Investment Rating - The report maintains an "Overweight" (OW) rating for several companies including Genscript Biotech, Innovent Biologics, Kingdee International, and Zhongsheng Group Holdings [32][46][50][53]. Core Insights - The A-share SMid indices, particularly the micro-cap CSI2000, have outperformed the CSI300 year-to-date (YTD), with CSI2000 rising by 12.9% compared to CSI300's 0.2% [2][3]. - High-beta micro-caps have benefited from robust trading volumes and less national team ownership, leading to increased retail trading interest [3][4]. - The outlook for 2Q25 suggests a range-bound trading environment for MXCN, with potential upside driven by trade negotiations and possible reforms in China [4][8]. Summary by Sections Market Performance - The micro-cap CSI2000 has outperformed other indices, with H shares rising by 15% to 18% in USD terms compared to the flat performance of onshore indices [2][3]. - The consensus EPS for SMids has faced significant downgrades, with declines of 13% and 17% for CSI500 and CSI1000 respectively [8][16]. Sector Analysis - Defensive sectors such as Healthcare, Utilities, and Consumer Staples have performed well, while Real Estate and IT lagged behind [8][25]. - Healthcare and IT remain preferred themes, with expectations for biotech shares to benefit from improved policy outlooks and AI adoption in IT [8][25]. Company-Specific Insights - Kingdee International has seen a 51% increase in shares YTD, supported by AI adoption [10]. - Innovent's shares have surged by 98% YTD, driven by strong product sales and potential for significant revenue growth from new drugs [10]. - Genscript is expected to achieve a 45% CAGR from 2024 to 2026, with profitability anticipated in 2026 [10].