Summary of Wanhua Chemical Conference Call Company Overview - **Company**: Wanhua Chemical - **Industry**: Chemicals, specifically polyurethanes - **Market Share**: ~30% for MDI, 19% for TDI, and 21% for aliphatic diisocyanates (ADI) [12][62] Key Financial Performance - **2Q NP**: Rmb3 billion, down 1% q/q and 24% y/y, in line with expectations [2] - **1H25 NP**: Represented 46% of the full-year estimate of Rmb13.2 billion [2] - **GPM**: 12% in 2Q, the lowest since 2002; 1H25 GPM turned negative for the first time in history at -0.4% [8][12] - **Admin Expenses**: Decreased by 41% q/q and 40% y/y to Rmb438 million, the lowest in recent years [8][27] Operational Insights - **Fujian Connell Expansion**: 330ktpa expansion started trial operations in July; slow ramp-up expected due to weak demand [2][19] - **TDI Prices**: Increased by 43% in July to Rmb16,700/t due to Covestro's force majeure; however, demand remains sluggish [8][19] - **Capacity Updates**: Major expansions planned, including a 700ktpa MDI capacity increase pending environmental approval [19] Market Dynamics - **Impact of US-China Trade War**: Escalation may lead to lower earnings for MDI exports and chemicals linked to global GDP/PMI [12][62] - **TDI and MDI Spread Sensitivity**: Wanhua is more exposed to MDI than TDI; a Rmb1,000/t increase in TDI spread could impact EPS by 4% [19] Financial Forecasts - **FY25 NP Forecast**: Expected decline of 5% y/y to Rmb12.4 billion [2] - **Price Target**: Rmb55 based on a 15x one-year forward P/E, consistent with historical averages [13][63] - **Consensus vs. JP Morgan Estimates**: JP Morgan's NP estimates are lower than consensus for FY25 and FY26 [23] Risks and Considerations - **Tariff Impacts**: Ongoing tariffs may affect earnings from MDI exports and other chemical products [12][62] - **Demand Weakness**: Slow demand recovery could limit price increases and affect profitability [8][19] Additional Insights - **Cost Control**: Management attributed flat performance to improved cost control despite declining MDI spreads [2] - **Future Capacity**: New capacities expected to come online in 2H25-1H26, including expansions in Hungary and Xinjiang [19][26] This summary encapsulates the key points from the conference call, highlighting Wanhua Chemical's financial performance, operational updates, market dynamics, and future outlook.

Core Viewpoint - Apple is shifting its iPhone supply chain to India to mitigate the impact of US tariffs on Chinese imports, expecting a $900 million cost due to tariffs in the current quarter [3][4][5]. Group 1: Financial Performance - Apple reported a revenue of $95.4 billion and a profit of $24.8 billion for the recently ended quarter, primarily driven by iPhone sales [9]. - The company experienced a 3% decline in revenue from China, despite expectations for growth due to government subsidies aimed at stimulating demand [10]. Group 2: Supply Chain Adjustments - Tim Cook indicated that a majority of iPhones sold in the US will originate from India, as Apple seeks to reduce its exposure to future tariff risks [4][8]. - Production of iPads, Macs, Apple Watches, and AirPods for the US market is expected to shift to Vietnam, while China will remain the primary manufacturing location for products sold outside the US [8]. Group 3: Tariff Impact - The estimated impact of US tariffs on Apple is projected to add $900 million to costs, although the initial effects were described as "limited" [4][5]. - High-end tech goods, including smartphones, received temporary exemptions from tariffs, but not all components used in Apple devices are exempt, leading to increased costs [6]. Group 4: Strategic Insights - Apple has been building inventory ahead of tariff implementations, indicating proactive measures to manage supply chain disruptions [7]. - Analysts express concerns regarding the execution timeline, capacity limitations, and potential cost increases associated with the shift in manufacturing to India [11].

Investment Rating - The report maintains a positive outlook for the China equity market, with a base case index target for MXCN at HK$80 for 2025, implying a 30% upside from current levels [17][26]. Core Insights - The report indicates a broad-based recovery in the MXCN/CSI300 indices, driven by national team buying and expectations of new policy easing, with a modest increase of 1.6% week-on-week [8]. - The report highlights a potential easing of US-China trade tensions, with improved macro data from China leading to a more favorable QMI reading [9]. - The investment strategy suggests a focus on high-yield sectors such as Energy, IT, and Utilities, while advising caution in Consumer Discretionary and Materials [10][36]. Market & Sector Performance - The report provides detailed sector performance metrics, showing Consumer Discretionary up 1.5% week-on-week but down 20.2% month-to-date, while Real Estate outperformed with a 3.0% increase [6]. - The MSCI China index showed a 1.5% increase over the week but a decline of 14.6% month-to-date [6]. Catalyst Calendar - The report outlines key upcoming macroeconomic events in China, including LPR announcements and housing transaction data, which could influence market movements [13]. Consensus Macro Forecasts - The report presents GDP growth forecasts for China, projecting 5.0% for Q1 2025, slightly revised from previous estimates [15]. QMI & Index Targets - The report sets specific index targets for MSCI-China and CSI-300, with the latter projected at 3,772 RMB for 2025, indicating a 10% upside potential [18]. Investment Recommendations - The report recommends a barbell strategy focusing on high-yielders and selected thematic plays in Internet and AI sectors, while advising a rotation into quality laggards [36][38]. - Specific sector recommendations include Overweight (OW) for Energy, IT, and Utilities, while downgrading Consumer Discretionary and Materials to Underweight (UW) [38].