Group 1 - The core viewpoint of the article is that Zhao Chi Co., Ltd. (002429) is experiencing stable shipments in its optical devices and modules business, which is expected to enhance profitability due to vertical integration and cost advantages [1] Group 2 - The company is implementing a vertical integration strategy that encompasses "optical chips - optical devices - optical modules," which is gradually revealing cost advantages [1] - The scale effect from this integration is anticipated to further improve the profitability of the business [1]

Core Viewpoint - The company reported a steady growth in revenue and net profit for the first half of 2025, driven by strong orders from major clients and a robust performance in the leisurewear segment, particularly in the U.S. market [1][2]. Financial Performance - Revenue for 25H1 reached 14.966 billion yuan, a year-on-year increase of 15.3%, while net profit attributable to shareholders was 3.177 billion yuan, up 8.4% year-on-year [1]. - The interim dividend per share was 1.38 HKD, representing a 10.4% increase year-on-year, with a payout ratio of approximately 59.6% [1]. Product Performance - Revenue growth by product category for 25H1 was as follows: sportswear +9.9%, leisurewear +37.4%, and underwear +4.1%, with respective revenue shares of 67.7%, 25.3%, and 6.3% [1]. - Leisurewear emerged as the fastest-growing category, benefiting from increased demand in markets such as Japan and Europe, while sportswear growth was steady, driven by demand in the U.S. and Europe [1]. Client Contribution - Revenue from major clients in 25H1 was as follows: Uniqlo 4.33 billion yuan (+27.4%), Adidas 3.44 billion yuan (+6.0%), Nike 2.99 billion yuan (+28.2%), and Puma 1.53 billion yuan (+14.7%) [1]. - Strong order growth was noted from Uniqlo and Adidas, while Nike's order growth remained relatively stable [1]. Regional Performance - Revenue growth by region for 25H1 was as follows: U.S. +35.8%, Europe +19.9%, Japan +18.1%, and mainland China -2.1%, with respective revenue shares of 17.1%, 20.2%, 16.7%, and 24.4% [1]. Cost and Margin Analysis - The gross margin for 25H1 was 27.1%, a decrease of 1.9 percentage points year-on-year, primarily due to increased labor costs from wage hikes for frontline employees [2]. - The selling and administrative expense ratios for 25H1 were 0.73% and 7.23%, reflecting a year-on-year increase of 0.07 percentage points and a decrease of 0.04 percentage points, respectively [2]. - Financial expenses decreased by approximately 15.5 million yuan year-on-year, attributed to lower average financing costs and interest rates [2]. Other Financial Insights - Government subsidies increased by approximately 179 million yuan to 274 million yuan year-on-year, while income tax expenses rose by about 137 million yuan to 455 million yuan due to changes in Vietnam's tax policies [2]. - The net profit margin for 25H1 was 21.2%, down 1.4 percentage points year-on-year [2]. Future Outlook - The company is progressing well with the construction of its second fabric factory in Vietnam, expected to gradually commence production by the end of 2025, with a planned capacity of 200 tons per day [3]. - The new garment factory in Cambodia began operations in March 2025 and is in the process of expanding its workforce [3]. - Net profit forecasts for 2025-2027 have been slightly adjusted from 6.62 billion, 7.38 billion, and 8.16 billion yuan to 6.58 billion, 7.30 billion, and 8.09 billion yuan, respectively, with corresponding P/E ratios of 13, 12, and 10 times [3].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company reported a robust performance in H1 2025, with revenue of 14.966 billion yuan, a year-on-year increase of 15.3%, and a net profit attributable to shareholders of 3.177 billion yuan, up 8.4% year-on-year. The interim dividend per share is 1.38 HKD, a 10.4% increase, with a payout ratio of approximately 59.6% [9] - The growth is driven by strong demand in the leisurewear segment, particularly in the US market, with significant revenue contributions from major clients such as Uniqlo, Adidas, Nike, and Puma [9] - The company is expanding its vertical integration with the construction of a new fabric factory in Vietnam, expected to start production by the end of 2025, and a new garment factory in Cambodia that began operations in March 2025 [9] Financial Summary - Revenue projections for the company are as follows: 24.970 billion yuan in 2023, 28.663 billion yuan in 2024, 32.019 billion yuan in 2025, 35.258 billion yuan in 2026, and 38.692 billion yuan in 2027, with respective year-on-year growth rates of -10.12%, 14.79%, 11.71%, 10.11%, and 9.74% [1] - Net profit attributable to shareholders is forecasted to be 4.557 billion yuan in 2023, 6.241 billion yuan in 2024, 6.583 billion yuan in 2025, 7.301 billion yuan in 2026, and 8.086 billion yuan in 2027, with year-on-year growth rates of -0.12%, 36.94%, 5.49%, 10.90%, and 10.76% [1] - The latest diluted EPS is projected to be 3.03 yuan in 2023, 4.15 yuan in 2024, 4.38 yuan in 2025, 4.86 yuan in 2026, and 5.38 yuan in 2027 [1] - The company’s P/E ratios are expected to be 18.45 in 2023, 13.47 in 2024, 12.77 in 2025, 11.51 in 2026, and 10.40 in 2027 [1]

