CITIC SEC: Tech upward revisions continue; watch for Q4 earnings delivery

CITIC SEC released a research report stating that 2026E and 2027E net profit forecasts for electronics and semiconductors continued to be revised upward, while machinery stabilized after earlier upward revisions; downward revisions for power equipment & new energy and autos narrowed, while downward revisions for food & beverage and home appliances widened. Combined with the Q3 reports, the Q4 profit contribution requirement for electronics is lower than for manufacturing and consumption, while small caps, power equipment & new energy, and autos rely more heavily on Q4 profit. It is recommended to prioritize earnings delivery in the electronics industry, track the stability of machinery forecasts and banks' profit contribution to dividend strategies, while for manufacturing and consumption, focus on the magnitude of downward forecast revisions and Q4 profit recovery. CITIC SEC's main views are as follows: Index level: All-A net profit forecasts were basically flat, with divergence in revisions between large caps and small caps. 1) In October, All-A 2026E and 2027E net profit forecasts were revised by 0.17% and +0.04%, respectively, while revenue forecasts were revised down by 0.32% and 0.04%, respectively. The upward revision to 2027E net profit forecasts slowed from 2.35% in August to 0.55% in September and 0.04% in October, indicating a marked slowdown in earnings expectation improvement. 2) CSI 300's 2027E net profit forecast was revised up 0.24%, while CSI 500, CSI 1000, and CSI 2000 all saw downward revisions to their 2026E and 2027E net profit forecasts, with CSI 2000 revised down 1.06% and 1.01%, respectively. The Q4 profit contribution deviations for CSI 1000 and CSI 2000 were 32.40 and 37.95 percentage points, respectively, versus 5.38 percentage points for CSI 300, indicating higher Q4 earnings delivery requirements for small caps. 3) STAR 50's 2027E net profit forecast was revised up 1.41%, while ChiNext and SSE STAR Market & ChiNext 50 were revised down 1.66% and 1.52%, respectively; CSI Dividend was revised up 0.27%, with 2027 profit expected to grow 3.6%, to which banks contributed 3.78 percentage points. Within tech, revisions diverged, while dividend strategies rely on the stability of bank contributions. Industry level: Tech net profit forecasts continued to be revised upward, while manufacturing and consumption were still revised down. 1) TMT and midstream manufacturing 2027E profits are expected to grow 41.9% and 31.5%, respectively, together contributing 63.0% of All-A profit increment; in October, their 2027E net profit forecasts were revised up 1.50% and down 1.35%, respectively. Both are the main sources of 2027 profit increment, but forecast adjustments moved in opposite directions. 2) TMT's 2026E and 2027E net profit forecasts were revised upward for four consecutive months from July to October, with the 2027E upward revision narrowing from 15.47% in August to 1.50% in October; the October increment mainly came from electronics, while computers and media were still revised down. Downstream consumption 2027E profit is expected to grow 28.5%, but its 2026E and 2027E net profit forecasts have been continuously revised down since February, with October revisions of 1.41% and 0.84%, respectively. 3) The Q4 profit contribution deviations for midstream manufacturing, downstream consumption, and infrastructure & real estate were 20.81, 18.57, and 33.12 percentage points, respectively, all higher than their revenue contribution deviations. The 2026 earnings targets rely heavily on Q4 profit recovery, and the repair in manufacturing and consumption still needs to be judged against actual results. Sector level: Electronics and semiconductors saw relatively strong upward revisions to net profit forecasts, with clear divergence within manufacturing and consumption. 1) Electronics 2026E and 2027E net profit forecasts were revised up 2.97% and 2.91%, respectively; semiconductors were revised up 4.56% and 3.85%, respectively; and components were revised up 3.07% for 2027E. The Q4 profit contribution deviations for electronics and semiconductors were 4.63 and 5.70 percentage points, respectively, lower than the Q4 delivery requirements for power equipment & new energy and autos. 2) Machinery net profit forecasts were basically flat in October after upward revisions in September; power equipment & new energy and autos 2027E net profit forecasts were revised down 2.84% and 0.51%, respectively, in October, narrowing from September, but their Q4 profit contribution deviations still reached 30.24 and 32.60 percentage points. For machinery, the focus is on the stability of forecasts after upward revisions; for power equipment & new energy and autos, the focus is on Q4 profit delivery. 3) Food & beverage and home appliances 2027E net profit forecasts saw downward revisions widen to 2.00% and 5.49%, while light industry manufacturing narrowed to 2.73%; pharmaceuticals turned to upward revisions, but the increment was concentrated, with the remaining samples still revised down in aggregate. Among pro-cyclical sectors, oil & petrochemicals saw relatively notable upward revisions to 2027E net profit forecasts, while non-ferrous metals remained revised down. Risk factors: Analyst forecast bias and earnings delivery falling short of expectations; incomplete sample coverage and differences in industry and index constituent structures; macroeconomic environment, industrial policy, and industry sentiment changes exceeding expectations, etc.