Core Viewpoint - China Liansu (02128) saw a significant increase of over 6%, currently trading at 4.8 HKD with a transaction volume of 32.37 million HKD, driven by favorable government policies regarding infrastructure investment [1] Group 1: Government Policy Impact - The Central Committee of the Communist Party of China held a press conference on October 24 to discuss the spirit of the Fourth Plenary Session of the 20th Central Committee, highlighting plans for extensive underground pipeline network construction and renovation exceeding 700,000 kilometers during the 14th Five-Year Plan period [1] - The National Development and Reform Commission's Secretary and Director, Zheng Zhanjie, indicated that the new investment demand for this initiative would exceed 5 trillion CNY [1] Group 2: Market Opportunities - Huatai Securities previously reported that the pipeline renovation segment is expected to stimulate demand for municipal plastic pipes, which aligns with the steady growth in first industry investment over the past two years [1] - China Liansu's involvement in the agricultural plastic pipe sector has shown positive results, and given the company's high market share in the engineering sector, it is anticipated that the company will fully benefit from these developments [1]

Core Viewpoint - China Lesso (02128) experienced a stock price increase of over 6%, reaching HKD 4.8 with a trading volume of HKD 32.3691 million, driven by positive market sentiment related to infrastructure investment plans announced by the government [1] Group 1: Company Performance - China Lesso's stock rose by 6.67% as of the latest report [1] - The company is expected to benefit from increased demand for municipal plastic pipes due to the government's plan to construct and renovate over 700,000 kilometers of underground pipelines during the 14th Five-Year Plan, with an additional investment requirement exceeding CNY 5 trillion [1] Group 2: Industry Outlook - The municipal plastic pipe demand is anticipated to be stimulated by the pipeline renovation segment, as highlighted in a report by Huatai Securities [1] - The stable growth in primary industry investment over the past two years is expected to further support the demand for agricultural plastic pipes, an area where China Lesso has shown effective engagement [1] - The company's high market share in the engineering sector positions it well to capitalize on these emerging opportunities [1]

Investment Rating - The investment rating for the company is "Buy" with a target price of RMB 14.53 [7][9]. Core Views - The company reported a revenue of RMB 2.078 billion for 1H25, a year-on-year decrease of 11.33%, and a net profit attributable to shareholders of RMB 271 million, down 20.25% year-on-year. The second quarter showed a revenue of RMB 1.183 billion, down 12.16% year-on-year but up 32.14% quarter-on-quarter, indicating that revenue and profit met previous expectations [1][2]. - The company is experiencing a slow recovery in pricing, with overall gross margin under pressure. The gross margin for 1H25 was 40.5%, a decrease of 1.61 percentage points year-on-year [2][3]. - The company is maintaining a stable retail brand presence, which is expected to benefit from urban renewal and renovation demand in the second-hand housing market [4]. Summary by Sections Financial Performance - In 1H25, the company's PPR/PE/PVC pipe business generated revenues of RMB 933 million, RMB 411 million, and RMB 290 million, respectively, with year-on-year declines of 13.04%, 13.28%, and 4.21%. The overall revenue decline is attributed to weak retail momentum and increased price competition in the plastic pipe industry [2]. - The net profit margin for 1H25 was 13.04%, down 1.46 percentage points year-on-year, but the decline in net profit margin for 2Q25 showed a narrowing trend [3]. Dividend Policy - The company plans to distribute a cash dividend of RMB 1 per 10 shares (including tax), resulting in a payout ratio of approximately 58% [4]. Profit Forecast and Valuation - The profit forecasts for 2025-2027 have been revised downwards by 20.39%, 15.67%, and 13.81%, respectively, with projected net profits of RMB 857 million, RMB 1.037 billion, and RMB 1.264 billion [5]. - The target price has been adjusted to RMB 14.53, based on a 27x PE valuation for 2025 [5].

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of HKD 5.89, up from the previous target of HKD 4.36, representing a 35% increase [1][5]. Core Views - The report emphasizes that urban renewal is transitioning from large-scale expansion to improving existing stock, which is expected to catalyze demand for municipal plastic pipes due to infrastructure upgrades [1][2]. - The company is well-positioned to benefit from the growing demand in the agricultural plastic pipe sector, supported by stable growth in primary industry investments and high market share in engineering [1][4]. - The projected total investment in urban gas, water supply, and heating networks over the next five years is approximately CNY 4 trillion, indicating significant market opportunities [3]. Summary by Sections Urban Renewal and Market Potential - The central urban work conference highlighted urban renewal as a key strategy for enhancing quality and efficiency, with a substantial number of existing buildings (3.54 billion) and a total area of 128 billion square meters [2]. - The estimated demand for building renovations is around 2.4 billion square meters, with a stable upward trend expected [3]. Agricultural Investment and Demand Stability - First industry fixed asset investment grew by 6.5% year-on-year in the first half of 2025, indicating robust growth [4]. - The government aims to transform 4.55 million acres of farmland into high-standard farmland by 2035, with increased subsidy standards from CNY 1,300 to CNY 2,400 per acre [4]. Financial Projections and Valuation - The company’s EPS forecasts for 2025-2027 are CNY 0.67, CNY 0.74, and CNY 0.82 respectively, with a projected PE ratio of 8x for 2025 [5][10]. - Revenue is expected to grow from CNY 27,026 million in 2024 to CNY 33,404 million by 2027, reflecting a compound annual growth rate [10][19].