Zhongjin: Concentrated Disclosure of First Quarter Reports Imminent, Focus on Performance Highlights and Four Main Themes of Economic Growth.

CICC releases research reports indicating that April will soon see a concentrated disclosure period for first-quarter reports, with A-share profits expected to show good performance year-on-year. The current market is experiencing significant volatility due to external uncertainties, and grasping the turning point of the fundamentals and the potential for recovery elasticity may be important investment strategies at present. Key points to focus on during the performance disclosure phase include: 1) Highlighted areas of first-quarter performance, such as the upstream resource sector, TMT sector benefiting from the AI boom, export chains, non-banking financial institutions, etc. 2) Economic growth: With the rapid development of the AI industry, the industry trend continues to support demand growth. Focus on sectors like optical communications, which directly benefit from AI technology implementation, as well as industries like batteries and energy storage that benefit from energy and industrial chain security. 3) Cyclical resource stocks: Taking into account the position of the production cycle, focus on sub-sectors that support rising prices and performance certainty, such as power grids and the chemical industry. 4) High dividend stocks: During a period when market risk preferences have not fully recovered, high dividend stocks have a relative income advantage, but may exhibit phase-related, structural performance throughout the year. It is important to focus on cash flow stability and dividend yield matching. Key points from CICC include: April will see a concentrated disclosure period for first-quarter reports. Since the outbreak of geopolitical tensions in the Middle East at the end of February, the situation has been fluid, and investor risk aversion has spread, leading to weak performance in global risk assets. Although there have been signals of temporary relief, there is still significant uncertainty in the future. As such, the importance of listed company performance has increased marginally, with industries and individual stocks that show improvements or exceed expectations in their performance likely to become the focus of investors. As of April 11, the number of companies that have disclosed first-quarter earnings forecasts accounts for about 1.5% of A-shares. The first quarter macroeconomic performance shows seasonal improvement, with A-share profits expected to perform well year-on-year. Looking at macroeconomic data for the first quarter, on the domestic front, the growth of social retail sales has been bolstered by the release of consumption during the Spring Festival holiday and the continued impact of the policy to replace old vehicles, with social retail sales totaling +2.8% year-on-year for January-February. Real estate has benefited from the continued effectiveness of policy easing and seasonal demand, with some core cities showing positive signs, although investment has declined year-on-year. Consumer prices in the first quarter have shown marginal improvement, with CPI increasing from 0.57% in Q4 2025 to 0.83%, and PPI narrowing its decline year-on-year to -0.6%, but with limited contributions from domestic demand. On the external front, the export value in RMB terms for January-February increased by 8.0%/36.1% year-on-year, showing an overall improvement beyond seasonal trends. Considering the marginal recovery in the macroeconomy and the emergence of more industry performance turning points, CICC predicts that A-share company profits for the first quarter are expected to perform well year-on-year. Some reference indicators include: 1) Industrial enterprise profits for January-February 2026 increased by 15.2% year-on-year (vs. the full year/December 2025 +0.6%/+5.3%), with revenue improvements, cost reductions, and investment benefits driving the improvement in industrial profits; 2) As of April 11, based on incomplete forecasting data for key A-share companies covered by CICC (around 583 companies), A-shares overall/financial/non-financial sectors registered year-on-year growth of 1.3%/-10%/4.5% for the first quarter. In the financial sector, non-banking institutions are expected to continue benefiting from high market activity; in the non-financial sector, the negative impact of high oil prices on corporate profits has not yet been evident. Gold and technology remain structural highlights, with some midstream industries benefiting from price improvements and the resilience of the export chain and downstream consumption trends. In terms of industry specifics: 1) Global-priced resource prices remain high, coupled with the promotion of anti-income disparity policies, some upstream industries are expected to achieve year-on-year growth in performance. The year-on-year decline in PPI narrowed further in the first quarter, while tensions in Iran drove up oil prices overseas, leading to increases in coal and chemical prices. While this impacted global economic growth and expectations of a Fed rate cut, causing international metal prices to initially rise and then fall, they still maintained high levels. Domestically, improvements in some industries' supply and demand relationships and prices were improved due to seasonal demand supporting black metal prices. 2) In the midstream manufacturing sector, a segment of the new energy industry continues to show performance improvements, with strong resilience in export performance. The supply-demand imbalance in the new energy sector improved in the first quarter, with lithium battery and photovoltaic equipment prices recovering and expected performance improvements. Export-wise, China's export growth in the first quarter exceeded market expectations, driven by off-season sales, marginal improvements in overseas demand, the AI industry trend, and a rush to export before the export tax rebate adjustment. This resilience in external demand is evident. 