Traditional 'old economy' stocks are regaining market attention.

For a period, the most crowded trade was in high-growth tech, where strong industry narratives could justify ever-higher valuations. However, the tech rally is now showing signs of strain, while sectors like pork stocks and innovative drugs have been strengthening, drawing renewed investor interest.

Is this the start of a sustained rally for these traditional stocks?

There is potential, but gains will not be evenly distributed.

The sectors most likely to benefit are those combining low valuations with an earnings expectation gap.

This is because the market's profit-making logic is shifting, moving from capitalizing on valuation repair to focusing on the realization of actual earnings.

Why is this the case?

Looking at valuation frameworks, whether using DCF or DDM models, only two core variables impact stock prices: the cost of capital (the discount rate) and the future profits a company can generate.

The discount rate can be seen as the 'denominator' in the valuation model, while corporate earnings represent the 'numerator'. The ultimate investment goal is a larger numerator and a smaller denominator: the numerator signifies sustained future profit growth, and the denominator represents a declining cost of capital.

Over recent years, the 10-year government bond yield has trended downwards, lowering the risk-free rate and boosting valuations. Even for companies with modest profit improvements, the declining denominator alone drove significant valuation expansion.

This dynamic is now changing.

Currently, the room for further declines in the 10-year bond yield has narrowed significantly, with rates showing more volatility. Simultaneously, as market risk appetite normalizes, relying solely on continued valuation expansion to drive stock prices higher is becoming more difficult.

In other words, the phase where a continuously shrinking denominator propelled stock gains is gradually ending.

As valuation expansion potential becomes increasingly limited, market focus naturally returns to corporate earnings themselves. This implies that the sectors worth watching next are those still at relatively low valuations, with expected profit improvements not yet fully priced in by the market.

Applying this framework, we identify several key sectors with both low valuations and an earnings expectation gap, analyzing them in order of the strength of their short-term interim report expectations.

Innovative Drugs: High Interim Report Volatility

Within short-term interim report expectations, innovative drugs show the highest potential volatility. The reason is not a full industry reversal, but rather that BD (Business Development) upfront payments are directly entering financial statements, creating the most immediate profit increment for interim reports.

At the industry level, the 'financial statement realization' from BD deals has likely far exceeded last year's同期 period. Data shows domestic innovative drug company BD upfront payments from January to May 2026 reached $5.3 billion,接近 80% of the $7 billion total for all of 2025. Extending this to the first half, the proportion is even higher. Considering that BD upfront payments directly boost当期 profits, this means the BD revenue recognized in H1 2026 financial statements will likely surpass H1 2025, forming the underlying support for interim report performance.

At the company level,业绩 foundations appear solid based on actual cash receipts and sequential BD deals. Companies like Frontier Biotech,荣昌生物,石药集团, and海思科 have announced receipt of BD upfront payments, providing the most direct 'cash evidence' of interim report improvement.

For instance, Frontier Biotech turned a profit in Q1 with a GSK upfront payment;石药集团 received a $1.2 billion upfront from AstraZeneca in May, exceeding its entire H1 2025 revenue;荣昌生物 was profitable in Q1, and with AbbVie's $650 million RC148 upfront payment arriving in Q2, profits are expected to continue.

海思科 presents an interesting case of sequential deals. Its Q1 profit included RMB 500 million from the upfront payment for HSK39004 licensed to AirNexis. If the $30 million upfront from its AbbVie Nav1.8 deal in April is confirmed in Q2, the company could show high volatility from 'sequential BD upfront payment realization'.

Therefore, with the innovative drug sector's valuation around 36x P/E, near the lower end of its 5-year historical range, and as interim report performance data is陆续 disclosed, the sector有望迎来 a second round of earnings-driven反弹, strengthening the basis for volume-price共振.

Thus, innovative drugs resemble a 'high-volatility direction' in this capital rotation: interim reports may first lift financial statements, but whether a continued re-rating follows depends on if BD deals持续接力, transforming one-time profits into a sustainable capability.

Shipbuilding: Strong Earnings Realization Certainty

If innovative drugs win on interim report volatility, shipbuilding wins on earnings realization certainty. As high-value orders enter the delivery phase, shipbuilders' profits are being released. Among low-valuation sectors, shipbuilding is one of the most aligned with the 'earnings realization' logic.

