Asia Pacific Equity Research 08 October 2025 ZTO Express (ZTO US/2057 HK) Anti-involution is no longer just talk - tangible pricing benefits emerge, raising PTs on improved margin visibility Following our recent pre-earnings call with ZTO, we are raising our forecasts and price target, reflecting a more constructive outlook and a series of incremental positives that have come to light. The call showcased a marked shift in management's tone versus that in the 2Q25 post-earnings call, with greater confidence ...

ab 30 September 2025 Global Research China Equity Strategy US & Asia marketing feedback - Q&A of the top 10 most asked questions International investor interest at the highest level in recent years Over the past month we have conducted multiple marketing trips in the US and Asia engaging with investors with diverse investment mandates. Overall the level of interest in Chinese equities was strong with more investors realigning with our more favourable outlook on the market. That said there was some unease am ...

October 7, 2025 09:00 PM GMT China Materials | Asia Pacific 4Q25 Outlook – Equity Implications: Building Materials | What's Changed | | | | --- | --- | --- | | Zhuzhou Kibing Group Co Ltd (601636.SS) | From | To | | Price Target | Rmb4.90 | Rmb5.20 | | Anhui Honglu Steel Construction (002541.SZ) | | | | Price Target | Rmb20.00 | Rmb19.00 | | Rating | Overweight | Equal-weight | | Weixing New Building Materials (002372.SZ) | | | | Rating | Overweight | Underweight | | Price Target | Rmb14.40 | Rmb8.60 | | Ch ...

October 7, 2025 09:00 PM GMT China Materials | Asia Pacific 4Q25 Outlook – Upcycle Continues A liquidity-driven bull market with supply disruptions is supporting commodity prices. We prefer gold, copper and aluminum equities in this environment. Liquidity-driven bull market with supply disruptions supporting commodity prices. Our FX strategists expect the USD to continue weakening, on both fundamental and technical factors – MSe DXY at 91 by 2Q26 (-7%). All else equal, this should be a tailwind for commodit ...

Specialist Sales APAC Specialist Sales 25 September 2025 J P M O R G A N JPM | APAC Market Thematics - 5x KEY THEMES Matthew See +852 2800 8889 matthew.see@jpmorgan.com What are the most interesting top-down themes/trades in Asia? In this week's email (1) The case to stay constructive on Asia, with the liquidity and policy backdrop remaining supportive, (2) China's improving S/D outlook, with anti-involution still in the early innings and increased monetary/fiscal easing likely in 4Q, (3) Latest views on Ch ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Asia Pacific Economics - **Key Focus**: Discussions with US investors regarding the economic outlook for Asia, particularly China, India, and Japan Core Insights 1. **Business Cycle Outlook for Asia**: - Investors are generally optimistic about growth, particularly equity investors compared to fixed income investors who anticipate a modest slowdown. - There is a strong IT capital expenditure in the US, which is expected to support Asia's exports [6][5][5] 2. **China's Macro vs. Market Divergence**: - Investors recognize the weakness in China's macroeconomic landscape but expect markets to diverge from macro trends. - The anti-involution policy is seen as insufficient to address deflationary pressures [22][22][5] 3. **India's Domestic Demand Recovery**: - Investor sentiment is bearish on India due to recent deceleration in corporate revenue and profit growth. - However, a recovery is anticipated from Q4 2025 driven by fiscal and monetary easing measures [26][27][28] 4. **Japan's Policy Rate Path**: - Most investors expect the Bank of Japan (BoJ) to hike rates sooner rather than later, contrary to the base case which does not foresee rate hikes even in 2026. - The current inflation dynamics are largely influenced by supply factors rather than demand [29][30][32] Additional Important Insights 1. **Impact of Tariffs**: - The weighted average tariff on imports from Asia has risen to 25%, significantly impacting growth expectations. - The US-Korea trade deal remains unresolved, with auto tariffs still at 27.5% [7][5][5] 2. **Korea's Trade Cycle**: - Recent data indicates a slowdown in Korea's exports, with daily exports contracting by 10.6% after adjusting for working days, highlighting broad-based weakness [8][8][8] 3. **Rate Cuts in Asia**: - More rate cuts are expected across Asian economies, particularly in India, Korea, Indonesia, and Taiwan, as growth and inflation pressures persist [16][19][19] 4. **China's Deflationary Pressures**: - For a sustainable exit from deflation, significant shifts in the growth model are necessary, including reducing excess capacity and boosting domestic consumption [23][24][24] 5. **Investor Focus on Micro Themes**: - Investors are increasingly interested in micro themes such as emerging frontiers and sectors benefiting from anti-involution policies, rather than macroeconomic recovery [25][25][25] 6. **US-India Trade Relations**: - Ongoing trade tensions pose risks to India's growth outlook, particularly concerning services exports which constitute a significant portion of GDP [28][28][28] 7. **Japan's Corporate Profit Outlook**: - The slowdown in global trade is expected to adversely affect corporate profits, especially in the manufacturing sector [34][34][34] This summary encapsulates the key discussions and insights from the conference call, providing a comprehensive overview of the current economic landscape in Asia and the sentiments of investors regarding future growth and risks.

