Guotai Junan Securities: Comprehensive restoration of future corporate profits requires policy support to stimulate downstream demand.

Guotai Junan Securities Research believes that in July, the overall decline in corporate profits narrowed, presenting a differentiated pattern structurally. This is mainly due to the current profit recovery, which mainly relies on supply contraction and price increases under the "anti-internal competition" policy, as well as demand support for some high-end manufacturing industries. However, downstream consumption demand is relatively weak, resulting in marginal profit contraction in downstream industries. In terms of inventory cycles, it is currently in an active destocking phase driven by policies. In the future, comprehensive repair of corporate profits requires policy efforts to boost downstream demand, and to shift profits from structural repair to comprehensive recovery.