Unlike most cyclical sectors, shipbuilding rallies typically occur during the profit realization stage, not the initial cycle upturn.

This is because the timeline from receiving an order to construction, delivery, and considering order backlogs often spans 1-2 years or longer.

The market worries that during such a long delivery period, numerous variables—like订单无法顺利交付, rising steel plate prices, or significant RMB appreciation—could affect最终 profit realization. Therefore, investor enthusiasm is suppressed until profits actually materialize, favoring a wait-and-see approach for earnings validation.

This validation phase is now arriving.

With持续优化 of the delivery structure and high-value ship types陆续 entering the delivery cycle, shipbuilders' profits are being released. In Q1 2026, the shipbuilding sector achieved cumulative revenue of RMB 71.8 billion, up 50% year-on-year; net profit attributable to shareholders was RMB 7 billion, up 206%. Among them,中国船舶 reported revenue of RMB 43.31 billion, up 54.9%, and net profit of RMB 4.832 billion, up 251.64%.

Sector profit realization will延续 into Q2.

This is because the业绩 for Q2 2026 likely corresponds to orders secured after H1 2024, when the new ship price index was基本处于 above 1100 points.

At that time, raw material steel plate prices were low.

A shipbuilder's main costs include equipment, raw materials (primarily steel plates, accounting for 65%-70%), and labor, roughly in a 2:1:1 ratio. Steel plates account for about 20% of total cost, a major component. Data shows steel plate prices in H2 2024 were基本处于 RMB 4,000 per ton.

With ship prices rising and steel prices持续下跌, the widening price剪刀差 naturally有利于 accelerated profit release for shipbuilders.

Regarding valuation, the shipbuilding sector is indeed not expensive.

We use the market cap-to-order ratio (market cap / order backlog) for assessment. Estimating the order backlog as of end-June 2026 using 'beginning backlog + new orders - delivered orders', we毛估出 China State Shipbuilding's民品船舶 order backlog at approximately 83.5 million deadweight tons. With a current market cap of RMB 279.6 billion, its market cap-to-order ratio is only 0.33, at a historical low.

Over the past quarter, shipbuilding earnings have been released, but the sector has not fully performed,核心原因是 market capital remained concentrated on the AI theme, leaving low-valuation cyclical manufacturing sectors lacking定价权.

Now, the change is that AI trading拥挤度 has decreased, and capital is seeking directions with earnings realization and low valuations. Simultaneously, external policy disturbances for shipping have marginally eased, and the market's previous悲观预期 is also修复.

CXO: Clearest Order Support

CXO is a core member of the second tier for interim report expectation gaps, with less certainty than shipbuilding and less volatility than innovative drugs, but it has the clearest order support.

With marginal easing of geopolitical disturbances, a共振 has formed between recovering overseas R&D and the爆发 of domestic innovative drug BD (upfront payments Jan-May already at 80% of full-year 2025), confirming an industry order trough.

Leading companies' order data provides clear signals.

For example,药明康德's持续经营 order backlog as of end-Q1 2026 was RMB 59.77 billion, up 23.6% year-on-year;凯莱英's order backlog at end-2025 was $1.385 billion, up 31.65%;昭衍新药's newly signed orders in Q1 2026 surged 111.6% year-on-year. Since昭衍新药's main preclinical CRO orders (efficacy/pharmacokinetics/toxicology) have a conversion cycle of only 3-9 months, this增量 will directly兑现 in H1 financial statements.

From this perspective, the interim report is not a blind box but a clear hand supported by orders.

同时,第二增长曲线 at several companies provides further earnings volatility. For instance,药明康德's oligonucleotide and peptide (TIDES) business revenue surged 96% year-on-year in 2025, with management projecting约 40% growth for full-year 2026.凯莱英 is also expanding peptide capacity, expecting total固相合成 capacity to increase from 45,000L to 69,000L by end-2026.

The叠加效应 of new business增量 and order backlog conversion further strengthens interim report earnings certainty.

Valuation-wise, the CXO index P/E was约 27x on July 2, at the 22nd percentile over 5 years,修复节奏略早半步 compared to innovative drugs (36x/10.38%), but同样 not crowded.

