28 February 2025 Equity Research Report China Power T&D Equipment Equities Concerns on price competition overdone The share prices of the five power equipment stocks we cover (Pinggao, Xuji, Nari, Huaming, Sieyuan) have dropped 1-18% YTD (vs CSI 300 index up 1%). We believe the correction is likely due to concerns on price cuts in the grid sector. The State Grid issued a notice (9 January 2025) to expand the scope of joint procurement in second-level regions. While the new policy could invite price cuts to ...

February 28, 2025 02:46 PM GMT China Property | Asia Pacific Major Developers' February Sales Stayed Decent, but Sustainability Remains Key CRIC preliminary sales data show contracted sales of 30 major Industry View In-Line developers we track dropping 16% y-y on average in February from a low base. We expect their sales growth to weaken in coming months owing to reduced landbank, reactive policy rollout, and higher base. Major developers posted positive sales growth in February, as we expected: The top 50 ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the retail sales performance in China, highlighting the divergent trends across different city tiers [2][3]. Core Insights 1. **Weak Consumption as a Structural Issue** - Weak consumption is identified as a major structural problem in China, contributing to a supply-demand imbalance and prolonged deflation pressure. From 2022 to 2024, consumption contributed an average of 2.8 percentage points to GDP growth per annum, significantly lower than the 4.2 percentage points from 2016 to 2019 [3][12]. 2. **Retail Sales Growth Disparity** - Cumulative retail sales growth from 2022 to 2024 was only 3.5% in tier-1 cities, compared to 8.6% in tier-2 cities and 11.2% in lower-tier cities [4][5]. This indicates a significant divergence in retail performance across city tiers. 3. **City-Level Performance Variability** - Among 168 cities analyzed, 8 cities reported over 20% cumulative growth, while 5 cities experienced a contraction. Notably, Beijing and Shanghai reported declines of -5.4% and -0.8%, respectively [6][8]. 4. **Household Income as a Key Driver** - A strong positive correlation exists between household income growth and retail sales growth, with an R-squared value of 0.32. This suggests that household income is a critical factor influencing consumption [9][12]. 5. **Policy Implications for Consumption Boost** - The report discusses the need for policies that boost household income and consumption. Direct fiscal transfers, such as cash handouts or consumption vouchers, are seen as temporary solutions. A more sustainable approach would involve broadening employment and income bases, particularly in the service sector [12][28]. 6. **Housing Market Dynamics** - The housing market's impact on consumption is multifaceted, involving both wealth effects and debt service burdens. The report notes that the decline in home prices has negatively affected consumption, particularly in tier-1 cities where home prices remain high relative to income [14][29]. 7. **Debt Service Burden and Affordability** - The average home price to income ratio was 17.0 in tier-1 cities, compared to 8.6 in tier-2 and 6.9 in tier-3 cities. High ratios in tier-1 cities correlate with weaker retail sales growth due to increased mortgage burdens [23][24]. 8. **Government Actions and Local Discretion** - Recent government actions to support consumption, such as trade-in subsidies, are noted. However, the effectiveness of these measures may vary across cities, necessitating local discretion to maximize impact [30][27]. Additional Important Insights - The report emphasizes the importance of addressing the social safety net and public services to reshape household expectations and reduce precautionary savings [13][28]. - The ongoing debate regarding effective policy measures to stimulate consumption highlights the complexity of the economic landscape in China [12][27]. This summary encapsulates the key findings and insights from the conference call, providing a comprehensive overview of the current state of retail sales in China and the factors influencing consumption trends.

Flash | 28 Feb 2025 05:26:07 ET │ 10 pages China Materials 2025 On-ground Demand Monitor Series #26– Funding Availability Rate Data Tracker CITI'S TAKE In this series of notes, we aim to track and analyze high-frequency on- ground demand trends in China – market expectation on demand recovery has been largely cautious. Our new sector pecking order is: Steel > Battery >Aluminum > Gold> Copper > Cement > Lithium > Coal (see our notes: China Steel: Supply Reform 2.0 a Potential Game Changer, Upgrade Steel Name ...

