1. Report Industry Investment Rating - The report does not mention the industry investment rating. 2. Core Viewpoints of the Report - The one - package debt - resolution policy has effectively curbed the growth of local debt and mitigated debt risks, but the scale of local debt still rises, and future policies and risks need re - evaluation [5]. - Most debt - resolution policies will gradually withdraw, but policies on urban investment bonds may continue. The focus will be on accelerating the clearance of financing platforms and promoting their substantial transformation [65][74]. - The credit spreads of urban investment bonds may widen, and investors are advised to be cautious and select regions with valuation safety margins and entities with clear government support [80][84]. 3. Summary According to the Directory 3.1 Policy Review: Continued Debt - Resolution Ideas and Strengthened Debt - Resolution Efforts - **Policy Background**: From 2022 to 2023, the local fiscal self - sufficiency rate declined, the local fiscal revenue decreased, and the expenditure increased, leading to intensified fiscal revenue - expenditure contradictions. Multiple regions faced debt risk hidden dangers, which prompted the introduction of the one - package debt - resolution plan [6][8]. - **Policy Framework**: After July 2023, fiscal and financial policies supported the resolution of local government illegal debts and financing platform debts respectively. The policy ideas were generally consistent with the previous round, but the scope of debt expanded and focused on key provinces. The policy also adopted a list - based management model [11][14]. - **Local Government Illegal Debts**: In terms of stock resolution, the types of debts that can be repaid by local government generalized replacement bonds expanded, the scale increased significantly, and the regions were more concentrated. In terms of increment constraint, Document 47 restricted government investment in key provinces, and a long - term mechanism for preventing local debt risks was gradually established [23][29]. - **Financing Platform Debts**: For financial debts, the policy strengthened both the support for resolving existing debts and the restriction on new debts, using new tools such as unified borrowing and repayment of urban investment bonds, syndicated loans to replace non - standard debts, and central emergency liquidity loans. For arrears, the policy's efforts to control growth and resolve stocks were relatively limited [33][42]. 3.2 Policy Effects: Slowed Debt Growth and Mitigated Debt Risks - **Urban Investment Debts**: The growth rate of urban investment interest - bearing debt decreased, especially in key provinces. The debt structure improved, the annual interest - payment rate decreased, and the credit spreads of urban investment bonds narrowed significantly. The number of debt - risk public opinions also decreased [46][56][58]. - **Local Debts**: The growth rate of local debts decreased, and the difference with the social financing growth rate narrowed. The proportion of urban investment interest - bearing debt in local debts decreased, indicating an improved debt structure. The growth rate of local government bonds declined, and the proportion of generalized replacement bonds increased [60][61][62]. 3.3 Policy Outlook: Ordered Withdrawal of Debt - Resolution and Promotion of Platform Transformation - **Most Debt - Resolution Policies Will Gradually Withdraw**: Fiscal and financial support for debt - resolution will decline. The scale of debt replacement may decrease significantly in the second half of 2026. The number of financing platforms has dropped by over 80%, and the policy may return to emphasizing local autonomous debt - resolution [65][66][67]. - **Accelerating the Clearance of Financing Platforms and Promoting Substantial Transformation**: In 2026, the central government will optimize debt - restructuring methods, including relaxing the pre - conditions for debt restructuring and promoting the trusteeship of implicit debts through "unified borrowing and repayment" to accelerate the platform - exit process. However, the substantial transformation of financing platforms remains a long - term task [74][75][77]. 3.4 Urban Investment Strategies: Spreads May Widen and Seek Safety Margins - **Low Default Risk but High Valuation Risk**: The default risk of urban investment bonds is expected to remain low, but there is a risk of valuation adjustment. From the perspectives of credit spreads, credit risks, and supply changes, the credit spreads of urban investment bonds are likely to widen [80][81]. - **Select Regions with Valuation Safety Margins and Entities with Clear Government Support**: In the short term, investors should be more vigilant about the regional differentiation risks caused by the withdrawal of central support. Regionally, focus on areas where bond yields are not overly compressed, such as Shanxi, Beijing, and Shanghai. At the entity level, pay attention to entities with clear government support, such as market - oriented declaration entities [84][85][86].

Macro Strategy - The core viewpoint indicates that the "government debt increment" in Q1 2026 is expected to achieve a year-on-year growth of no less than 3%, reflecting a proactive fiscal policy approach despite being lower than the 104% growth in Q1 2025 and higher than the -33% in Q1 2024 [1][7][8] Fixed Income - The report discusses the current status of urban investment bonds in Fujian Province, highlighting that the supply side will continue to face high-pressure regulatory conditions to consolidate existing debt reduction achievements. This suggests that the "asset shortage" situation is likely to persist, with low interest rates maintained to ensure debt cost reduction [2][9] - Fujian Province is characterized by strong local financial resources and a smooth debt reduction process, allowing for a duration extension to over 3 years for investment strategies. The report recommends focusing on traditional urban investment platforms while selectively moving down to county-level platforms due to their safety margins from the debt reduction process [2][10] Industry Recommendations - Guangfa Securities plans to raise approximately 39.59 billion HKD through the placement of H shares and 21.5 billion HKD through zero-interest convertible bonds to support its international business expansion. The expected net profit for 2025-2027 is adjusted to 148/172/196 billion CNY, with corresponding growth rates of 53%/16%/15% [3][12][14] - Zhihui AI, a leading independent general model developer, is projected to achieve revenues of 7.9 billion CNY (up 151%), 15.5 billion CNY (up 97%), and 32.2 billion CNY (up 108%) from 2025 to 2027. The company is expected to transition from localized to cloud-based services, with an overall gross margin reaching 50% in 2025 [4][15][16] - Aotewei has successfully delivered optical detection equipment to a leading domestic optical communication company, with expectations of continued growth in net profits of 6.8/6.1/6.4 billion CNY for 2025-2027, maintaining a "buy" rating [5][17][18]