Therefore, the CXO sector's dual-driver logic of 'earnings support + low-valuation repair' is clear.

However, note that sector repair is not all-inclusive; it is分化.

The industry's competitive core has shifted from 'capacity is king' to competition based on three capabilities: technological platformization, global coordination, and AI empowerment. Additionally, with enhanced client (MNC + domestic Biotech) bargaining power and pursuit of R&D certainty, only leading companies with 'stable old业务 and explosive new业务' can maximize benefits. Leaders like药明康德 (global layout + TIDES volatility) and凯莱英 (peptide capacity expansion) deserve重点关注.

In summary: CXO interim report earnings certainty is high, valuations are reasonable, the sector值得关注, but opportunities belong to a少数头部玩家. Focusing on leaders where old and new业务 can form接力兑现 is the optimal choice to share in this复苏红利.

Lithium Battery and Solar: Performance Repair Tied to Energy Storage

Lithium battery and solar can only be considered for structural expectation gaps: the companies that can truly attract capital are those with strong energy storage order realization capability and clear盈利质量 improvement.

If capital flows out of tech, it has the opportunity to reach solar and lithium battery sectors, as Q2业绩 has support and valuations are not high.

Previously, lithium batteries faced产能过剩, but the爆发 of energy storage in recent years has alleviated this.

From an industry trend perspective, growth in lithium battery shipments is a确定性事件.

Data shows that in Q1 2026, cumulative sales of power and energy storage batteries in China were 437.1 GWh, up 52.9% year-on-year, with energy storage being the largest driver.

Research预计 global lithium battery shipments for 2026-2028 to be 3,037 GWh, 3,878 GWh, and 4,855 GWh, growing 33%, 28%, and 25% respectively. Among these, energy storage battery shipment growth is particularly突出,预计 up 60% in 2026.

Benefiting from the爆发式增长 of energy storage, lithium battery companies'业绩 is beginning to stabilize and回升.

EVE Lithium Energy released its H1 2026 performance预告, with estimated net profit attributable to shareholders of RMB 3.13-3.37 billion, up 95%-110% year-on-year. The company's业绩 also showed sequential quarterly growth.

We believe the interim report业绩 of多数锂电企业有望增长.

Besides growing market demand,新增供给产能 is the largest variable. On the capacity side, newly operational energy storage lithium battery capacity in 2026 is预计超 500 GWh, which will affect the supply-demand格局 and lithium carbonate price changes.

多数机构 believe the lithium carbonate market in H2 2026 will整体呈现供需紧平衡格局, with the price anchor for battery-grade lithium carbonate around RMB 150,000 per ton.

Under neutral假设, Q3 battery-grade lithium carbonate prices may fluctuate in the RMB 150,000–170,000 per ton range. If新增产能量产不及预期 and considering the traditional demand旺季 in Q4, prices could reach RMB 180,000 per ton.

If the lithium carbonate price中枢 exceeds RMB 150,000 per ton, the lithium battery industry chain could see a 'volume increase, price stable' logic in H2, with业绩仍有持续增长的可能.

Furthermore, at the 2026 SNEC Shanghai International Photovoltaic Exhibition, the number of energy storage theme halls首次反超光伏 battery component halls, with many solar companies纷纷跨界 into energy storage.

Therefore, as interim reports are disclosed, solar companies that have跨入 energy storage also有望迎来业绩回暖.

Chemicals: Volatility in Sub-sectors

Chemicals represent a medium-to-high expectation gap, relying not on demand爆发 but on supply contraction; opportunities lie in细分 sectors, not the entire板块.

This year, some midstream cyclical manufacturing sectors have performed relatively well within traditional industries. Statistics show that as of July 3, building materials, basic chemicals, and machinery industry indices have gained 43%, 16%, and 15% year-to-date, ranking 3rd, 4th, and 5th among 30 primary sectors,仅次于 the hottest electronics and communications.

This突出表现 is mainly driven by细分赛道 within these three industries benefiting from AI. However, these areas are交易拥挤, and despite high earnings growth, further expectation gaps are hard to find. Potential expectation gaps exist更多 in traditional cyclical manufacturing areas outside AI demand.

Among these, the chemicals industry has the strongest logic.

