Zhitong Hong Kong Stock Analysis | NATO's Secondary Sanctions Involving the U.S. as Summer Economy Heats Up

[Market Dissection]

The current market is characterized by repeated fluctuations; whenever the market seizes an opportunity, it pushes upward, but it is difficult to sustain, still exhibiting a rotational pattern, as the fundamentals are not solid. This includes the NASDAQ reaching a historical high, primarily driven by NVIDIA. Other stocks are not outstanding, driven mainly by sentiment, and the Hong Kong stock market today saw a high before retreating, down 0.29%.

Continuing around tariffs: According to CCTV news, on Tuesday local time, U.S. President Trump announced that tariff letters for some smaller countries will soon be issued, with tariffs expected to be "slightly above 10%." On July 15, NATO Secretary-General Mark Rutte stated that if Russia does not reach a peace agreement with Ukraine, Brazil, China, and India may face secondary sanctions from the U.S., urging Brazil, China, and India to pressure Russia. Europe is also following suit, continuing to appease Trump. The Ministry of Foreign Affairs responded: there are no winners in a tariff war, and coercion cannot solve problems. The U.S. proposed that South Korea refer to Japan's suggestion: to establish a sovereign fund to lend to South Korean companies to build factories in the U.S.

The third China International Supply Chain Promotion Expo was held today in Beijing, with NVIDIA CEO Jensen Huang attending and delivering a speech in Chinese. Huang stated that they have received many orders for H20. To be fair, even if the H20 is a stripped-down version, it is still somewhat better than domestic products, mainly due to its higher ecological matching efficiency. The key reason for the U.S. easing its stance this time is that they realized that if they don't sell now, they won't be able to sell later. Of course, it cannot be ruled out that they want us to relax on rare earths as a gesture, but it is unlikely to be within the scope of discussions between both parties and is hard to use as leverage. Currently, it is a win-win situation. However, we must remain clear-headed; this is not the norm, and fully achieving self-sufficiency is the real way out. InnoLux (02577): Long-term focus on the GaN power device field, is the world's first IDM manufacturer to achieve mass production of 8-inch gallium nitride wafers. On June 30, InnoLux announced that the international semiconductor giant STMicroelectronics (STM) voluntarily committed not to reduce its holdings within the next 12 months on the day the original ban on sales expired. As the largest cornerstone investor, STMicroelectronics holds 12.5921 million H shares, accounting for 27% of the tradable shares. The company plans to increase its current monthly capacity from 13,000 wafers to 20,000 wafers by the end of 2025. The long-term goal is to further expand monthly production capacity to 70,000 wafers within the next five years. Today, the stock rose over 9%. Jensen Huang is indeed professional, with a clearer understanding of AI than U.S. politicians; he stated that China's AI models are "world-class," capable of creating new growth points for the Chinese supply chain and changing every industry, describing China's open-source artificial intelligence as a catalyst for global progress. This should not be mere flattery; if the U.S. relaxes restrictions on high-end chips, China's AI development will accelerate. Yesterday, AI applications made a full push, and today Chalk (02469) is catching up: the AI question-answering system class version 3.0, with cumulative sales exceeding 16 million yuan in the first half of 2025, and transaction volume around 50,000 orders, with annual cumulative sales expected to exceed 100 million yuan. Today, the stock rose over 6% Today, the market is generally in a cooling state, as the leading gainers are still in the pharmaceutical sector. The latest logic is that innovative drugs do not participate in centralized procurement, which fully guarantees the profit margins of innovative drug products. The official WeChat account of Livzon Pharmaceutical (01513) announced yesterday that the Phase II clinical trial enrollment for its Class I innovative drug H001 in the cardiovascular field has been successfully completed. This oral direct thrombin (Factor IIa) inhibitor is aimed at preventing venous thromboembolism after major orthopedic surgeries, targeting the downstream coagulation process, and has advantages such as rapid onset, high safety, and strong convenience of use. Currently, there are no drugs targeting the same site on the market in China, and H001 is expected to bring new treatment options for patients. Today, it surged over 13%; Shandong Xinhua Pharmaceutical Co., Ltd. (00719): Its subsidiary Shandong Xinhua Health Technology Co., Ltd. recently received the Medical Device Registration Certificate issued by the National Medical Products Administration. Today, it rose by 8%.

Looking at the latest centralized procurement, according to the list of 55 varieties announced for the 11th batch of national organized drug centralized procurement (starting on July 15, 2025), the Hong Kong-listed companies directly involved in the centralized procurement varieties include CSPC Pharmaceutical Group (01093): Dapagliflozin tablets (antidiabetic), Olaparib tablets (anticancer), and Cefazolin injection (anti-infection). China Biologic Products (01177): Famotidine injection (digestive system drug), with its subsidiary Chengdu Tianqing holding over 10 approved varieties; Hansoh Pharmaceutical (03692): Dapagliflozin tablets (Hansoh is one of the approved companies), Dapagliflozin is the sales champion among oral antidiabetic drugs (with terminal sales exceeding 7 billion yuan in 2024), and winning the bid is expected to enhance market share.