Summary of Conference Call on Mid-Cap Life Science Tools & Services Industry Overview - The conference call focused on the **CRO/CDMO** (Contract Research Organizations/Contract Development and Manufacturing Organizations) sector within the **China Healthcare** industry, particularly in the **Asia Pacific** region. [1][2] Key Insights - The general outlook for **CRO/CDMO** companies is improving in **2025**, driven by better-than-expected tariff scopes, solid overseas order trends, and stabilized domestic pricing. Quality players with high-quality order books and visible earnings recovery paths are expected to outperform peers. [3][23] - **Pharmaron** is highlighted as the most preferred pick among mid-cap CRO/CDMOs, showing continued earnings recovery due to robust CMC (Chemistry, Manufacturing, and Controls) progress and minimal tariff exposure. [4][23] - **GenScript** is undergoing a turnaround in its non-cell business, with potential catalysts including further disposals of its subsidiary **Legend Biotech**. [5][29] - **Asymchem** has a favorable geographical revenue mix but faces margin pressure in the next 12 months. [5] - **Joinn Lab** and **Tigermed** are viewed positively for their long-term prospects due to domestic leadership, although significant earnings improvement is expected to take time. [5] Financial Performance and Projections - **Pharmaron** anticipates a **10-15% revenue growth** in 2025, supported by a **20%+ new backlog growth** in 2024. The company reported a preliminary adjusted non-IFRS net profit range of **Rmb1.55-1.66 billion** for 2024, indicating a potential earnings turnaround. [26][27] - **GenScript** expects stable bottom-line performance for its non-cell business units, with high-single-digit revenue growth anticipated in 2024 and further recovery in 2025. [29] - **Asymchem** recorded over **20% new backlog growth** in 2024, with expectations of double-digit revenue growth in 2025, despite limited margin visibility. [33] - **Tigermed** reported preliminary 2024 results with operating revenue between **Rmb6 billion and Rmb7 billion**, and recurring net profit between **Rmb830 million and Rmb1 billion**, which fell below estimates. [34] Market Dynamics - Milder-than-expected tariff scopes are creating a positive landscape for 2025, with long-term decoupling risks largely priced in. [9][23] - The impact of **AI applications** in drug R&D and manufacturing is expected to create long-lasting positive value for CRO/CDMO companies, although significant breakthroughs are not anticipated in the near term. [16][20] - Domestic policies supporting innovative drug development are expected to benefit CRO/CDMO companies, leading to improved funding and cash positions for domestic clients. [18] Price Target Adjustments - Price targets for **Pharmaron** have been maintained at **Rmb27.4** for A-shares and **HK$23.3** for H-shares, reflecting the company's solid preliminary results. [28] - **Tigermed's** price target has been adjusted from **Rmb41.3** to **Rmb57.5**, reflecting changes in earnings estimates and updated DCF assumptions. [37] Conclusion - The CRO/CDMO sector in China is poised for growth in 2025, with key players like Pharmaron and GenScript leading the way. The overall market dynamics, including tariff adjustments and AI integration, are expected to support this growth trajectory. [23][38]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **China Local Markets** and the implications of recent **US-China trade tensions** on the Chinese economy and financial markets [2][5]. Core Insights and Arguments 1. **Tariff Risks and Geopolitical Tensions**: - USD/CNH is currently tracking approximately **0.8% above relative rate fundamentals**, indicating a tariff risk premium in the price, which may be insufficient against potential escalations in trade tensions [4][6]. - President Trump has threatened a new round of **10% tariff hikes** on China, with a deadline approaching on April 2nd for various tariffs [6][4]. - The **America First Investment Policy** has introduced investment restrictions that could limit US investments in China, potentially leading to greater outflows if divestment occurs at scale [6][4]. 2. **US Investment in China**: - US investment in China is estimated at approximately **$306 billion**, which could rise to nearly **$700 billion** when including indirect exposure through offshore financial centers [6][4]. - A partial unwind of US investments could exacerbate outflow pressures for CNY FX, contributing to a bearish outlook for the currency [6][4]. 3. **Liquidity Conditions in China**: - The **excess reserve ratio** in the interbank market has decreased from **1.1%** in December to **1.0%** in January, indicating tightening liquidity conditions [4][11]. - The report suggests that the worst period of liquidity drawdowns may be behind, with expectations of easing from the PBoC in the medium term [4][11]. 4. **National People's Congress (NPC) Expectations**: - The NPC is set to begin on **March 5**, with expectations for a growth target of around **5%** and a fiscal deficit target of **3.8%** [28][30]. - Financial markets are optimistic ahead of the NPC, driven by a rebound in offshore listed Chinese stocks, particularly in the AI and tech sectors [28][30]. 5. **Market Reactions and Predictions**: - Historically, Chinese equities tend to rally post-NPC, with a **60-90% probability** of positive returns in the month following the meeting [35][41]. - The report anticipates that if policymakers deliver positive surprises, there could be a catch-up for lagging sectors, particularly in consumption and housing [28][30]. Other Important Insights 1. **Banking Sector Challenges**: - Large banks in China have experienced significant contraction in corporate deposits due to regulatory crackdowns on manual interest compensation, leading to rising loan-to-deposit ratios [20][24]. - The PBoC's liquidity supply is increasingly critical for maintaining stability in the financing market amid these pressures [24][20]. 2. **Potential Catalysts for Easing**: - Several factors could signal a shift towards easing liquidity conditions, including moderating NCD financing pressures and potential recapitalization of large banks by the PBoC [24][25]. - The report highlights the importance of monitoring these catalysts for a potential relief rally in the market [24][25]. 3. **Investment Strategy Recommendations**: - The report suggests maintaining a **neutral stance on duration** while being cautious about adding receivers immediately due to elevated repo rates [25][24]. - There is a focus on the potential for a relief rally in front-end rates as they approach value zones following recent cheapening [25][24]. This summary encapsulates the critical insights and implications for the China Local Markets as discussed in the conference call, highlighting the interplay between US-China relations, liquidity conditions, and market expectations surrounding the NPC.