Summary of ZTO Express Conference Call Company Overview - **Company**: ZTO Express - **Industry**: Transportation & Infrastructure - **Market**: Asia Pacific, primarily Mainland China Key Points and Arguments Market Dynamics and Volume Growth - ZTO's volume is expected to grow by approximately 10% year-over-year (YoY) in 3Q25, while industry volume growth is projected to slow from 17% in 2Q25 to 13% YoY in 3Q25 due to soft consumption and competition from instant shopping [2][4] - The anti-involution initiatives are impacting the market, leading to decreased low-value parcels and limiting upside for ZTO's market share gains in 3Q25 [2][5] Earnings Outlook - Adjusted net profit (NP) growth for 3Q25 is likely to remain negative at -8% YoY, an improvement from previous expectations of a drop greater than 15% YoY [3][4] - Unit operating profit is expected to improve by Rmb0.03 quarter-over-quarter (QoQ) to Rmb0.28 in 3Q25, influenced by various factors including anti-involution initiatives and market pricing [3][4] - There is mild potential for earnings growth to turn positive in 4Q25, with EPS forecasts for 2025-2027 raised by 9.1%, 5.8%, and 5.7% respectively [4][14] Price Target and Valuation - The price target remains unchanged at US$23.80, implying a 15x 2025 estimated price-to-earnings (P/E) ratio, which is below the domestic peer average of 20x [4][15] - The stock is currently trading at 12x 2025 estimated P/E, with a forward free cash flow (FCF) yield of 6-7%, which is attractive compared to the peer average of 1% [6][28] Competitive Landscape - More provinces are announcing price hikes amid anti-involution, but the competition outlook for 2026 remains uncertain [5][28] - ZTO aims to prioritize market share gains in the long run, despite potential disruptions from anti-involution initiatives [5][28] Financial Metrics - Current market capitalization is Rmb109,666 million, with a share price of US$19.24 as of September 25, 2025 [8] - The company has a projected non-GAAP net profit of Rmb9.3 billion for 2025, exceeding consensus estimates of Rmb8.9 billion [13][42] Risks and Considerations - Risks include potential pricing competition resuming after peak season, which could lead to near-term earnings cuts and market share gains for ZTO [5][43] - The company faces challenges from intensified industry competition and potential market consolidation stagnation [43] Additional Important Information - ZTO's strategic initiatives include cash dividends with a 40% payout and share repurchases to enhance shareholder returns [28] - The company is focused on maintaining its market leadership position and improving unit profitability despite the competitive pressures [6][23]

