Investment Rating - The report maintains a "Strong Buy" rating for the company, with a target price of HKD 321.9 [2][8]. Core Insights - The company's H1 2025 performance exceeded expectations, with revenue growth projected to be at least 200%, corresponding to revenue of at least HKD 13.67 billion. The group's profit growth is expected to be at least 350%, corresponding to a profit of at least HKD 4.34 billion, with a profit margin of approximately 31.7%, an increase of 10.6 percentage points year-on-year [2][8]. - The report highlights the ongoing enhancement of brand momentum and the successful expansion of the IP ecosystem, with new product launches receiving positive market feedback [2][8]. - The company is expected to continue its impressive performance in the domestic market while expanding its presence in overseas markets, supported by the influence of celebrity endorsements [2][8]. Financial Summary - Projected total revenue for 2024 is HKD 13.04 billion, with a year-on-year growth rate of 105.5%. By 2025, revenue is expected to reach HKD 30.05 billion, reflecting a growth rate of 130.5% [4][9]. - The projected net profit for 2024 is HKD 3.13 billion, with a year-on-year growth rate of 188.8%. By 2025, net profit is expected to increase to HKD 9.38 billion, with a growth rate of 200.1% [4][9]. - The report anticipates a steady increase in earnings per share (EPS), projected at HKD 2.33 for 2024, rising to HKD 6.98 in 2025 [4][9].

Investment Rating - The report maintains a strong buy rating for the company [1][4] Core Views - The company's manufacturing business revenue increased by 2.5% in Q2 2025, with a shipment volume increase of 4%, but the average selling price decreased by 2% [1] - Employee efficiency improvements are slower than expected, leading to capacity ramp-up challenges, which are expected to impact short-term profitability [1] - The company is expected to bear some tariff costs in the second half of 2025, particularly in Q4, but these impacts are anticipated to lessen in the following year [1] - The company has a strong order book for Q4 2025 and is actively expanding its customer base, with plans to onboard new clients in 2026 [1] Financial Data and Valuation - Total revenue for 2025 is projected at $1.614 billion, with a year-on-year growth rate of 4% [3] - Net profit for 2025 is expected to be $169 million, reflecting a slight decline of 1% year-on-year [3] - The company’s PE ratios are projected at 9X for 2025 and 8X for 2026, indicating a favorable valuation [1][3] - The company’s total assets are expected to reach $1.420 billion by 2025, with a total liability of $317 million [8] Performance Metrics - The company’s gross margin is projected to be 24.2% in 2025, with a net margin of 10.5% [9] - Return on equity (ROE) is expected to remain stable at 15.5% for 2025 [9] - The company’s debt-to-asset ratio is projected to be 22.3% in 2025, indicating a manageable level of debt [9]

Core Viewpoint - The article argues that the market may overestimate the impact of tariffs on exports, suggesting that the elasticity of tariff shocks is non-linear and may decrease as tariff rates increase, leading to a more muted impact on exports than previously assumed [2][9]. Group 1: Misconceptions about Tariff Impact - The elasticity of tariff shocks exhibits a "non-linear decreasing" characteristic, meaning that as tariff rates rise, the marginal impact on exports may decline. For instance, the elasticity of the tariff shock for the current 145% tariff has dropped from 1.8 to 0.3 [2][12][15]. - Tariffs have a "reflexive" nature, where U.S. importers can apply for exemptions, which were not negotiated by China but initiated by U.S. importers. During the first round of tariffs, the exemption rate reached as high as 60% for certain goods, indicating the significant impact of trade friction on the U.S. economy [2][21][22]. - The U.S. has recently issued a new round of tariff exemption lists, with a total import scale of $22.03 billion from China, suggesting that the sustainability of high tariffs is questionable [2][30]. Group 2: Trade Partners' Counterbalancing Power - Canada and Mexico have not been subjected to reciprocal tariffs, becoming key "trade transit" channels that can mitigate the export pressure on China to the U.S. by up to 23% [3][41]. - Emerging markets are seen as partners rather than adversaries, with a significant portion of exports to these countries driven by their internal demand rather than just supply chain collaboration [3][43][49]. - The deep integration of supply chains means that imposing tariffs on China could hinder the industrialization processes of emerging countries, as they rely heavily on Chinese intermediate and capital goods [3][53]. Group 3: Confusion between Exports, GDP, and Employment - The article highlights the confusion between the concepts of export value and GDP, emphasizing that a decline in exports does not necessarily equate to a decline in GDP due to the buffering effect of imports [6][58]. - The shift towards general trade, which reduces reliance on imports, has led to a significant increase in trade surpluses, particularly in sectors like mobile phones, indicating a structural change in trade dynamics [6][63][65]. - The impact of export declines on domestic employment is overstated, as the elasticity of employment response to export changes is less than one, meaning that domestic job creation can occur through import substitution [6][73][80].

Market Performance - A-shares opened significantly lower, with the Shanghai Composite Index down 4.46%, Shenzhen Component Index down 5.96%, and ChiNext Index down 6.77% [5] - The North China Stock Index opened with a sharp decline of 7.04% [4] - The Hong Kong stock market also experienced a severe drop, with the Hang Seng Index down 9.28% and the Hang Seng Tech Index down 11.15% [11] Sector Performance - All major sectors in A-shares saw declines, with communication equipment, components, general machinery, and non-ferrous metals all dropping over 7% [7] - The agriculture, forestry, animal husbandry, and fishery sector showed relative resilience, with a decline of less than 1% [8] Impact of US Tariff Policy - The US tariff policy continues to impact global financial markets, leading to significant declines in A-shares and Hong Kong stocks [2][10] - The tariff policy is viewed as a tool for negotiation and coercion by the US, affecting various sectors in China, particularly electronics, light industry, and textiles [15][17] - The electronics sector, which accounts for 20% of China's exports to the US, is expected to face pressure due to the tariffs [17] Export Dependencies - The pharmaceutical and biotechnology sectors have a high dependency on exports to the US, with 25% of their total exports expected to be directed to the US in 2024 [18] - The automotive parts and home appliance sectors also have significant exposure to the US market and are likely to be heavily impacted by the tariffs [20]