Core Viewpoint - The CXO industry in China is experiencing a structural recovery driven by new technologies and models, moving beyond short-term profit and order recovery to a new cycle of higher added value [6][31]. Summary by Sections Introduction - The CXO industry has undergone significant fluctuations over the past five years, transitioning from a period of rapid growth to a phase of adjustment due to various external pressures [5][8]. Definition, History, and Business Model of CXO - CXO encompasses contract research organizations (CRO) and contract development and manufacturing organizations (CDMO), providing essential services throughout the drug development lifecycle [9][10][11]. - The industry evolved through three main stages: initial outsourcing in the 1960s-80s, systematic development of R&D outsourcing since the 1990s, and the rise of integrated services and new technologies in the 2010s [12][13][14]. Business Model of CXO - The growth of the CXO market is driven by global pharmaceutical R&D investment and the increasing outsourcing penetration rate [15][16]. - Global pharmaceutical R&D investment has grown from approximately $130 billion in 2010 to over $250 billion in 2023, providing a solid foundation for the industry [16]. - The outsourcing penetration rate has increased from about 30% to nearly 50% over the past decade, driven by cost efficiency and risk management [17][18]. Cycle Review: 2017-2024 - The CXO industry in China experienced a "super cycle" from 2017 to 2021, driven by domestic demand, global technology cycles, and the COVID-19 pandemic [20][22][23]. - The subsequent downturn from late 2021 to early 2024 was marked by a decline in demand, tightening global liquidity, and the natural decline of COVID-related demand [24][25][26]. New Cycle: Structural Recovery or Full Reversal? - The current recovery is characterized by a structural shift driven by new technologies, moving away from homogeneous competition to a higher value cycle [31][32]. - The recovery signals are evident from upstream drug discovery to midstream animal testing, indicating a gradual improvement in demand [33][34]. Core Drivers: New Technology Platforms - The recovery is driven by the emergence of complex, high-value new technology platforms such as ADCs and TIDES, which enhance the dependency on CXO services [35][36]. Funding Dynamics - The funding landscape has shifted from reliance on external financing to a more diversified and stable model, with domestic companies achieving profitability and increased BD activities [37][38][40]. Global Competition and Geopolitical Challenges - Chinese CXO companies maintain a competitive edge through cost advantages, efficiency, and quality improvements, despite geopolitical uncertainties [42][43][46]. - The geopolitical risks, such as the proposed BIOSECURE Act, may impact market perceptions but are unlikely to significantly affect the core operations of leading CXO firms [48]. Investment Logic in the New Cycle - The investment focus has shifted from chasing overall industry growth to identifying companies with unique competitive advantages, such as leading technology platforms and integrated service capabilities [49][50][51].

Summary of Key Points from Conference Call Records Industry Overview - The focus is on the non-banking sector, particularly the insurance and internet finance sub-sectors, as well as traditional brokerage firms [1][2][3]. Core Insights and Arguments Insurance Sector - In a slow bull market, stock selection in the insurance sector should prioritize companies with equity beta or higher elasticity, as these companies tend to have larger price increases in the early stages of an uptrend [1][3]. - During the upturn cycles of the life insurance industry, such as 2016-2017 and 2020-2021, companies that can withstand declines in liabilities or grow against the trend perform better [1][7]. - Notable companies like Xinhua Insurance, Ping An Insurance, China Life, and Taikang Insurance have shown strong performance at different stages of these cycles [1][7]. Internet Finance Sector - In a fast bull market, stock selection in the internet finance sub-sector should focus on companies with significant alpha logic, such as Dongfang Caifu, which performs exceptionally when it possesses alpha logic [1][5]. - The overall performance in the internet finance sector is strong, but individual stock performance should be assessed based on their alpha logic [1][5]. Traditional Brokerage Firms - Selection of traditional brokerage stocks should consider new stocks and those aligned with current market or policy themes, such as mergers and acquisitions or international reforms [1][6]. - Long-term recommendations favor leading low-valuation brokerages with excellent performance, as they tend to have lower drawdown risks and better cost-effectiveness [1][6][11]. - In different cycles, regional brokerages like Xibu Securities, Xingye Securities, and Changjiang Securities have shown significant price increases due to expectations of international reforms [1][10]. Important but Overlooked Content - The beta characteristics of the brokerage and internet finance sectors are similar, but the typical stocks that perform well in different cycles vary [1][8]. - In 2014-2015 and 2019, Dongfang Caifu and Tonghuashun were standout performers, with Dongfang Caifu achieving excess returns through license monetization [1][4][8]. - By the end of 2024, both Dongfang Caifu and Tonghuashun had similar stock prices, but Tonghuashun exhibited stronger growth [1][9]. - Recommendations for long-term holding of traditional brokerage stocks suggest that low-valuation leaders like Huatai Securities are good choices due to their strong performance and lower drawdown risks [1][11].