Core Viewpoint - The A-share market is expected to focus on structural opportunities as the mid-year reporting season approaches, with attention on sectors with strong performance and high safety margins, as well as policy-driven consumer sectors and core assets in innovative pharmaceuticals [1][5][8]. Market Performance - The A-share market saw a rise last week, with the Shanghai Composite Index reaching a new high for the year, while the Shenzhen Component Index and the ChiNext Index increased by 3.73% and 5.69%, respectively [1]. Economic Indicators - In the first five months of the year, China's industrial enterprises reported a total profit of 27,204.3 billion yuan, with gross profit increasing by 1.1% and operating revenue rising by 2.7% year-on-year, indicating ongoing industrial economic transformation [2]. Fundraising Trends - As of June 24, 13 out of the 26 newly approved floating rate funds have been established, raising over 12.6 billion yuan, with several funds exceeding 1 billion yuan in fundraising [4]. Investment Insights from Institutions - CITIC Securities suggests that the mid-year reporting season will primarily present structural opportunities, with active funds shifting from pharmaceuticals and consumer sectors to technology and finance [5]. - Shenwan Hongyuan emphasizes the importance of focusing on long-term positive factors, suggesting that the market may experience short-term fluctuations but will stabilize in the long run [7]. - China Galaxy Securities identifies three main investment lines: high safety margin assets, technology sectors, and policy-driven consumer sectors [8]. - HSBC Jintrust Fund expresses optimism for the second half of the year, particularly for cyclical sectors due to improved supply-demand dynamics [9]. - ICBC Credit Suisse Fund highlights the potential of core assets in innovative pharmaceuticals, anticipating significant developments in 2025 [10]. - Morgan Asset Management focuses on four key areas: AI, pharmaceuticals, consumer goods, and power batteries, indicating strong investment opportunities in these sectors [11].

Summary of Key Points from Conference Call Records Industry Overview - **Consumer Sector**: The consumer sector in China is currently facing challenges due to a lack of growth engines, but there are signs of recovery driven by export growth and improvements in domestic economic activities. [1][4] - **Retail Sector**: The retail sector is experiencing supply surplus and insufficient demand, necessitating a focus on new demand opportunities, including traditional channel transformations and the rise of instant retail. [1][7] Core Insights and Arguments - **Economic Recovery**: The recovery of exports is expected to positively impact domestic economic activities and consumption, with a notable rebound in personal income tax indicating a gradual recovery in residents' income. [1][4] - **Investment Strategy**: In July, the investment strategy should avoid liquidity-driven assets and focus on service consumption and high-turnover goods that are less affected by liquidity pressures. [1][4] - **New Consumption Trends**: New consumption is identified as a key growth driver for the next two to three years, emphasizing the creation of new consumption scenarios and business models, particularly in high-turnover and low-leverage service consumption. [1][5][6] Specific Areas of Focus - **Service Consumption**: Investment opportunities in the consumer sector are concentrated in emotional value consumption (e.g., trendy toys, pets) and functional value consumption (e.g., AI-related products). [6] - **Cross-Border Trade**: Companies engaged in cross-border trade should focus on supply chain management, brand premium capabilities, and channel premium capabilities due to tightening trade policies. [8] - **E-commerce Performance**: The 2025 618 e-commerce promotion met expectations, with Douyin's growth exceeding forecasts, highlighting a trend of collaboration across platforms. Instant retail channels performed exceptionally well during this event. [9][10] Additional Important Insights - **Tobacco Industry**: The tobacco industry is showing a stable upward trend, with new products like Glohilo from British American Tobacco expected to perform well in Japan. [3][11][12] - **Home Appliances**: The home appliance sector is expected to see double-digit growth driven by national policy support, with leading companies using pricing strategies to enhance market share. [3][22] - **Household Goods**: The household goods sector is stabilizing at the bottom, with a focus on companies that can demonstrate alpha capabilities. [3][13] - **Competition in Cleaning Appliances**: The competition in the cleaning appliance sector is easing, benefiting companies like Roborock and Ecovacs, with expectations of rising industry profit margins. [3][20] Conclusion The conference call highlighted the complexities and opportunities within various sectors of the Chinese economy, particularly in consumer and retail markets. The focus on new consumption trends, service-oriented products, and strategic adjustments in response to economic conditions will be crucial for navigating the current landscape.

