Investment Rating - The industry investment rating is positive, indicating a favorable outlook for the carbon market expansion and its impact on the steel, cement, and aluminum smelting sectors [30][31]. Core Insights - The report highlights the issuance of the allocation plan for carbon emission rights in the steel, cement, and aluminum smelting industries, marking a significant step towards substantial carbon market expansion [1][11]. - The allocation plan emphasizes a stable transition with increased carryover allowances and a narrowed deviation range for carbon emission intensity, which is expected to enhance long-term emission reduction incentives while maintaining market stability [2][17]. - The carbon market is entering a new phase of systematic expansion and institutional deepening, with expectations for broader coverage and more precise regulation in the future [3][23]. Summary by Sections 1. Policy Overview - The Ministry of Ecology and Environment issued the allocation plan for carbon emissions in the steel, cement, and aluminum smelting industries, which is a concrete implementation of earlier expansion policies [11][12]. - The plan focuses on direct emissions from fossil fuel combustion and industrial processes, excluding indirect emissions from electricity and heat consumption [12][13]. 2. Policy Impact - The continuity of the policy is strong, with a clear emphasis on using market mechanisms to control greenhouse gas emissions and promote green transformation in industries [21][22]. - The expansion of the carbon market is expected to follow a principle of gradual inclusion, with new industries being added as they mature [23][24]. - Near the end of the year, carbon prices are showing signs of support, although the impact of the new allocation plan on carbon prices is expected to be limited [26][27].

Core Viewpoint - The carbon market is a crucial policy tool for addressing climate change and promoting green transformation in China, with significant growth and participation observed in recent years [1][3]. Market Overview - The national carbon market has been operational for four years, covering over 60% of China's carbon dioxide emissions, with a cumulative trading volume of 728 million tons and a transaction value of 49.83 billion yuan as of September 30, 2025 [1]. - The number of key emission units that have opened trading accounts has reached 1,277 as of August 2025, indicating an increase in market participants [3]. Market Changes and Opportunities - The expansion of the carbon market to include steel, aluminum smelting, and building materials has diversified market participants, enhancing trading opportunities and market development [3][5]. - The trading volume in the carbon market has increased by 40% compared to the same period last year, with significant growth in transaction numbers and active participants [5]. Local Market Dynamics - Local carbon markets, such as Shanghai's, are expected to play a supportive role in achieving local "dual carbon" goals while adapting to the national carbon market's expansion [6][7]. - Shanghai's carbon market has over 2,200 registered entities, including around 400 regulated enterprises, contributing to its trading activity [7]. Future Plans and Mechanisms - The Shanghai Environmental Energy Exchange is focusing on expanding industry coverage, researching paid allocation mechanisms, and enhancing market participant diversity [10][11]. - The transition to a "paid allocation + total control" model is anticipated during the "14th Five-Year Plan" period, with an emphasis on policy coordination to achieve national carbon reduction targets [12][13].

Core Viewpoint - The national carbon market in China is transitioning from an "initial phase" to a "comprehensive deepening phase," with over 3,000 key emission units covering approximately 8 billion tons of CO2 annually, marking it as the largest carbon market globally [2] Market Performance - The expansion of the national carbon market has significantly increased the scale and number of market participants, enhancing market development [2] - The trading volume in the national carbon market has reached 1.4 times that of the same period last year, indicating substantial growth [3] - Although trading remains concentrated, improvements have been noted, with a shorter off-peak trading season and a doubling of average daily trading volume compared to last year [3] Shanghai's Experience - Shanghai has optimized its quota allocation mechanism, shifting from historical methods to efficiency-based methods, with over 70% now based on efficiency [4] - The city has diversified its market participants, with over 2,200 entities involved, including around 400 regulated enterprises and numerous investment and financial institutions [4] - Shanghai is continuously innovating and enriching trading tools, which is crucial for enhancing market liquidity [4] Financing and Asset Management - The carbon assets in the national market exceed 8 billion tons, potentially valued at 400 to 500 billion yuan, which could provide new financing solutions for enterprises facing funding difficulties [5] Future Focus Areas - Key tasks for the national carbon market during the 14th Five-Year Plan include expanding industry participation, researching paid allocation mechanisms, and introducing institutional investors [6] - The exploration of "total control" over carbon quotas is critical, especially for industries with excess capacity, which may lead the way in achieving peak carbon emissions [6][7] Local Market Transformation - Local pilot markets need to adapt their roles as the national carbon market evolves, focusing on supporting local green and low-carbon development [7] - Shanghai is considering expanding its carbon market to include more industries and reduce participation barriers [7] Environmental Integration - Addressing environmental issues and externalities is essential for integrating them into overall economic and social development, which local pilot markets should explore [8] International Carbon Dialogue - China aims to enhance its carbon dialogue by strengthening standards and rules in the carbon market, promoting its experiences in low pollutant emissions, and striving to establish international standards [9]

Core Viewpoint - The company demonstrated steady revenue growth and significant improvement in profitability during the first half of 2025, with net profit growth outpacing revenue growth, indicating enhanced operational efficiency [2] Financial Performance - In the first half of 2025, the company achieved operating revenue of 596 million yuan, a year-on-year increase of 4% [1] - The net profit attributable to shareholders reached 61.97 million yuan, reflecting a year-on-year growth of 26% [1] - The net profit after deducting non-recurring items was 50.73 million yuan, up 37% year-on-year [1] Profitability Improvement - The growth in net profit (25.51%) exceeded the revenue growth rate (3.70%), highlighting improved profitability [2] - Cost control measures led to a decrease in sales and management expenses by 2.27% and 8.22% respectively [2] - The optimization of product structure contributed to a 1.18 percentage point increase in gross margin, with the industrial process analysis system business revenue growing by 19.17% [2] - Improvement in asset quality resulted in a positive contribution to profits, with credit impairment losses shifting from -7.38 million yuan in the previous year to 2.91 million yuan this period [2] Strategic Initiatives - The company is positioning its carbon monitoring business as a "second growth engine," developing an integrated solution for carbon emission monitoring and management [3] - The expansion of the national carbon market and mandatory installation policies in industries like thermal power and steel are expected to accelerate market growth [3] - The company is capitalizing on domestic substitution opportunities in high-end manufacturing, with successful applications in advanced fields such as semiconductor gas purity detection and nuclear power gas analysis [3] Operational Strategy - The company has optimized its operational strategy by focusing on cash flow-positive industrial enterprises (To B) while strategically managing longer payment cycles in government contracts (To G) [4] - It has established R&D centers in Beijing, the UK, and Belgium, leveraging five core technologies to support international market expansion [4] - The development of data collection and IoT platforms aims to transform environmental monitoring data into a commercial asset, potentially opening new business growth avenues [4] Earnings Forecast - Projected operating revenues for 2025-2027 are 1.527 billion, 1.682 billion, and 1.869 billion yuan, with year-on-year growth rates of 7.53%, 10.11%, and 11.17% respectively [5] - Expected net profits for the same period are 224 million, 241 million, and 267 million yuan, with growth rates of 33.15%, 7.34%, and 10.82% respectively [5] - Corresponding PE ratios based on the closing price on August 22, 2025, are projected to be 23.97, 22.33, and 20.15 [5]