Zhitong Hong Kong Stock Analysis | Physical AI Reshapes the Industrial and Robotics Sector, Li Auto i8 Launch Sparks Enthusiasm

[Market Dissection]

The US stock market remains stable, with all three major indices in the green. Trump's support for the market is indeed strong; currently, Wall Street collectively supports Powell, hoping for the independence of monetary policy. Trump has indicated that he will not fire Powell while continuing to release positive news: stating that the US is close to reaching a trade agreement with India and may also reach an agreement with the European Union, which has buoyed the US stock market.

Hong Kong stocks fell slightly by 0.08% today, mainly due to a general adjustment in the large financial sector dragging down the market. However, it doesn't seem to be a big issue, as the A-shares are also on the rise.

Jensen Huang's remarks have a considerable impact on the market. At the Chain Expo, he predicted that the next wave of artificial intelligence would be Physical AI—using algorithms to learn physical laws to predict outcomes, replacing programmers in writing code, which will reshape the industrial and robotics sectors. Riding this wave, UBTECH ROBOTICS (09880) announced that its next-generation industrial humanoid robot, Walker S2, is equipped with the world's first hot-swappable autonomous battery replacement system for humanoid robots, allowing it to replace batteries autonomously without manual intervention or shutdown, taking only about 3 minutes, enabling the product to work continuously for 24 hours and avoiding task interruptions due to charging downtime. This marks some progress, with a rise of over 7% today. New entrants show even more imagination, such as Delta Electronics (00179), which announced that it has signed two equity joint venture agreements with Shanghai Mechanical and Electrical, establishing two equity joint ventures. The first joint venture will primarily serve as a sales channel for humanoid robot solutions. The second joint venture will focus on the design and manufacturing of humanoid robot hardware modules and system integration. Each joint venture has a registered capital of 75 million RMB (approximately 10.5 million USD), indicating significant movement into the robotics industry, with a rise of over 14% today. Other stocks like Horizon Robotics-W (09660) rose nearly 5%. Not only in robotics, but Jensen Huang has praised nearly all industries that have purchased H20. Currently, public opinion in the US has also shifted; previously, there was talk of threats to ban sales, but now it leans more towards cooperation. This includes a complete 180-degree turn in views on fentanyl. The continuous rise of innovative drugs is also related to this, as sentiment has improved.

However, the market remains clear-headed and will not relax its self-sufficiency just because of a few good words. Domestic efforts will accelerate; InnoCare Pharma (02577), which became the world's first to achieve mass production of 8-inch gallium nitride wafers, saw another rise of over 8% today. Leading hollow-core fiber company Yangtze Optical Fibre and Cable (06869) surged nearly 20%.

Innovative drugs have skyrocketed, with the Hang Seng Innovative Drug ETF (159316) seeing a trading volume exceeding 200 million RMB during the session, receiving a net subscription of 3 million shares. Wind data shows that the Hang Seng Innovative Drug ETF (159316) has seen a net inflow of 270 million RMB in the past month, with the latest product scale reaching 640 million RMB, setting a historical high. On July 16, Ascentage Pharma (06855) announced that its self-developed novel Bcl-2 selective inhibitor, Lisatoclax (brand name: Lisengto), has officially launched. This is the first domestically developed original Bcl-2 inhibitor and the second Bcl-2 inhibitor to be launched globally. Today, it rose nearly 4%; other stocks like Lepu Medical Technology-B (02157) rose over 14%, and companies like CanSino Biologics (09926), BeiGene (06160), and 3SBio (01530) all saw increases of over 10% Yesterday, regarding the new centralized procurement, major banks had very positive views. Citigroup believes that the 11th batch of VBP places greater emphasis on intellectual property and clinical value. This public exclusion standard is unprecedented transparency in the national drug procurement process, which helps improve the predictability and transparency of future national centralized procurement, benefiting manufacturers' decision-making. Given that recent policy discussions aim to prevent involution and optimize the "lowest bid wins" model, and that there are fewer "big drugs" in this VBP, the price reduction in the 11th batch of VBP is expected to be relatively moderate, and the impact on large Chinese pharmaceutical companies will gradually weaken. The stocks mentioned yesterday, including Shiyao Group (01093), China Biopharmaceutical (01177), and Hansoh Pharmaceutical (03692), all rose more than 4%.