Summary of the Conference Call on China Cosmetics Industry Industry Overview - The conference call focused on the China cosmetics industry, particularly the Women's Day Online Shopping event, which significantly contributes to online GMV in Q1, accounting for approximately 40% of the total online GMV for the quarter and nearly 10% of the annual total [1][8]. Key Insights 1. **Discount Trends**: - Discounts during the Women's Day event were slightly higher year-over-year (LFL) but lower than during major sales events like 618 and Double 11. Tmall/Taobao/JD offered an average discount of 15%, compared to 13% last year, while Douyin maintained a stable 15% discount [2][12]. 2. **Brand Performance**: - **Giant and MGP** were highlighted as outperformers during the Day 1 livestreaming event, with Comfy's GMV estimated to grow over 100%, driven by strong sales of its collagen single-use stoste, which saw a 131% increase LFL [4][17]. - **Proya** experienced a significant decline of 31% LFL, with its star products showing higher-than-average declines despite the introduction of new SKUs [6][16]. - **MAOGEPING** also saw substantial growth, with an estimated GMV of RMB 66.7 million, reflecting a growth of over 100% [6][19]. - **Jahwa** recorded a remarkable 573% LFL growth, primarily due to the introduction of new SKUs from its VIVE brand [6][19]. 3. **SKU Listings**: - Several brands, including Proya, Shiseido, and Winona, introduced more SKUs compared to previous major sales events, indicating a strategy to diversify product offerings [2][9]. - Proya had 17 SKUs listed, while Comfy increased its listings to 6 SKUs, including new products like Anti-acne single-use stoste [15][17]. 4. **Sales Performance**: - The overall performance varied significantly among brands, with some experiencing substantial declines. For instance, Bloomage recorded a 61% LFL decline, primarily due to weak sales of its Barrier Repair Mask [6][19]. - Whoo saw a 67% LFL decline, attributed to lower sales volumes of its Cheongidan skincare set [24]. 5. **Market Dynamics**: - The data suggests that the top-tier KOL livestreaming on Tmall may not fully represent brand performance, and aggregating data from Tmall and Douyin could provide a more comprehensive view [7]. Additional Observations - The Women's Day event serves as a critical testing ground for brands to gauge the market potential of new products and set the tone for the rest of the year [1]. - The overall discounting strategy appears to be more disciplined compared to previous major sales events, with many multinational brands opting for less promotional activity [3][12]. This summary encapsulates the key points discussed during the conference call, highlighting the performance and strategies of various brands within the China cosmetics industry during the Women's Day event.

