims to prevent vicious competition, stabilize product prices, and promote market self-discipline, which may create more opportunities in cyclical sectors like engineering machinery and humanoid robots [5][6] - The humanoid robot industry is gaining national attention, with practical applications being validated, such as TaoTao Automotive's sales and production of humanoid robots in the U.S., laying the groundwork for large-scale promotion [3][8] - The pure electric six-seater market is witnessing dual improvements in supply and demand, with a wave of vehicle replacements expected in 2025 due to technological advancements and a shorter replacement cycle compared to traditional fuel vehicles [19][21] Recommendations - Companies such as TaoTao Automotive and Giant Star Technology are recommended for their strong export capabilities and competitive advantages in the global market [1][13] - In the military sector, companies like Inner Mongolia First Machinery Group and China North Industries Group are highlighted for their potential in military trade development [1][14]

Industry Overview - The term "anti-involution" has become a high-frequency keyword in the photovoltaic industry, reflecting strong market expectations for policy enforcement [1] - The photovoltaic industry chain has seen varying degrees of price increases, with polysilicon futures prices rising over 60% recently, and spot prices rebounding from a low of 30,000 yuan/ton [1] - As of July 25, the CSI Photovoltaic Index has increased by over 17% since its low in June, indicating a potential industry bottoming out [2] Policy and Market Dynamics - The urgency to address price wars in the photovoltaic industry has intensified, with government meetings emphasizing the need to combat involution and promote capacity exit [3] - Recent regulations require sales prices to not fall below cost, leading to significant increases in silicon material prices [4] - Multiple broker reports suggest that the photovoltaic sector is at a bottom in terms of prices and profitability, with expectations for a rebound driven by supply-side policy reforms [6] Company Spotlight: Duliang Energy - Duliang Energy has established a strong competitive edge in the clean energy sector, focusing on energy-saving and clean energy technologies [7] - The company has developed a complete photovoltaic industry chain, including polysilicon core equipment and solar cell components, and is actively involved in hydrogen energy technology [7] - Duliang Energy's recent contract for a 450 million yuan green hydrogen system has garnered significant attention, showcasing its competitive advantage in the hydrogen sector [8] Growth Potential - Duliang Energy's strategic foresight in hydrogen energy has positioned it well for future growth, with a focus on high-performance alkaline electrolyzers [8] - The company has secured several international project orders, indicating strong market recognition and trust in its hydrogen technology [8] - The photovoltaic sector is expected to see a valuation recovery, with Duliang Energy benefiting from both operational stability and favorable policies [10][11] Financial Outlook - Duliang Energy anticipates a 2.96% increase in silicon wafer shipments and a 210.48% increase in component shipments in 2024, despite facing negative gross margins [13] - The company's gross margin is projected to improve to 4.52% in Q1 2025, reflecting a 13.8% quarter-on-quarter increase as the industry stabilizes [13] - The demand for electrolytic water hydrogen production equipment is expected to exceed 2.37 GW in 2024, providing long-term growth opportunities for Duliang Energy [13]

Summary of Conference Call on Swine and Livestock Industry Industry Overview - The swine industry is experiencing intensified competition, leading to increased trial and error costs for companies, resulting in some reducing production or exiting the market [1][2] - The overall market is characterized by a "short bull, long bear" cycle, with the agricultural sector underperforming in the secondary market [1][2] Key Insights and Arguments - Pork price fluctuations significantly impact the Consumer Price Index (CPI), despite pork's low share (1.2%-1.5%) in CPI, due to its strong cyclicality and amplification effects [1][3] - In the first half of 2025, pork prices are expected to decline by 20% quarter-on-quarter, with potential further decreases in the second half if no policy interventions occur, affecting CPI negatively [1][4] - Approximately one-third of breeding entities are currently operating at a loss [1][4] Policy Measures - The National Development and Reform Commission (NDRC) is leading a multi-ministerial effort to balance swine supply and demand, aiming to reduce the number of breeding sows to 39.5 million to reverse the cycle and increase prices [1][5] - Initial policy execution has been weak, with some leading companies expanding against the trend, prompting regulatory bodies to strengthen credit policies to maintain a price floor of 14 yuan/kg [1][6] Investment Recommendations - Recommended companies include: - **Muyuan Foods**: Noted for its significant cost advantage and potential for profit release, with projections of achieving over 30 billion yuan in profits if costs drop to 11 yuan/kg by 2026 [1][8] - **Bangji and Dekang**: Innovative companies focusing on empowering farmers and achieving efficient expansion through light-asset models [1][8] Livestock Industry Trends - The beef industry is currently in a deep loss phase, but with reduced imports due to anti-dumping investigations, a capacity clearance is expected [3][10] - The beef cycle is similar to the swine cycle, with low production rates and slow recovery in capacity expected [3][10] Future Prospects for Dairy and Beef Companies - Companies like **Yuran** and **Shengmu** are expected to benefit from the cyclical recovery in both beef and dairy markets, with stable operations and prices above industry averages [3][11] - Profit projections for Yuran are estimated at 2.8 to 4 billion yuan by 2026, while Shengmu is expected to reach 600 million to 1 billion yuan [3][13] Overall Investment Strategy - The livestock sector, including swine, beef, and dairy, presents significant investment potential. Companies like Yuran and Shengmu are recommended for their dual-benefit logic and stable operational status [3][14] - Continuous monitoring of policy changes and anti-dumping investigations is advised to adjust investment strategies accordingly [3][14]

Investment Rating - The report maintains an "Outperform" rating for China Mengniu Dairy [2][6]. Core Views - Supply depletion is occurring in the raw milk market, with prices stabilizing at a low level, indicating a potential reversal in the cycle [3][11]. - The reversal of milk prices is expected to positively impact Mengniu's profitability, as the company is increasingly affected by the upstream raw milk cycle [4][12]. - The company is focusing on improving operating profit margins and shareholder returns, with a planned increase in dividend payout [5][13]. Financial Summary - The current share price is HK$19.76, with a target price set at HK$27.60, indicating a potential upside [2]. - Market capitalization stands at HK$77.38 billion (approximately US$9.98 billion) [2]. - Revenue projections for 2025-2027 are estimated at Rmb 91.44 billion, Rmb 95.82 billion, and Rmb 101.30 billion, respectively, with year-on-year growth rates of 3.1%, 4.8%, and 5.7% [6][13]. - Net profit attributable to the parent company is forecasted to be Rmb 5.41 billion, Rmb 5.81 billion, and Rmb 6.42 billion for the same period, with significant growth expected in 2026 and 2027 [6][13]. - The diluted EPS is projected to increase from Rmb 1.38 in 2025 to Rmb 1.64 in 2027 [6][13]. Market Dynamics - The price of raw milk has been on a downward trend for nearly four years, reaching a 14-year low, which has led to a reduction in upstream production capacity [3][11]. - The national dairy herd has decreased by 5.8%, with expectations that a balance between supply and demand will be achieved at around 5.9 million heads [3][11]. - If the raw milk cycle reverses, it could lead to improved sales prices and reduced competition among dairy companies [4][12].