EB SECURITIES: A-share profits in 2024H1 remain resilient, technology leads Hong Kong stocks' performance recovery.

EB SECURITIES released a research report stating that the mid-year performance of all A shares in 2024 improved, with the mid-year performance of all A shares in non-financial sectors and non-financial petroleum and petrochemical sectors stabilizing. There is differentiation in performance, with necessary consumption sector profit growth accelerating, while optional consumption and technology sectors saw a slight decline in profit growth but overall remained positive. In terms of Hong Kong stocks, the first half of the year saw some improvement in performance, with the Hang Seng Tech Index performing well. Looking at the mid-year results, industries that showed accelerated improvement in net profit growth and ROE (TTM) in the first half of 2024 include the automotive and automotive parts, retail, durable consumer goods, and clothing industries, with healthcare equipment and services and software and services also showing improvement in net profit. The main points of view of EB SECURITIES are as follows: A-share profits show resilience, necessary consumption sector performance significantly improves The mid-year performance of all A shares in 2024 improved, with the mid-year performance of all A shares in non-financial sectors and non-financial petroleum and petrochemical sectors stabilizing. Specifically, the year-on-year growth rate of net profit attributable to shareholders of all A shares in the first half of 2024 was -2.6%, up 2.0 percentage points from the first quarter of 2024, while the year-on-year growth rates of net profit attributable to shareholders of all A shares in non-financial sectors and non-financial petroleum and petrochemical sectors in the first half of 2024 were -5.7% and -8.1% respectively, roughly in line with the year-on-year growth rates in the first quarter of 2024. There is differentiation in the performance of A shares, with necessary consumption sector profit growth accelerating, while optional consumption and technology sectors saw a slight decline in profit growth but overall remained positive. Looking at different sectors, there was differentiation in the mid-year performance of various sectors in 2024, with the necessary consumption sector showing a trend of accelerated improvement in the year-on-year growth rate of net profit attributable to shareholders in the mid-year of 2024 compared to the first quarter, while the optional consumption and technology sectors saw a slight decline in the year-on-year growth rate of net profit in the mid-year of 2024 but overall remained positive. Looking at specific industries, industries such as agriculture, forestry, animal husbandry, fisheries, social services, and electronics showed strong growth in net profit in the first half of 2024, with agriculture, forestry, animal husbandry, fisheries, computers, and steel showing significant improvement in the growth of net profit in the first half of 2024 compared to the first quarter. Non-financial ROE of all A shares declined, while ROE of upstream, consumption, and technology sectors improved The ROE (TTM) of non-financial stocks of all A shares saw a slight decline. The ROE (TTM) of all A shares, non-financial A shares, and non-financial petroleum and petrochemical A shares in the second quarter of 2024 decreased slightly compared to the first quarter of 2024. Looking at DuPont analysis, although the debt-to-asset ratio of non-financial A shares increased slightly in the second quarter of 2024, its net profit margin (TTM) and asset turnover ratio (TTM) both declined, dragging down the ROE (TTM). Industries with relatively high prosperity in the mid-year of 2024 in A shares include agriculture, forestry, animal husbandry, fisheries, automobiles, petrochemicals, social services, and electronics. Looking at the mid-year results, industries that showed accelerated improvement in net profit growth and ROE (TTM) in the first half of 2024 include agriculture, forestry, animal husbandry, fisheries, automobiles, and petrochemicals; industries that showed a decline in net profit growth but remained positive and saw improvement in ROE (TTM) in the first half of 2024 include social services, electronics, light manufacturing, utilities, and food and beverage. Hong Kong stock performance has improved, with significant improvement in the technology sector's performance The profit growth of non-financial Hong Kong stocks in the first half of 2024 was higher compared to the full year of 2023, with the Hang Seng Tech Index showing impressive performance. Specifically, the year-on-year growth rates of net profit of non-financial, Hang Seng Index, and Hang Seng Tech in the first half of 2024 improved compared to the full year of 2023, with the Hang Seng Tech Index improving significantly by 47.0 to 69.5%. However, compared to the second half of 2023, the net profit growth rates of the Hang Seng Composite Index and the non-financial Hang Seng Composite Index have declined, while the net profit growth rates of the Hang Seng Index and the Hang Seng Tech Index have improved. Industries with relatively high prosperity in the mid-year of 2024 in Hong Kong stocks include automobiles and automotive parts, retail, durable consumer goods and clothing, household and personal goods, and healthcare equipment and services. Looking at the mid-year results, industries that showed accelerated improvement in net profit growth and ROE (TTM) in the first half of 2024 include automobiles and automotive parts, retail, durable consumer goods and clothing; industries that showed improvement in net profit growth and ROE (TTM) in the first half of 2024 include healthcare equipment and services, software and services; industries that showed a decline in net profit growth but remained positive and saw improvement in ROE (TTM) in the first half of 2024 include household and personal goods, media, etc. Risk Analysis 1. Mid-year performance may contain errors due to data sources or statistical methods; 2. Economic growth may fall significantly short of expectations; 3. Geopolitical conflicts may escalate unexpectedly.