Summary of the Conference Call on China's Wind Power Industry Industry Overview - The conference call focuses on the **wind power industry in China**, highlighting a significant turnaround after a down-cycle from 2022 to 2024, attributed to self-regulation and robust demand [3][12][39]. Key Points Demand and Installation Forecasts - **Domestic demand** is expected to remain resilient during the 15th Five-Year Plan (FYP), with forecasts of annual installations of **106GW for 2025**, **103GW for 2026**, and **105GW for 2027**, potentially reaching **~120GW per annum from 2028 to 2030**, including **15-20GW offshore annually** [4][12][45]. - Public tendering for wind projects was robust, with **21.5GW tendered** from June to August 2025, marking a **21% year-on-year increase** [13][45]. Industry Dynamics - The industry has achieved a **price and profitability turnaround** without significant government intervention, driven by: 1. **Increased demand** for wind installations, with a **79% year-on-year rise** in new installations in the first seven months of 2025 [40]. 2. **Recovery in bidding prices** for Wind Turbine Generators (WTG), with onshore prices rising **8%** and offshore prices **12%** in 2025 [52]. 3. **Supply chain consolidation** and improved quality focus among manufacturers due to past losses and accidents [15][41]. Investment Preferences - Preference for **key WTG component suppliers** and **submarine cable manufacturers** over WTG Original Equipment Manufacturers (OEMs) due to better margin recovery prospects [5][14]. - **ZTT** is highlighted as a preferred investment due to its strong valuation and expected growth in submarine cable deliveries [20]. Company-Specific Insights - **Sinoma S&T** upgraded to Overweight (OW) with a price target of **Rmb48.2**, reflecting a **98.9% increase in net profit estimates for 2025** and **117.1% for 2026** due to recovery in gross profit margins across its business segments [19][21]. - **Ningbo Orient** remains OW despite a **39.4% reduction in net profit estimates for 2025**, with a price target of **Rmb69.63** [22][23]. - **Riyue** and **Goldwind** are maintained at Equal Weight (EW) with adjusted price targets reflecting lower profit forecasts due to rising costs and reduced sales expectations [24][25][29]. Risks and Challenges - Potential risks include **delays in offshore project approvals**, **competition affecting offshore WTG prices**, and **increased costs for outsourced machining** [16][24][29][37]. - The industry faces challenges from **overseas shipment growth slowing down** and **delayed revenue recognition** for key offshore projects [30][32]. Conclusion - The wind power industry in China is positioned for a strong recovery, driven by robust demand and improved pricing dynamics. Key players in the supply chain are expected to benefit from ongoing margin recovery and favorable market conditions, making them attractive investment opportunities in the near term [42][43].