3) Overall consumption demand remains to be boosted. The Spring Festival holiday and the continuation of the policy to replace old vehicles supported the early social retail performance, but with the holiday effect wearing off and the high base set by last year's replacement policy, social retail growth may edge lower. The consumption sector is expected to remain differentiated, with the new consumption sector performing relatively well, while other areas may experience relatively flat performance. 4) The TMT sector continues to enjoy high prosperity. With artificial intelligence now in the stage of new technology iteration and application, capital expenditure has increased in some technology areas, with products like hardware (such as optical fiber cables, storage, targets, MLCC) seeing continuous price increases, leading to positive effects on industry trends spreading, and related areas expecting to maintain high growth. What are some highlights in specific sectors? Based on feedback from industry analysts at CICC: 1) Energy and raw materials sector: Due to the impact of Middle East geopolitical tensions, oil and natural gas production capacity has been damaged, with high short- to medium-term price expectations. Chemical prices have noticeably increased, coupled with downstream entering the restocking cycle, the sector is expected to show good performance. Overseas energy prices remain high, coupled with approaching peak restocking season, coal prices may further increase; the non-ferrous metal sector benefits from the Fed's loose policy direction and both supply and demand boosts, with the gold sector expected to exceed expectations; the steel industry's supply-side reform trend is clear, and special steel reaches a profit turning point under the acceleration of import substitution; while the demand for real estate and infrastructure remains relatively weak, the combination of low base from last year and expected raw material price increases will lead to predicted improvements in certain consumption-related building materials, with fiberglass and overseas building materials expected to exceed expectations. 2) Midstream manufacturing: In the new energy sector, lithium battery material price increases have landed, combined with inventory income, the fundamentals are expected to recover, with batteries possibly impacted in the short term by rising raw material prices, but top manufacturers are expected to make a smooth transition; strong demand for energy storage, with overseas demand slightly exceeding expectations under the US-Iran conflict; strong domestic business in the power grid, with potential high base effects overseas, global AI-driven construction leads to accelerated export orders; industrial control steadily grows, optimistic about the catalyst from AIDC and human-shaped Siasun Robot & Automation. Wind power delivery pace follows historical trends; most companies' performance remains stable or slightly increases. In the photovoltaic industry, the impact of rising silver prices has not diminished, the cancellation of export tax rebates has pushed up industry chain prices, with expected second quarter financial statements to reflect this. In utilities, pressure on electricity income increasing, cost reductions not enough to offset; waste-to-energy income declines, but cost reductions drive performance improvements, with water utilities overall stable. In the transportation industry, aviation is expected to turn a profit, non-aviation business in airport sector awaits recovery, diversification present in high-speed rail, significantly increased profits for oil transportation, express delivery benefits from anti-income disparity policies and low base effects, with profit expectations favorable. Expected fields to exceed expectations include: lithium mining, lithium iron phosphate, electrolyte 6F, oil transportation, express delivery. 3) Downstream consumption: The misaligned Spring Festival holiday and the prolonged holiday period have boosted performance in the catering supply chain, travel, hotels, tourism, etc. sectors, with slightly better than expected sales performance for alcohol products during the Spring Festival. However, the overall domestic consumption environment remains weak, with retail, domestic appliances, textiles, jewelry, light industry, and daily essentials showing flat performance. Domestic car sales are weak, but exports show a high year-on-year increase, with OEMs or high export business showing better profit performance. In the medical sector, investment in innovative drug companies has significantly turned around, likely to stimulate a new round of research and development, driving order improvements, with a need to actively monitor the impact of AI on industry chain efficiency and competition dynamics. In the agriculture and breeding chain, short-term pig prices hit a near ten-year low and feed costs are rising due to Middle East conflicts, but with the gradual implementation of anti-income disparity policies, a cyclical trading window may open, with improvements expected in poultry and feed management; short-term competition intensifying in the pet sector, with cost rates rising, performance may fall below expectations; rising grain prices favor companies in the planting chain. 4) TMT: In the media sector, sub-sectors show differentiated performance, with the gaming industry maintaining high buoyancy, while other areas show relatively flat performance. AI, going abroad, and IP are expected to remain main themes for 2026. In the software sector, differentiation within the sector is observed, with original AI companies represented by large model companies showing accelerated revenue growth, while concerns over AI encroachment exist for traditional software companies. In telecommunications services, market concerns of declining operator performance post-value-added tax in the fourth quarter of last year have yet to show, but with continued technological transformation, asset utilization rates in computational power are expected to improve. 5) Financial and real estate sectors: Benefiting from the prosperity of the equity market, overall high profits in the brokerage sector; insurance sales on the liability side continue a positive trend, but net profits are relatively under pressure from market adjustments.