Investment Rating - The report emphasizes a strong hold on high-conviction new consumption leaders, focusing on themes such as emotional consumption, functional value, channel transformation, and brand expansion abroad [2][8] Core Insights - The new consumption sector is expected to see a rise, with a focus on both established leaders and traditional companies adopting new consumption strategies [2][8] - The report suggests that Q3 will present structural opportunities, while Q4 is anticipated to see leading companies reaching new highs [2][8] - The light industry manufacturing sector is highlighted for its growth potential, particularly in new tobacco products and the home goods market [3][16] - The textile and apparel industry is advised to focus on differentiated companies with high growth potential [5][20] - The beauty and personal care sector remains robust, with recommendations for high-value stocks [5][21] - The home appliance sector shows strong performance in sales, particularly during the 618 shopping festival [5][22][23] - The retail sector is experiencing a shift, with online sales stabilizing and offline stores undergoing significant transformations [5][24][25] Summary by Sections New Consumption - Focus on holding high-conviction new consumption leaders and exploring traditional companies with new consumption mindsets [2][8] - Q3 is seen as a period for structural opportunities, while Q4 may bring valuation shifts for leading companies [2][8] Light Industry Manufacturing - New tobacco products are on an upward trend, with significant market expansion expected [3][16] - The home goods market is stabilizing, with a focus on companies showing signs of recovery [3][16] Textile and Apparel - The sector is advised to prioritize companies with unique advantages and high growth potential [5][20] Beauty and Personal Care - The sector remains high in demand, with recommendations for companies showing strong performance and recovery potential [5][21] Home Appliances - The sector has shown excellent sales performance, particularly during promotional events, with a notable increase in production [5][22][23] Retail Sector - The online retail landscape is stabilizing, with significant changes in offline retail strategies [5][24][25]

Core Insights - The pet industry in China is experiencing rapid growth, with the number of pets expected to reach 430 million by 2024, driven by urbanization, smaller family structures, and changing social dynamics [1][2] - The report highlights a significant shift in consumer demographics, with over 60% of pet owners being from the "90s" and "00s" generations, who are increasingly willing to invest in their pets' health and well-being [1][2] - The market for pet-related businesses has grown at a compound annual growth rate (CAGR) of 25.4%, increasing from 97.8 billion RMB in 2015 to 592.8 billion RMB in 2023, and is projected to reach 811.4 billion RMB by 2025 [1][2] Market Drivers - The rapid increase in pet numbers is a fundamental driver of market expansion, leading to growth in pet food, supplies, and medical services [2] - Changing consumer attitudes towards pet ownership are shifting the market from a focus on basic needs to a more emotional and lifestyle-oriented approach [2] - Social media plays a crucial role in influencing purchasing behaviors, with online channels becoming the primary sales avenue for pet food [2] Challenges - The pet industry faces challenges such as food safety concerns, which have led to a trust crisis among consumers regarding pet food quality [3] - Increased competition from a growing number of brands poses a challenge for companies in the market [3] - The regulatory framework for the pet economy is still developing, necessitating improvements to ensure consumer protection and industry standards [3]

Group 1 - The event "Intelligent Consumption, Trendsetting Future" focused on the emotional economy and its high-quality development, gathering industry experts, corporate representatives, and scholars to discuss trends and insights [4][9] - The emotional economy, represented by products like LABUBU, is gaining popularity, with a projected market size exceeding 100 billion yuan by 2025 [10][20] - The government is prioritizing consumer spending, with a 52% increase in the mention of "consumption" in this year's work report, reflecting its importance in economic recovery [7][8] Group 2 - Emotional consumption is primarily driven by the Z generation, single individuals, and the elderly, who seek emotional value and unique experiences in their purchases [10][11] - The emotional economy includes sectors like trendy toys and pet products, with a significant focus on emotional resonance and consumer engagement [12][14] - The market for emotional consumption is expected to grow, with AI and technology playing a crucial role in enhancing consumer experiences [17] Group 3 - Guangdong's immersive consumption scene has a coverage rate of 30%, indicating substantial growth potential in service consumption [8] - The toy industry in Guangdong is transitioning from manufacturing to creative design, emphasizing the need for innovative talent to drive emotional engagement [12][13] - The pet economy is expanding rapidly, with consumers increasingly viewing pets as family members, leading to a rise in pet-related services and products [15][16] Group 4 - The rise of "light health" products, such as traditional health drinks, is meeting the demands of young consumers, with the market expected to grow significantly [19][20] - The cosplay market is thriving, particularly among the Z generation, highlighting the emotional needs for recognition and belonging [21] - The interest consumption sector for the elderly is growing, with a call for more standardized and professional services to meet their needs [22]