Compared to building materials and machinery, chemicals are less dependent on real estate and infrastructure. Their核心逻辑 is primarily supply-side反内卷 capacity出清 and global份额提升 from出海.

On one hand, chemical supply contraction力度有望超过年初市场预判. From 2024-2025,全行业 capital expenditure持续负增长,叠加 factors like反内卷 industry自律,双碳产能审批收紧, permanent closure of overseas老旧装置, and rigid quota control for third-generation refrigerants, have明显 constrained新增供给.

On the other hand, Chinese chemical companies持续出海,不断提升 global market share. After退出 of overseas high-cost capacity, domestic leaders' competitive advantages are进一步增强.

The chemicals industry has numerous细分赛道. The following key细分赛道 can be重点关注:

The strongest景气 likely belongs to high-end氟化工.

Supply side: The third-generation refrigerant quota system is落地, locking in a domestic total capacity ceiling with no新增配额; upstream萤石 is a strategic resource with受限开采; overseas high-end electronic氟材料产能 has关停, with long certification cycles and no短期新增供给.

Demand side: High temperatures in 2026 are driving demand for air conditioners and refrigeration equipment,明显上涨 refrigerant prices, supporting traditional demand; on the增量 side, although high growth in AI data center liquid cooling demand is比较充分地预期了, growth in lithium battery binders随储能 and new energy vehicle demand is emerging.

Next值得关注 is磷化工.

Supply side: Domestic磷矿开采 is under total control, high-grade ore is稀缺,定价权 is concentrating upstream, with upstream resource companies' profits持续超预期. Companies with自有磷矿 and low-cost hydropower see expanding价差, while midstream processors without mines have偏弱业绩.

Demand side:持续扩张 of energy storage and power battery lithium iron phosphate capacity and growing industrial phosphorus demand are在一定程度上填补ing疲软 traditional real estate demand.

Additionally, MDI/TDI,民营炼化, and钾肥同样值得关注.

Although terminal demand growth in these industries is not突出, their共同特点 is extremely limited新增供给.

The炼化 industry is反内卷, with stalled capacity投放; there are no新增大型轻烃裂解装置 domestically in 2026,老旧炼化产能 is退出, and the industry is限产稳价.钾肥 mine construction cycles are long, with limited global新增产能 in 2026. MDI/TDI lack新增产能, with万华化学 and three overseas giants monopolizing global MDI, leading to industry紧平衡 and价格上涨. High costs and reduced operations at overseas chemical plants are leading to回流 of export orders to China.

Machinery and Building Materials: Focus on Leaders Going Global

Machinery and building materials are not the main line for interim report expectation gaps this round,只能算 low-valuation后排机会.

First, looking at machinery,出海 is already a market consensus, with less expectation gap than shipbuilding, CXO, or innovative drugs. Engineering machinery leaders have the highest certainty, as提升海外收入占比 is削弱ing their traditional cyclical attributes.

The traditional engineering machinery板块 has relatively扎实的基本面. Latest data shows that in May 2026, sales of various excavators were 24,794 units, up 36.2% year-on-year, higher than the 19.5% growth in Q1 and the 17% growth in 2025. Growth动力 comes from domestic开工复苏 and海外需求提振.

However, medium-to-long term, the核心逻辑 for engineering machinery is出海, using明显的性价比优势 to提升 global份额. Many companies'海外营收增速 far exceeds domestic markets, with海外营收占比 already high. For example, industry leader三一重工's海外营收占比 has reached 63%;徐工机械 and中联重科 have reached 48% and 58% respectively.出海 will减弱 cyclicality for machinery listed companies,推动业绩继续增长.

Besides engineering machinery, the machinery industry has many细分垂直领域 with突出高成长性, such as breakthroughs in卡脖子环节 like industrial母机,减速器, and高端传感器, leading to渗透率提升.

Within the humanoid robot industry chain, component companies remain the most值得关注的方向. As 2026 enters the量产元年,核心环节 like减速器,滚珠丝杠,直线执行器,伺服电机, and传感器有望率先兑现业绩. For example, harmonic减速器龙头绿的谐波 saw Q1 revenue grow 128.65% year-on-year and net profit grow 189.32%.

The building materials industry is different, with cheaper valuations but weaker盈利改善. The domestic real estate chain remains a drag, and海外收入占比 for多数 companies is still不够高,难以支撑全板块重估 in the short term.

