Brokerage Morning Meeting Highlights | The combination of AI large models and smartphones is expected to drive a new round of replacement cycles.

Market hit bottom and rebounded yesterday, with the three major indexes showing mixed movements and consumer stocks performing well. The total trading volume in Shanghai and Shenzhen exceeded 2 trillion for the whole day, with an increase of 662 billion compared to the previous trading day. In terms of sectors, Hainan free trade zone, retail, food, solid-state batteries and other sectors led the gains, while copper cables, state-owned enterprises in the cloud, CPO, software development and other sectors led the declines. As of the close of yesterday, the Shanghai Composite Index rose by 0.23%, the Shenzhen Component Index fell by 0.26%, and the Growth Enterprise Index fell by 0.52%. At today's brokerage morning meeting, Galaxy Securities stated that there is still room for interest rate cuts and reserve requirement cuts for the whole year 2025; China Securities Co., Ltd. believes that the combination of AI large models and smartphones is expected to drive a new round of phone replacement cycle; Guotai Junan stated that prices are entering an upward channel and is optimistic about the positive catalyst for photovoltaics. Galaxy Securities: There is still room for interest rate cuts and reserve requirement cuts for the whole year 2025 Galaxy Securities pointed out that the moderate easing stance remains unchanged, but the pace of interest rate cuts may change, and further rate cuts need to wait. The monetary policy orientation for 2025 is still towards moderate easing, with room for interest rate cuts and reserve requirement cuts for the whole year. Policy rates (7-day reverse repo rates) may be lowered by 30-40 basis points (BP) throughout the year, guiding a downward trend of 40-60 BP in the 5-year LPR. Reserve requirements may be lowered by 100-150 BP throughout the year. The net purchase of government bonds by the central bank in the open market may exceed 2 trillion yuan for the whole year. The window for interest rate cuts may gradually open after the expected rate cut by the Federal Reserve in the second quarter. Both reserve requirements and buyout-style reverse repos will be important tools for releasing medium- to long-term liquidity, and reserve requirements can save banks costs, support credit expansion, with a high probability of landing in the first quarter. Galaxy Securities forecasted that the annual fluctuation range of the 10-year government bond yield in 2025 would be between 1.5% and 1.9%. If the central bank lowers policy rates by 40 basis points for the whole year, the level of 1.64% may be reasonable. The exchange rate of the US dollar against the RMB may fluctuate around 7.3. China Securities Co., Ltd.: AI large models combined with smartphones are expected to drive a new round of phone replacement cycle China Securities Co., Ltd. stated that the global smartphone market is expected to see a narrowing decline in 2023, and rebound in 2024, with the combination of AI large models and smartphones driving a new round of phone replacement cycle, leading the industry development trends: large models driving intelligent upgrades, cloud hybrid will be the mainstream solution for a period of time; lightweighting of large models and hardware upgrades support more powerful local operation of AI large models; AI empowered operating system kernels, personal assistant-style operating systems becoming a trend; the limitation of "stacked hardware" competition is expected to be broken, with the ability of large models determining the distribution of dividends, and phone manufacturers having significant say; AI phones with high computing power and locally deployed large models are expected to grow rapidly in sales, and drive the value of smartphones. Guotai Junan: Prices are entering an upward channel, optimistic about positive catalysts for photovoltaics Guotai Junan stated that the current photovoltaic industry chain is expected to enter a phase of price increases, the sector is at an expected bottom position, the industry fundamentals have stabilized, and positive catalysts from the supply and demand sides are expected to emerge. The subsequent improvement in industry prosperity and expectations for supply and demand improvement continue to increase, with sector opportunities expected to be revealed, and maintaining an industry overweight rating. Key focus areas are: 1) inventory continues to decline, with battery, silicon wafer, and photovoltaic glass links expected to improve profitability first, as well as leading companies in each segment. 2) Continuous breakthroughs in new technologies, with BC battery module efficiency leading the way, and the gradual application of innovative technologies such as copper paste and stack grids.