Summary of Key Insights from the China EV & Battery Tour Industry Overview - The report focuses on the **Electric Vehicle (EV)** and **Battery** industry in China, highlighting insights from the 3rd annual China EV and Battery Value Chain Tour held from September 15th to 19th, 2025 [1] Core Insights - **Optimism for Q4 2025**: Industry players are optimistic about EV demand in China for Q4 2025, driven by favorable policies and potential pull-forward demand due to uncertainty over subsidies in 2026. Battery supply chain players expect growth of **20-30% year-over-year**, while OEMs forecast a more conservative **10-15%** [2] - **Long-term Growth Confidence**: The industry remains confident in long-term EV growth, supported by rising EV adoption in Europe and domestic Energy Storage System (ESS) projects. Technological advances are addressing range and charging challenges, with strong demand growth expected in the coming years [3] - **Anti-involution Initiative**: The anti-involution initiative is welcomed by the industry as a framework to reduce low-quality, price-based competition. OEMs are committing to pay suppliers within **60 days**, improving supplier sentiment, although implementation is slow [4] - **ADAS Commoditization**: Advanced Driver Assistance Systems (ADAS) development is advancing, but commoditization is increasing. OEMs lagging in ADAS can adopt third-party solutions, making it less of a differentiator for consumers [5] Financial and Market Insights - **High Utilization Rates**: Battery and component makers report high levels of utilization, indicating potential for margin expansion. If demand remains strong, margins could reach cyclical highs, boosting earnings in upcoming quarters [6] - **Valuation Metrics**: The report includes a valuation table for various companies in the EV and battery sector, indicating performance metrics such as P/E ratios and expected earnings per share for 2024-2026 [7] Investment Implications - **Cautious Outlook for China EV Demand**: While long-term growth is anticipated, a near-term slowdown in China's EV demand is expected due to a high base effect and policy adjustments. EV sales penetration recently reached **55%**, with a forecasted growth of **10-15% year-over-year** in 2026 [8] - **Competitive Dynamics**: Despite government discouragement of aggressive price competition, competitive dynamics will persist. OEMs are focusing on incremental improvements to convert remaining internal combustion engine (ICE) holdouts to EVs [9] - **Stock Ratings**: The report rates various companies, with **BYD** and **Xiaomi** rated as Outperform, while **XPeng**, **Li Auto**, and **NIO** are rated as Market-Perform. For global energy storage, **CATL** and **Tianqi Lithium** are rated Outperform [10] Additional Insights - **Global Battery Comparison**: A comparison table of global battery companies is provided, detailing market capitalization, sales growth, and valuation metrics [12] - **Valuation Comps Table**: A detailed valuation comps table for various automotive companies is included, showcasing market cap, EV, cars sold, and other financial metrics [11] This summary encapsulates the key points from the conference, providing a comprehensive overview of the current state and future outlook of the EV and battery industry in China.

Summary of Key Points from the Conference Call Industry and Company Involvement - **Industry**: US-China Trade Relations - **Companies**: TikTok, Nvidia, Chinese automotive manufacturers Core Insights and Arguments 1. **Progress in US-China Trade Talks**: A framework deal for TikTok has been reached, pending final approval from the Presidents of both countries, indicating constructive dialogue between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng [2][9] 2. **Broader Deal Potential**: There is an expectation for a broader trade agreement that may include investment agreements, especially if an in-person meeting occurs between Presidents Xi and Trump later this year [3][9] 3. **Contention Areas**: Despite progress, the US has added 32 entities to its export restriction list, with 23 being Chinese, leading to retaliatory actions from China, including investigations into US chip trade policies and Nvidia's alleged anti-monopoly violations [4][9] 4. **Impact of Tariff Increases**: Mexico plans to raise import tariffs on cars from China and other Asian countries to 50%, significantly affecting Chinese auto exports, which accounted for 322,000 units (7.7% of total car exports) from January to July [5][9] 5. **Anti-Involution Campaign**: China is focusing on reducing local government protectionism to foster fair competition, as outlined in President Xi's speech on building a unified national market [10][11] 6. **Fiscal Policy Adjustments**: The Ministry of Finance plans to front-load local government bond quotas, potentially tapping into RMB2.8 trillion to improve cash flows for firms and settle government arrears [12][13] 7. **Services Consumption Plan**: A new plan has been unveiled to expand services consumption, particularly in telecommunications, healthcare, and education, with government funding and monetary support to facilitate this [16][9] Other Important but Potentially Overlooked Content 1. **Economic Activity Indicators**: Various operating rates in sectors such as semi-steel tyres, petroleum asphalt, and cement shipping have shown slight increases, indicating a potential recovery in industrial activity [17][20][22] 2. **Container Shipping Trends**: Container exports from China to the US have eased, while major ports' freight throughput remains above 2024 levels, suggesting mixed signals in trade dynamics [59][61] 3. **Price Trends**: Crude oil, steel rebar, cement, and glass prices have all edged down, reflecting broader trends in commodity markets [63][65][68] 4. **Foreign Direct Investment (FDI)**: Guangdong's FDI increased by 8.2% year-on-year, contrasting with a national decline of 13.4%, indicating regional economic resilience [82][84] This summary encapsulates the key points discussed in the conference call, highlighting the ongoing developments in US-China trade relations, economic policies in China, and the implications for various industries.