The involution in the automotive sector has finally shown some movement. Li Auto (02015) announced that the Li ONE pure electric six-seat large SUV is now open for reservations, with an expected price range of RMB 350,000 to RMB 400,000. The official price will be announced on July 29, with deliveries starting in late August. This year, there are only two new pure electric models priced above 300,000, namely Nio (09866) ES6 and XPeng G9, both of which have cumulative sales exceeding 10,000. The Li ONE is expected to be competitive, with a starting model offering a CLTC pure electric range of 670 km and the ability to recharge 500 km in 10 minutes. In terms of motor performance, the i8 is leading among its peers, surpassing the range-extended models Li L8 and Aito M8. The space is also quite large, making it suitable for family travel. At the same time, Li Auto announced that after 2 years and 3 months, the core section of the Li Auto "Nine Vertical and Nine Horizontal" high-speed supercharging network has officially been completed. The market expects good sales, and today the stock rose over 9%. Geely Holding (00175) announced last night that its subsidiary Geely Automobile Holdings Limited has officially signed a merger agreement with ZEEKR Intelligent Technology Co., Ltd. Geely Automobile will acquire all the ZEEKR shares it does not already own, and ZEEKR shareholders can choose cash or exchange for Geely Automobile shares as consideration. The completion of privatization will enhance competitiveness, and today the stock rose over 4%.

According to news from NEXTEER (01316) official WeChat, on July 15, 2025, NEXTEER Automotive Systems will hold a groundbreaking ceremony for a new smart manufacturing factory in Liuzhou, China. It is reported that after the completion of the new factory in Liuzhou, NEXTEER will be better able to meet the strong demand from domestic and foreign vehicle manufacturers for advanced steering systems and motion control technologies, including column-type electric power steering systems (CEPS), as well as controller assemblies that provide excellent safety, maintainability, and layout advantages for intelligent vehicle platforms. As one of the top stocks in July, it rose nearly 9% today. The gradual activity in the automotive sector also provides significant support for upstream lithium mines, see sector focus for details.

【Sector Focus】

Cangge Mining (000408.SZ) announced at noon that its wholly-owned subsidiary Cangge Potash received a notice from the Haixi Prefecture Natural Resources Bureau and the Haixi Prefecture Salt Lake Management Bureau to "immediately stop lithium resource development and utilization activities." The company's wholly-owned subsidiary Cangge Lithium has ceased production as required. It is also reported that there are certain issues with the preliminary approvals of eight mines in Yichun. On the afternoon of July 17, both lithium mining stocks and lithium carbonate futures surged, with the main contract for lithium carbonate rising more than 5% at one point, followed by a slight pullback According to statistics, the price of lithium carbonate futures has rebounded from around 58,000 yuan/ton since late June, with an increase of over 15% in the range. Overall, it is mainly driven by anti-involution policies. In the short term, lithium ore prices are likely to rise but difficult to fall.

Main varieties: Ganfeng Lithium (01772), Tianqi Lithium (09696), CATL (03750).

[Stock Picking]

Fuyao Glass (03606): Steadily advancing global layout, second-quarter net profit expected to hit a new high

In the first quarter of 2025, the company achieved operating revenue of 9.91 billion yuan, a year-on-year increase of 12.16%; net profit attributable to shareholders of the listed company was 2.03 billion yuan, a year-on-year increase of 46.25%. Excluding non-recurring gains and losses, it was 1.99 billion yuan, a year-on-year increase of 30.90%; revenue from the automotive glass main business was 9.03 billion yuan, a year-on-year increase of 11.5%.

Comment: Fuyao Glass's performance in the first quarter of this year showed steady growth, with sales and average prices increasing steadily without being affected by tariffs. Since its listing in 1993, the company's performance has maintained a good growth momentum. Revenue has grown from just over 100 million to 39.252 billion yuan in 2024, and net profit attributable to the parent company has expanded from tens of millions to 7.498 billion yuan in 2024. Fuyao Group has become the world's largest professional supplier of automotive glass, and the company's production capacity can meet the needs of automobile manufacturers. The Fuzhou Yangxia project and the Anhui Hefei project that the company is investing in are expected to each have 1 million sets completed by September 2025, with remaining capacity expected to be completed by the end of 2025. The company is steadily advancing its global layout. Fuyao Glass is still expanding its production capacity in multiple locations around the world. Currently, overseas production capacity is 6.8 million sets, mainly concentrated in the United States and Russia, while domestic production capacity is 34 million sets, distributed in Fuzhou, Changchun, Chongqing, Shanghai, Guangzhou, and other places. Fuyao Glass is building float glass production lines in multiple locations, with a self-supply and sales ratio exceeding 90%. More than 90% (float glass accounts for 34% of automotive glass costs). Furthermore, the company has begun to layout upstream silica sand plants, with four major factories established in Hainan, Hunan, Inner Mongolia, and Liaoning, further reducing glass production costs. The significant appreciation of the euro against the yuan is estimated to bring over 300 million yuan in exchange gains, and the company's net profit in the second quarter is expected to hit a new quarterly high. High value-added products such as skylight glass and HUD glass continue to penetrate the market, driving the increase in per-vehicle value. We are optimistic about the company's capacity being gradually released and its global market share continuing to rise