Financial Performance - The total revenue for ZhiJiang Bio (688317) in the 2025 mid-year report was 59.68 million yuan, a decrease of 36.91% year-on-year [1] - The net profit attributable to the parent company was -9.85 million yuan, representing a decline of 137.88% year-on-year [1] - The gross profit margin was 63.56%, down 14.76% year-on-year, while the net profit margin was -16.51%, a decrease of 160.04% year-on-year [1] - The total of selling, administrative, and financial expenses reached 26.31 million yuan, accounting for 44.09% of total revenue, an increase of 18137.82% year-on-year [1] - Earnings per share were -0.05 yuan, a decline of 135.71% year-on-year [1] Cash Flow and Debt - The company reported cash and cash equivalents of 2.506 billion yuan, a decrease of 9.42% year-on-year [1] - The accounts receivable decreased by 52.29% year-on-year to 39.89 million yuan [1] - Interest-bearing liabilities increased significantly by 12370.61% year-on-year to 2.666 million yuan [1] Business Evaluation - The company's historical median ROIC since its listing is 12.38%, with the worst year being 2024, which recorded a ROIC of -6.43% [2] - The company has experienced two years of losses since its listing, indicating a fragile business model [2] Fund Holdings - The largest fund holding ZhiJiang Bio is Dachen Jingheng Mixed A, with a scale of 397 million yuan and a recent net value of 3.405, which has increased by 97.9% over the past year [4] Research and Development - The company is focusing on vertical integration, extending its product, industry, and value chains, particularly in the development of innovative antibody drugs for cancer and autoimmune diseases [4] - The company has successfully screened several antibody drug molecules, with one entering the invention patent acceptance stage [4]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company has shown a slight increase in revenue for the first half of 2025, with a year-on-year growth of 1.1%, while net profit attributable to the parent company decreased by 7.2% [2] - The company plans to invest approximately 23 billion Indian Rupees (around 27.6 million USD) to establish a production base in an economic zone in India, with preliminary construction already underway [2][3] - The company has a strong market position as a leading global sports shoe manufacturer, benefiting from vertical integration and a significant share of the global sports brand market [5] Summary by Sections Financial Performance - For the first half of 2025, the company's revenue and net profit attributable to the parent company were 406 million USD and 171 million USD, respectively, with a year-on-year growth of 1.1% and a decline of 7.2% [2] - The second quarter of 2025 saw revenue and net profit of 203.1 million USD and 95 million USD, with a year-on-year decline of 0.35% in revenue but a 13.02% increase in net profit [2] - The company plans to distribute a dividend of 0.4 HKD per share, resulting in a payout ratio of 47.77% and an annualized dividend yield of 6.4% [2] Manufacturing Insights - The manufacturing segment's revenue and net profit for the first half of 2025 were 279.8 million USD and 155 million USD, reflecting a year-on-year growth of 6.2% and a slight decline of 0.3% in net profit [3] - The manufacturing gross margin and net margin were 17.7% and 5.5%, respectively, with a year-on-year decrease of 1.4 and 0.4 percentage points [3] - The company has increased its workforce to 292,300 employees, a 5.5% year-on-year increase, with manufacturing staff growing by 6.6% [3] Retail Business Performance - The retail segment experienced a decline in revenue and net profit for the first half of 2025, with figures of 915.9 million CNY and 188 million CNY, representing a year-on-year decrease of 8.26% and 44% [4] - The number of direct-operated stores decreased by 1.16% year-on-year to 3,408, with a closure of 40 stores since the end of 2024 [4] - Despite challenges, the company reported a robust growth of 16% in omni-channel revenue, with live streaming sales increasing by over 100% [4] Investment Recommendations - The company is expected to face short-term order pressures due to tariffs and inflation, but medium-term growth is anticipated as production capacity is expanded and orders recover [5] - Revenue forecasts for 2025-2027 have been adjusted downwards to 8.218 billion USD, 8.546 billion USD, and 8.822 billion USD, respectively, with net profit forecasts revised to 373.67 million USD, 414.02 million USD, and 450.05 million USD [5][7] - The company maintains a favorable valuation with a projected PE ratio of 7, 6, and 6 for 2025-2027, supporting the "Buy" rating [5][7]

Investment Rating - The investment rating for the company is "Buy" and is maintained [8]. Core Insights - The company reported a revenue of 198.38 billion yuan for 2024, representing a year-on-year growth of 13.66%. The net profit attributable to shareholders was 5.32 billion yuan, up 108.97% year-on-year, aligning with previous forecasts. The net operating cash flow reached 47.74 billion yuan, a 24.64% increase year-on-year, with free cash flow exceeding 15 billion yuan, significantly up from 9 billion yuan in 2023 and 7 billion yuan in 2022 [2][6]. - The company announced a shareholder return plan for the next three years, committing to distribute cash dividends of no less than 35% of the net profit attributable to shareholders each year, along with a minimum buyback of 1.5 billion yuan annually, with potential mid-term profit distributions when conditions permit [2][6]. Financial Performance Summary - For Q4, the company achieved a revenue of 54.65 billion yuan, a year-on-year increase of 13.79% and a quarter-on-quarter increase of 8.55%. The net profit attributable to shareholders for Q4 was 2.01 billion yuan, up 32.01% year-on-year and 96.30% quarter-on-quarter. The strong performance in Q4 was driven by domestic market demand stimulated by government policies and increased demand from North American clients [12]. - The company continues to advance its "1+4+N+ecosystem" strategy, with significant innovations in technology and new products. High-end LCD solutions and OLED products have seen substantial sales growth, and the company has established a strong presence in various segments, including smart finance and IoT [12]. - The company expects to reach a peak in depreciation in the upcoming quarters, with a gradual decline anticipated starting in 2028. The current price-to-book (PB) ratio is 1.1X, indicating a high margin of safety for investors [12]. Earnings Forecast - The projected earnings per share (EPS) for the company are 0.22 yuan, 0.32 yuan, and 0.42 yuan for the years 2025, 2026, and 2027, respectively, corresponding to price-to-earnings (PE) ratios of 17.54, 11.99, and 9.08 [12].