If不看 AI demand, domestic overall demand for building materials is较弱,主要看出海. Currently,部分龙头企业 have begun兑现出海成果.

For instance, cement leader海螺水泥 has deployed capacity in Southeast Asia and Central Asia, with overseas营收占比 reaching 7% in 2025 and提升ing, and毛利率显著高于国内.东方雨虹's overseas revenue grew 62.13% in 2025, accounting for 5.15% of total revenue. More激进 is Hong Kong-listed西部水泥, with海外营收占比 already at 49%, and both growth rate and利润率优于国内.

整体来看, current出海占比 for building materials companies is still较低, with significant future提升空间.出海有望成为 the industry's most important业绩增长来源.

Overall, chemicals are the最强, with逐渐产能出清, negative capital expenditure in 2025, low inventory,叠加 European capacity退出, macro复苏, and新能源与 AI拉动需求. Machinery and building materials have次之 elasticity.

Traditional Chinese Medicine: Earnings Release Awaits Q3

Traditional Chinese Medicine (TCM) offers attractive low valuations, but short-term interim report expectation gaps are偏弱, with the真正的窗口 in Q3.

Compared to innovative drugs and CXO, lower-valuation TCM's业绩兑现 will be later. Why?

Data shows the CSI TCM Index P/E is约 20x, at仅 the 0.79th percentile over 5 years, cheaper than innovative drugs (36x/10.38%) and CXO (27x/22%), offering the厚est valuation安全垫.

But便宜 doesn't mean immediate上涨. TCM is in an尴尬期 of 'cost拐点已现, but报表尚未完全释放'.

First, there is a time mismatch between 'clear cost improvement trends' and the 'inventory消化周期'.

The中药材综合200 index fell 15.81% in 2025, with天然牛黄 plummeting from RMB 1.65 million/kg to RMB 500,000/kg (a约 70% drop). However, listed pharmaceutical companies' high-priced inventory (e.g.,天然牛黄) from 2024-25尚未消耗完毕, so cost-side improvements will大规模体现在报表上 only from Q3 2026 onwards.

A May 2026 research report explicitly mentioned: "TCM companies may迎来毛利率修复 in H2, especially for those with significant raw material price declines like天然牛黄, where修复弹性 may be greater." This 'H2'实际对应s Q3起业绩逐步体现,侧面验证ing the above判断.

This also意味着 the即将披露 2026 interim report is more of a '筑底' signal: the revenue side may stabilize before profits, but爆发式增长 is hard to see. Market expectations for an '业绩反转' in the interim report will大概率落空.

Secondly, two major policy催化 are最快 starting in Q3.

First, the July 1 deadline for TCM说明书修订 has passed, with约七成 old批文 facing re-registration obstacles due to incomplete safety information, requiring不合规 products to be cleared before then. This means大量产品 still faced出清 and说明书补充 pressure in Q2 2026, directly affecting interim report业绩.

Second, the配套细则 for the "TCM Registration Management专门规定" implemented from July 2026 formally落地 'human experience' as a basis for减免 clinical trials,利好 TCM companies also from Q3起.

From the above维度, TCM is currently in a 'valuation底+业绩底'双底区域, but报表修复可能要等到 Q3. Therefore, from an investment perspective, the interim report is a signal confirming筑底, suitable for左侧蹲守, with more右侧机会还要等 Q3业绩兑现.

Finally, to summarize, when capital begins flowing out of high-growth tech sectors, it will not平均流向 all low-valuation industries. It is more likely to flow towards directions combining low valuations with an earnings expectation gap.

Considering valuation levels, profit improvement, and expectation gap strength, the investment ratings are as follows.

Regarding specific allocation思路, elasticity determines potential returns (赔率), while certainty determines win rate (胜率).

Innovative drugs are responsible for博取弹性, but attention must be paid to whether BD deals can持续接力. Shipbuilding offers the highest胜率 and is the main line for本轮业绩兑现. CXO兼具胜率与赔率 and can serve as a balanced配置. TCM awaits Q3 report催化. Lithium battery/solar and chemicals offer mainly结构性机会. For machinery and building materials, focus on leaders兑现ing出海 results.