Group 1 - China is the world's second-largest consumer market with the largest middle-income group, indicating significant investment and consumption potential [1] - The "Global Brand China Online 500" list, based on consumption data from China's largest e-commerce platform, reflects the preferences of nearly 1 billion Chinese consumers, featuring 156 international brands from 17 countries [1][2] - The presence of 57 American brands, 53 European brands, and 28 Japanese brands on the list demonstrates China's attractiveness to major global economies [1][2] Group 2 - International and domestic brands are showing a trend of collaborative development and mutual benefits, particularly in sectors like beauty and sports, where international brands dominate due to their technological advantages [2] - Domestic brands are innovating based on local market needs, moving up the value chain, and gaining popularity both domestically and internationally [2] - The digital economy platform facilitates the deep integration of international and domestic brands in China, enhancing interaction with consumers and accelerating localization [2] Group 3 - International brands that seize opportunities in China's vast market can share in the economic development benefits, as seen with Adidas empowering its local team for product design and manufacturing [3] - Embracing the Chinese market is essential for international brands to gain a competitive edge globally, as the market offers significant consumer power with over 400 million middle-income individuals [3] - China's commitment to high-level openness and consumption upgrades is crucial for both its economic quality and global economic recovery [3]

Core Insights - The rise of emotional economy is reshaping consumer behavior, with young generations prioritizing emotional satisfaction in their purchasing decisions [1][4][3] - A significant 64% of Chinese consumers consider emotional fulfillment as their primary need, indicating a shift from functional to emotional consumption [4][3] - The emotional economy is becoming a new economic engine, with notable growth in sectors like trendy toys, pets, and outdoor activities [3][4] Emotional Consumption Trends - Over 80% of respondents reported engaging in emotional consumption in the past year, with preferences varying by age group [12][5] - The survey revealed that 92.53% of 90s generation consumers prefer tangible products like fragrances and toys, while 00s generation favors virtual experiences and social engagement [11][10] - Emotional consumption motivations include seeking companionship and emotional resonance, with 97.34% of respondents citing these as primary reasons [11][21] Market Dynamics - The emotional economy is reflected in the explosive growth of brands and stores, with 453 brands achieving over 100 million in sales during recent shopping events [3] - The emotional marketing landscape is influenced by factors such as live streaming, celebrity endorsements, and consumers' current moods, particularly among younger demographics [21][3] - The emotional economy is characterized by a focus on personalized needs, with over 65% of respondents believing it meets individual desires [21]

Core Insights - The report highlights the rapid expansion of China's pet industry in the international market, with exports reaching $5.8 billion in 2023 and projected to exceed $6.5 billion in 2024, driven primarily by pet food, which accounts for 55% of exports [1] - The United States remains the largest market for pet products, holding a 40% share of the global pet market, with a household penetration rate of 70% [1][26] - Emerging markets such as Southeast Asia and Latin America show significant growth potential, with Indonesia's pet market expected to grow from $2.3 billion in 2023 to $5.9 billion by 2033 [1][44] Industry Overview - The global pet products market was valued at $261 billion in 2022 and is expected to reach $350 billion by 2027, with a compound annual growth rate (CAGR) of approximately 6.1% [10] - The U.S. pet market is projected to reach $80.69 billion in 2024, with pet food and treats accounting for $64.41 billion of that total [26] - In Europe, the pet market is also substantial, with a total value of approximately €29.2 billion, indicating strong demand for pet products [30] Export Overview - China's pet product exports have shown consistent growth, with a peak of $4.39 billion in 2022, followed by a slight decline to $3.96 billion in 2023 [13] - The main export categories include pet food, toys, clothing, and care products, with a complete supply chain from raw materials to logistics [14] - The U.S., Germany, and the UK are the primary destinations for Chinese pet food exports, with significant growth rates observed in these markets [17] Market Analysis - The North American market is a major driver for pet e-commerce, with platforms like Chewy and PetSmart leading the way [24] - In Europe, there is a strong emphasis on high-quality and natural products, with German platforms like Zooplus setting market trends [24] - The Asia-Pacific region, particularly China, is witnessing rapid growth in pet e-commerce, driven by platforms like JD and Taobao [24] Competitive Landscape - Chinese pet companies possess advantages such as cost efficiency, manufacturing capabilities, product innovation, and e-commerce experience [22] - Challenges include insufficient brand influence, quality control issues, and regulatory barriers in foreign markets [22] - Opportunities arise from the growing global pet market, diverse consumer demands, and the rise of digital marketing [23]

