中国股票策略：2025 年，“反内卷” 和过度扩张突出-China Equity Strategy_ 2Q25_ anti-involution and overseas expansion stood out

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the performance of the MXCN and CSI-300 indices in the context of the Chinese equity market for 2Q25, highlighting trends such as "anti-involution" and overseas expansion [2][5]. Core Insights and Arguments - Earnings Performance: - MXCN reported flat EPS growth of +0.1% year-on-year (y-y) despite a sales per share growth of +6.1% y-y, leading to a net profit margin (NPM) contraction of -70 basis points (bps) y-y [2]. - CSI-300 showed slightly better results with a 3.1% y-y increase in EPS, flat sales per share growth of +1.1% y-y, and a small NPM expansion of +18 bps y-y [2]. - Consensus forecasts for EPS growth in 2025/2026 are +4.8%/+12.6% for MXCN and +14.3%/+13.3% for CSI-300, indicating a need for catch-up in the second half of 2025 [2]. - Sector-Specific Insights: - E-commerce: Companies like JD and Meituan faced profitability challenges due to intense competition, while Alibaba managed to offset losses from its international business [5]. - Automotive: BYD's earnings were 30% below consensus due to price cuts affecting gross margins, but discounts have started to narrow since July [5]. - Solar Industry: Daqo reported a 35% quarter-on-quarter decline in sales volume, but pricing has improved in 3Q25 [5]. - Baijiu Sector: EPS for MXCN's baijiu companies fell 24% y-y, attributed to "involution" and soft demand [5]. - Logistics: ZTO reported a 26% y-y decline in net profit, but pricing has started to improve due to government initiatives [5]. - Overseas Revenue Growth: - The overseas revenue mix for MXCN and CSI-300 increased from 11%/17% in 2024 to 14%/19% in 1H25, indicating a positive trend for margins as offshore markets are less affected by "involution" [5]. - Notable increases in overseas revenue ratios were seen in consumer discretionary sectors, with BYD and Leapmotor showing significant growth [5]. - Financial Sector Performance: - Non-bank financials showed strong performance with a +4.7% y-y EPS growth, while banks reported flat EPS growth of +0.2% y-y [7]. - Insurance companies like New China Life and CPIC reported robust EPS growth rates of 61% and 45% y-y, respectively [7]. - Real Estate Sector: - The sector is showing signs of bottoming out, with a -5.5% y-y EPS decline, but some companies like KE Holdings reported revenue growth despite profit declines [7]. Additional Important Insights - Market Expectations: - The consensus estimates for EPS growth in 2H25 are +5.8% for MXCN and +23.9% for CSI-300, indicating a significant gap that needs to be addressed [7]. - The impact of "anti-involution" is expected to play a crucial role in improving pricing, margins, and EPS outlook for 2H25 and 2026 [7]. - Stock Recommendations: - Top picks for 2H25 include Tencent, Alibaba, and CATL, among others, with a focus on sectors like Communication Services, Healthcare, and IT [8]. - Index Targets: - MXCN closed at 82, with a base-case target of 80 and a bull-case target of 89 for end-2025, while CSI-300 closed at 4,365, slightly below the bull-case target of 4,420 [8]. This summary encapsulates the key points discussed in the conference call, providing insights into the performance of the MXCN and CSI-300 indices, sector-specific trends, and market expectations moving forward.