Summary of China Battery Materials Conference Call Industry Overview - The conference call focused on the **China Battery Materials** industry, particularly the production plans for March 2025 among the top battery manufacturers in China. Key Points 1. **Production Surge**: The production pipeline of the top five battery makers is expected to surge approximately **80% YoY** during **1Q25**, with March 2025 production projected to increase by about **9% MoM** to **99 GWh** [1][3]. 2. **CATL's Conservative Approach**: CATL is anticipated to have a more conservative production increase of around **4% MoM** in March 2025, compared to an **18% MoM** increase from other top players. This is attributed to uncertainties in **Energy Storage System (ESS)** demand in both domestic and US markets, as well as a high base effect from previous production levels [1][3]. 3. **ESS Battery Shipments**: In 2024, ESS battery shipments accounted for approximately **23%** of CATL's total shipments, indicating a significant role in their overall business strategy [1]. 4. **Battery Materials Production Growth**: Overall production of battery materials is experiencing strong momentum, with increases of **10-20% MoM** expected in March 2025 [1]. 5. **Top Picks**: The near-term top investment picks identified are **CATL** and **Kedali** [1]. Company-Specific Insights CATL (Contemporary Amperex Technology Co., Limited) - **Valuation**: CATL is valued at **Rmb 362/share**, based on a **17.0x 2024E EV/EBITDA** multiple, which aligns with its historical average since listing. This valuation implies a **30.8x 2024E P/E** and **23.7x 2025E P/E** [7]. - **Risks**: Potential downside risks for CATL's shares include: - Lower-than-expected demand for electric vehicles (EVs) - Increased competition in the EV battery market, potentially reducing CATL's market share - Higher-than-expected raw material costs [8]. Shenzhen Kedali - **Valuation**: Shenzhen Kedali is valued at **Rmb 92.03/share**, based on a **15x 2025E P/E** multiple, which is approximately **1 standard deviation below** its 5-year average. This valuation reflects the overall low sentiment in the battery sector due to demand slowdowns and policy challenges [9]. - **Risks**: Risks that could hinder Kedali's share price from reaching the target include: - Slower-than-expected battery demand - Intensified competition leading to price wars - Rising raw material costs, particularly for aluminum and copper [10]. Additional Insights - The overall sentiment in the battery materials sector is cautious, with many companies experiencing de-rating to levels below historical averages due to demand slowdowns and policy headwinds [9]. - The production forecasts and valuations suggest a competitive landscape where companies like CATL and Kedali are navigating both growth opportunities and significant risks in the evolving battery market [1][9].

19 February 2025 | 9:27PM HKT China Battery Cathode LFP cyclical recovery in sight; initiate on Yuneng at Buy Following our China battery 2025 outlook, we continue to highlight cyclical recovery opportunities in China's LFP (Lithium ferrous phosphate) cathode sector by forecasting utilization to reach 72%/86% in 2025-2026E, from 71% in 2024E. On the demand side, we forecast a 2024-2026E LFP cathode demand CAGR of 34% driven by robust BESS demand and more constructive LFP penetration in the NEV battery marke ...

28 February 2025 | 8:54AM CST Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US ...