Zhongtai: Non-bank financial sector leads in mid-year performance, real estate chain sector under pressure.

Zhongtai released a research report stating that in the first half of 2025, China's macroeconomic situation will see a moderate recovery with an improved demand structure. In the first quarter of 2025, GDP grew by 5.4% year-on-year, and in the second quarter, it grew by 5.2%, exceeding the annual target of 5%. As of July 15, 2025, a total of 1490 A-share listed companies issued profit warnings, with 642 companies reporting positive results, accounting for 43.09%. By industry, the non-banking financial sector had the highest proportion of positive performance warnings in the first quarter, with 32 out of 39 listed companies reporting positive results, accounting for 82%. This was followed by the nonferrous metals sector, with a 75% proportion of positive profit warnings. Additionally, 31 listed companies in the real estate sector continued to make losses, 6 companies had profit warnings, and 16 companies reported their first losses, putting pressure on overall performance. Zhongtai's specific analysis is as follows: 1. What are the trends in the macroeconomic environment in the second quarter? In the first half of 2025, China's macroeconomy will see a moderate recovery with an improved demand structure. GDP growth in the first quarter of 2025 was 5.4% year-on-year, and in the second quarter, it was 5.2%, exceeding the 5% annual target. Consumer spending was a bright spot in the demand structure, with significant growth in durable goods consumption due to policy incentives such as the "replacement of old with new" scheme. Despite disruptions caused by Trump's policies, overall foreign demand was better than expected, with China's exports achieving growth in the first half of the year. In the second quarter, overall export growth remained steady, with a year-on-year growth rate in June rebounding to 5.80%. In terms of investments, the second quarter saw a differentiated sectoral structure: manufacturing investment slowed down due to low profit margins, infrastructure investment remained steady, and real estate investment and sales were sluggish. 2. Second quarter performance forecast: Non-banking financial sector is leading, while the real estate chain sector is under pressure. As of midday July 15, 2025, a total of 1490 A-share listed companies issued profit warnings, with 642 companies reporting positive results, accounting for 43.09%; and 844 companies reporting negative results, accounting for 56.64%. The top three companies with the highest forecasted net profits were China Shenhua Energy (expected net profit of 23.6 billion to 25.6 billion yuan), Zijin Mining Group (expected net profit of 23.2 billion yuan), and Guotai Haitong (net profit of about 15.283 billion to 15.957 billion yuan). By industry, the non-banking financial sector had the highest proportion of positive performance warnings in the first quarter, with 32 out of 39 listed companies reporting positive results, accounting for 82%. This was followed by the nonferrous metals sector, with a 75% proportion of positive profit warnings. Additionally, the electronic sector continued its strong performance from the first quarter, with about 60% of listed companies issuing positive performance warnings. Industries with poor performance warnings were mainly concentrated in the real estate chain sector. Due to the decline in coal prices, most coal enterprises' profits were impacted to varying degrees, with a high proportion of negative performance warnings reaching 95%. In the architectural decoration sector, 29 listed companies continued to make losses, with 7 companies reporting their first losses, accounting for 80% of negative performance warnings. Additionally, in the real estate sector, 31 listed companies continued to make losses, 6 companies had profit warnings, and 16 companies reported their first losses, putting pressure on overall performance. 3. What are the trends in profitability for sectors with high prosperity? Non-banking financial sector: Market recovery drives better-than-expected performance. With the introduction of various capital market policies this year, both the primary and secondary markets have seen a significant increase in activity. In the mid-year profit warning, 28 brokerage firms were expected to increase profits or turn losses around, showing overall good performance. Looking ahead, with the overall enthusiasm in the capital markets and the enhanced capacity of brokerage firms to serve new quality production elements, the brokerage sector's performance may continue to improve. Household appliances: Policy dividends supported a high growth in the first half of the year, with a possible slowdown in growth in the second quarter, but still maintaining a high growth rate for the whole year. Since September last year, retail sales of household appliances have maintained double-digit growth for nine consecutive months. From April to June this year, retail sales of household appliances and audio-visual equipment by units above the quota increased by more than 30% year-on-year. Looking at end sales data, leading downstream companies in household appliances such as Midea and Haier are expected to continue their strong performance in the second quarter. AI combined with consumer electronics and national subsidies for electronics, the electronic sector may continue to see high growth in the second quarter. With the support of AI investments and consumer electronics subsidies, the electronic sector saw a significant rebound in performance in the first quarter. Looking ahead, the electronic industry's prosperity is expected to remain high in the second quarter, as the AI trend drives demand for computing chips and related hardware, increases capital expenditure for companies, and maintains a strong growth trend in the semiconductor sector. Downstream orders for cloud computing and automotive electronics are sufficient, and second-quarter performance is expected to exceed market expectations. 4. Investment recommendations: For the second quarter performance, focus on the following key points: 1) Under the support of national subsidies for household appliances and the policy of "replacement of old with new", the household appliances sector's performance may continue to be strong. Currently, pay attention to the performance of leading household appliance companies in the second quarter. 2) With the combined effects of national subsidies for consumer electronics and AI capital expenditure expansion, consumer electronics, semiconductors, servers, and other segments may maintain a high growth rate. 3) Under the current anti-"involution" policies, some commodity futures prices have shown notable rebounds, providing favorable support for the continued recovery of profits for some upper and middle stream companies. Risk warning: Risks from macroeconomic policies falling short of expectations, macroeconomic conditions falling short of expectations, industry prosperity falling short of expectations, listed company performance falling short of expectations, increased uncertainty in external environments, etc.