The summer blockbuster season is starting to take off. According to data from online platforms, as of July 15, the total box office (including pre-sales) for the 2025 summer season (June 1 - August 31) has reached 3.3 billion yuan. Among them, "Jurassic World: Rebirth," "Sauce Garden: Suspense," and "Mission: Impossible 8: Final Reckoning" rank in the top three. Related stocks include Huayi Brothers Media (01003): The main producer of the summer box office runner-up "Sauce Garden: Suspense" (with pre-sales exceeding 30 million), which is the opening film of the Shanghai International Film Festival, directed by Peter Chan and starring Zhang Ziyi, with high topic attention. If the film receives positive reviews after its release, it is expected to significantly contribute to the company's revenue. Damai Entertainment (01060): Participated in "Mission: Impossible 8: Final Reckoning" (the champion of the Dragon Boat Festival box office, with a box office of 190 million), and the company has also entered regional sports event ticketing, becoming the official ticket purchasing channel for the Scottish Super League Nanjing Suzhou station; Maoyan Entertainment (01896): Deeply involved in multiple films during the summer season (such as "Time's Son" and "Private Detective"), with a stable share in the ticketing platform. Meanwhile, China Ruyi (00136): Participated in investing in leading domestic films during the summer season (such as "Lychee of Chang'an"), but the increase has already been significant.

Additionally, the short drama industry is experiencing explosive growth: In the first quarter of 2025, global in-app purchase revenue from short drama applications has approached 700 million USD, nearly quadrupling compared to the same period in 2024. The domestic short drama market size reached 50.4 billion yuan in 2024, a year-on-year increase of 35%, surpassing movie box office for the first time. In the Hong Kong stock market, companies involved in the short drama industry chain mainly include China Literature Group (00772), Kuaishou (01024), and Bilibili (09626) Pop Mart (09992) reported good performance. According to the announcement data, Pop Mart's revenue in the first half of this year reached at least 13.7 billion yuan, with a net profit attributable to shareholders of no less than 4.1 billion yuan. The adjusted net profit may be no less than 4.6 billion yuan. This performance has fully surpassed last year's total performance— in 2024, the company's revenue was 13.04 billion yuan, with an adjusted net profit of 3.4 billion yuan. However, institutions believe that Pop Mart's net profit performance is only at the lower end of the buy-side expectation range (4.5-5.5 billion yuan). Considering that the stock price has risen 60% in the past three months and skyrocketed 588% in 12 months, it is normal for some funds to choose to take profits.

【Sector Focus】

Although the market has not yet been significantly impacted by the new tariffs from the U.S. in August, Wall Street has once again warned that investors should seek safe havens in precious metal assets in advance. In the latest reports from Morgan Stanley, Goldman Sachs, and UBS, due to the Trump administration's announcement of tariffs on major trading partners such as the EU, gold will become one of the best investment targets for investors, with silver and copper also being good options.

Morgan Stanley analysts predict that there is still potential for price increases in copper, gold, and silver this year. In the fourth quarter, the target price for gold has been raised to $3,800 per ounce. Goldman Sachs holds a similar view, predicting that the gold price will reach $3,700 per ounce by the end of this year and rise to $4,000 by mid-next year. Goldman Sachs particularly emphasizes that speculative positions in the market have significantly decreased, replaced by long-term buyers such as central banks, which reduces the risk of forced liquidation leading to a sharp drop in gold prices. In the long term, gold is on an upward trend. The strength of gold stocks often occurs during market adjustments when funds seek safe havens. Major varieties include Zijin Mining (02899), Zhaojin Mining (01818), Shandong Gold (01787), and China Gold International (02099).

【Stock Picking】

Tuniu (00780): OTA business shows considerable growth with steadily increasing market share

The company's total revenue in Q1 2025 grew by 13.2% year-on-year to 4.4 billion yuan, with core OTA business revenue increasing by 18.4% year-on-year to 3.8 billion yuan; adjusted net profit grew by 7% year-on-year to 788.2 million yuan, with a profit margin of 18%.

Comment: Tuniu's Q1 performance exceeded expectations, with significant growth in both revenue and net profit, showcasing brand effect. Although revenue from travel services decreased by 11.8% year-on-year, domestic demand remains strong, and international business is growing rapidly. The company is a leading one-stop travel service platform in China and has successfully entered the top three in the OTA industry, engaging in deep cooperation with its two major shareholders, Tencent and Trip.com. The company is actively expanding into hotel management, vacation, and other businesses, and is gradually exploring international markets, which is expected to bring incremental performance. By business segment: Core OTA business: revenue grew by 18.4% year-on-year, exceeding market expectations by 1%; International business: international flight tickets and hotel night stays increased by over 40% and 50% year-on-year, respectively, which is expected to improve user consumption frequency and ARPU, enhancing profit margins. The company's ticketing business maintains strong growth momentum, with steadily increasing market share, showing low single-digit growth in domestic ticket volume and over 40% growth in international ticket volume, contributing single-digit revenue to transportation. It is expected that in Q2 2025, the company's sales expense ratio will further decline year-on-year, and core OTA profit margins will continue to improve year-on-year In addition, the company announced the acquisition of Wanda Hotel Management on April 17, 2025, which is expected to fill the gap in high-end hotel management and create a more comprehensive hotel management brand matrix, with the potential to enhance revenue and profits in the future. Tongcheng Travel, backed by Tencent and Trip.com, has a prominent competitive advantage in traffic and inventory resources, and its domestic business competitiveness continues to improve; the core OTA business has considerable growth potential and is gradually expanding into international markets, which is expected to further contribute to performance growth