Core Viewpoint - The new consumption sector in the Hong Kong stock market is performing well, with "Pop Mart, Lao Pu Gold, and Mixue Group" being viewed as the three giants. Meanwhile, the A-share market is also seeing significant interest in new consumption leaders, with many companies experiencing stock price increases of over 30% since Q2 of this year [1]. Group 1: A-Share Market Performance - Several A-share new consumption companies, such as Mankalon (300945.SZ) and Zhou Dazheng (002867.SZ), have attracted over 10 institutional research visits since May, indicating strong institutional interest [1]. - Mankalon's stock price has increased nearly 50% in the last two months, reflecting the growing attention from institutions [2]. - In Q1, Mankalon reported revenue of 714 million yuan, a year-on-year increase of 42.87%, and a net profit of 43.01 million yuan, up 33.52% year-on-year [2]. Group 2: Institutional Research Focus - Institutions are particularly interested in sectors such as gold and jewelry, food and beverage, apparel, and pet products, with topics like gold prices, trendy IPs, and young consumer preferences being key areas of focus [2]. - Mankalon has been researched 16 times by 77 institutions, while Zhou Dazheng has been visited 14 times by 144 institutions, ranking among the top in the A-share market [2]. Group 3: Impact of Rising Gold Prices - The surge in gold prices has negatively impacted consumer willingness to purchase, particularly affecting mid-to-high weight gold jewelry [3]. - Zhou Dazheng's management acknowledged the significant disruption caused by rising gold prices and emphasized the need to adapt to changing consumer preferences [3]. - Companies like Mankalon and Zhou Dazheng are focusing on brand positioning and product innovation to capture market share amidst these challenges [3][4]. Group 4: Targeting Young Consumers - The focus on young consumer demographics is a common strategy among consumption companies, with Mankalon aiming to align product design with young consumers' cultural aesthetics [5]. - Zhou Dazheng is launching a new brand "Zhuan Zhu Ge" targeting young consumers with a focus on cultural and trendy products [6]. - Companies are also enhancing their presence in high-end shopping centers to attract younger customers [6]. Group 5: AI Empowerment Strategies - Institutions are increasingly interested in how companies are leveraging AI technology, with Zhou Dazheng establishing an AI project team to enhance operational efficiency [7]. - Mankalon plans to integrate AI into its design and customer service processes to better understand consumer needs [7]. - Other companies, such as Chuangyuan Co., are also adopting AI-driven strategies to improve customer insights and product development cycles [7]. Group 6: Market Resilience and Innovation - The consumer market is showing resilience, with a gradual recovery expected, prompting companies to innovate continuously to meet diverse consumer demands [8]. - Companies are encouraged to shift from traditional sales models to innovative product offerings and new distribution channels to thrive in a competitive environment [8].

Group 1: New Consumption Trends - The core driving force of new consumption lies in a deep understanding of "people" and value resonance, with five key investment opportunities identified [2] - The new consumption index in the capital market has performed well, driven by generational shifts and consumption upgrades, indicating a profound structural transformation in the Chinese consumer market [1][2] - Key sectors include trendy toys, pets, tea beverages, discount retail, and AI consumption, with emotional and companionship economies showing significant potential [2] Group 2: AI and Digital Assets - AI is driving a shift from "software as a service" to "results as a service," with advancements in AI Agent technology leading to greater autonomy and personalized experiences [1] - Stablecoins are reshaping societal perceptions and usage of currency due to their stability, speed, accessibility, and practicality [1] Group 3: Energy Transition and Nuclear Fusion - The nuclear fusion industry is approaching a critical point of transitioning from scientific research to engineering practice and commercial application, with significant potential for investment [3] - High-temperature superconducting materials are key to breakthroughs in nuclear fusion, with the industry projected to have a trillion-dollar market potential [3] - The existing nuclear power industry has potential technology transfer value and synergies with the development of fusion technology [3]