Galaxy Securities of China: A-share valuations are still in a reasonable range, with some industries showing slightly higher valuations.

Galaxy Securities research report indicates that the current valuation level of A-shares is generally matching overall performance, but there are significant differences between different industries. Looking at the market as a whole, A-shares valuation is still within a reasonable range, with some industries having high valuations, while others have lower valuations but significant profit improvement. Overall, the market is still on track. The 2025 interim report shows that A-share companies' overall net profit attributable to shareholders increased by 2.45% year-on-year, with non-financial sectors' net profit attributable to shareholders increasing by 1.04% year-on-year. Despite a slight slowdown compared to the first quarter, overall growth is still positive, indicating overall stable earnings quality for companies. At the industry level, net profit growth since 2025 has been relatively robust, with current price-to-book ratio within a reasonable range, showing good alignment between valuation and performance. There is still room for improvement. In terms of valuation levels, A-shares' absolute valuation is still lower than that of US stocks, indicating potential for further growth. US stocks, particularly in the technology sector, are at historical highs, with price-to-book ratios generally exceeding 90%, suggesting that valuation expansion may be nearing its end. Some industries in A-shares, such as finance and transportation infrastructure, still have valuation advantages and present structural opportunities. Expectations for performance improvement point towards combating internal competition.