GEMS FIRST TO MARKET

Research evidence excerpt

GEMS FIRST TO MARKET

neration and defensive earnings growth, yet reported earnings have consistently lagged cash flow

—highlighting that earnings recognition in recent years has been too conservative. After a muted 1.5 year period for train

procurement losing growth momentum, we see early signs that activity may re-accelerate, including a pickup in MU and new-

energy locomotive orders. For ZZCRRC, the power semiconductor pricing environment is showing clear signs of recovery, with

recent price hikes led by Infineon and positive AIDC-driven demand trends providing constructive sector read-through. Despite

robust procurement and delivery activity, both stocks have de-rated YTD, with CRRC A/H down c.15% and ZZCRRC A/H down

c.10%, underperforming MSCI China at c.-10%. The current multiples are close to historical troughs, and dividend yields are

attractive (CRRC c.5%, ZZCRRC c.4%). We maintain OW on both after our model update, and our revised PTs offer c.40–50%

potential upside for CRRC and ZZCRRC. We believe the recent de-rating is more about style rotation than a fundamental

demand issue, and the value angle is becoming increasingly difficult to ignore.

Sany Heavy - H/A (Karen Li, CFA), China

Core business accelerates, de-rating due to FX drag unjustified as cycle strengths; 2Q26 preview,

stay OW

We update our model and provide a 2Q26 preview for Sany, as the market continues to focus on the disconnect between

robust operating momentum and a share price that remains under pressure. Sany-A/H shares have dropped c.8-9% YTD,

broadly in line with MSCI China at -10%, despite improving fundamentals, mainly due to FX concerns and prior fund flows

concentrating in AI names. Our recent pre-earnings call confirmed that Sany’s underlying business is accelerating, with