Investment Rating - The report assigns a "Buy" rating to the company with a current price of HKD 15.97 and a fair value of HKD 19.99 [4]. Core Insights - The company is the world's largest sports shoe manufacturer, driven by both manufacturing and retail operations, with a potential performance turnaround expected [1][9]. - The manufacturing business is expected to see revenue and profitability improvements due to various factors, including a recovery in order placements from brand clients and a favorable market environment in 2026 [9]. - The retail business is actively pursuing multi-channel and refined operations, which are anticipated to lead to a performance rebound [9]. Summary by Sections Company Overview - The company is the largest sports shoe manufacturer globally, with a market share based on annual production [14]. - It has a significant workforce of 285,500 employees, with 265,500 in manufacturing and 20,700 in retail [14]. - The company achieved a revenue of USD 8.182 billion in FY2024, reflecting a year-on-year growth of 3.7% [2][14]. Manufacturing Business - The manufacturing segment contributed 68.7% of total revenue and 85.2% of profit in FY2024, with revenues of USD 5.621 billion, up 11.1% year-on-year [17]. - The average selling price (ASP) for shoes was USD 20.25, down 5.1% year-on-year due to a higher concentration of high-end products in previous years [17]. - The company has a diversified production base across several countries, with significant output from Indonesia, Vietnam, and China [15][17]. Retail Business - The retail segment, operated through the subsidiary BaoSheng International, generated USD 2.561 billion in FY2024, a decrease of 9.5% year-on-year [24]. - The company is optimizing its store network, reducing the number of direct-operated stores to 3,448 while improving average store size [24]. - The retail business is expected to benefit from improved discount rates and effective inventory management [9]. Financial Projections - The company forecasts earnings per share (EPS) of USD 0.23, USD 0.26, and USD 0.28 for FY2025, FY2026, and FY2027, respectively [9]. - The report estimates a fair value of HKD 19.99 per share based on a sum-of-the-parts valuation method [9]. Market Performance - The company's stock price has shown significant volatility, with a historical increase of 2044.24% since its listing in 1992, although it has faced challenges in recent years due to external market conditions [46]. - The company’s price-to-earnings (P/E) ratio has fluctuated between 7 and 18 times, indicating a relatively low valuation compared to historical levels [46].

Core Insights - The acquisition of a 12.95% stake in Tianhua New Energy by CATL for 2.635 billion yuan is seen as a strategic move to enhance its upstream positioning in the competitive battery industry [2][3] - The share transfer price of 24.49 yuan per share represents a 19% discount compared to the closing price of 30.42 yuan on the announcement day, indicating a unique financial strategy in the current A-share market [3] - The deal allows CATL to gain significant influence in Tianhua New Energy's decision-making process by securing two board seats, thus transitioning from a supplier to a strategic shareholder [3] Strategic Intent - CATL aims to position itself in next-generation battery technology, leveraging Tianhua New Energy's advancements in solid-state battery materials, which includes a project for producing 5,200 tons of high-nickel ternary cathode materials annually [4] - The acquisition strengthens CATL's resource security by tapping into Tianhua New Energy's established global lithium resource network, which spans regions from Africa to South America [4] - This investment is part of CATL's broader strategy to build a comprehensive industrial ecosystem by investing in key material companies, following previous investments in Hunan Youneng and Luoyang Molybdenum [4] Industry Trends - The trend of vertical integration is becoming a mainstream choice in the global battery industry, as evidenced by CATL's investment and similar moves by other leading companies like Tesla and BYD [6] - The volatility in lithium carbonate prices, which have dropped from 500,000 yuan per ton to below 100,000 yuan, poses significant cost control challenges for battery manufacturers [6] - Tianhua New Energy is also pursuing upstream integration, planning to acquire a 75% stake in Tianhua Times to enhance its lithium resource capabilities [6] Future Collaboration - CATL has committed to not reducing its stake in Tianhua New Energy for 18 months post-acquisition, allowing both companies ample time to deepen their business integration [7] - The focus will shift towards translating the equity relationship into tangible business synergies, requiring collaboration in technology development, production planning, and market expansion [7]

Core Viewpoint - The chemical industry is undergoing a profound transformation from scale expansion to value reconstruction, necessitating a shift from isolated efforts by individual companies to collaborative strategies that enhance market value through systematic management [1][4] Group 1: Vertical Integration - Vertical integration aims to break the fragmentation of the supply chain, achieving deep coupling of resources and value enhancement through vertical integration [2] - Leading companies can secure key resources by investing in upstream mining enterprises or signing long-term supply agreements to stabilize raw material supply [2] - Optimizing production processes and utilizing by-products can lower energy consumption per ton and enhance competitive advantages [2] Group 2: Horizontal Expansion - Horizontal expansion focuses on achieving economies of scale and synergy effects within the same segment of the supply chain [2] - Leading companies can quickly consolidate capacity and iterate technology through mergers and acquisitions of similar enterprises [2] - Integrating regional sales networks and logistics systems allows companies to mitigate risks associated with demand fluctuations in single markets [2] Group 3: Industry Chain Collaboration - The core of industry chain collaboration is to break down corporate boundaries, with cluster effects serving as the spatial carrier for collaboration [3] - Chemical parks must evolve from basic physical aggregation to "chemical fusion," requiring companies to share infrastructure and form complementary relationships in technology and product lines [3] - The recognition and pricing of value in capital markets are ultimately a test of corporate strategic effectiveness [3] Group 4: Value Management Mechanism - Companies need to establish a complete value management mechanism to optimize resource allocation and dynamic optimization across departments [3] - Effective communication with the market through media, investor relations, and ESG rating systems is essential for conveying sustainable development value [3] - A positive cycle of "industry competitiveness—market value performance—capital empowerment" can be formed through effective value management [3] Group 5: Strategic Necessity - Embracing scientific value management has become a necessity for chemical companies aiming for long-term stable growth [4] - Continuous optimization of resource allocation and innovation is crucial for building resilience against cyclical challenges [4] - This approach not only addresses current challenges but also strategically positions companies for future competitive advantages [4]