CICC released a research report stating that the third-quarter earnings reporting season will peak in late October, with year-on-year A-share profit growth potentially improving compared to the second quarter. Investors should focus on three main themes.
According to Zhitong Finance APP, CICC released a research report stating that mid-to-late October will enter the peak period for the disclosure of third-quarter reports, and the year-on-year growth rate of A-share earnings in the third quarter may increase compared to the second quarter. During the earnings season, investors may pay more attention to the dynamics of fundamentals. Key areas of focus during the earnings disclosure phase include: 1) Highlights from the third-quarter reports, such as the gold sector, TMT sectors benefiting from high AI prosperity, and non-banking finance. 2) High-growth opportunities with low correlation to economic cycles and external risks, such as the AI industry chain, as well as white home appliances, construction machinery, and grid equipment with trade oriented towards non-U.S. economies and ample overseas production capacity. 3) Industries that have achieved supply-side consolidation under a mild recovery environment, including industrial metals, lithium batteries, innovative drugs, commercial vehicles, rail transit equipment, and railways and highways.
CICC's main viewpoints are as follows:
Mid-to-late October marks the peak period for the disclosure of third-quarter reports. A-share listed companies’ third-quarter performance will be disclosed intensively during this time. Signs of marginal slowdown have appeared in certain domestic growth drivers in the third quarter. The market has maintained volatility following a rapid rise in trading volumes and amid the impact of Sino-U.S. tariff tensions. Fundamentals may become the focal point of trading activities. As of October 16, about 2.3% of A-share companies had issued third-quarter previews. Based on bottom-up predictions by industry analysts, CICC provides a preview of third-quarter results for investors' reference.
The year-on-year growth rate of A-share profitability in the third quarter may increase compared to the second quarter. In terms of domestic demand, retail sales growth showed signs of marginal slowdown in the third quarter, with total retail sales up 4.6% year-on-year from January to August (versus 5.0% in the first half). The phased withdrawal of the trade-in policy likely played a major role. Property transaction volumes and prices continued to weaken, and the real estate sector may continue to weigh on overall A-share earnings. At the price level, inflation remained pressured in Q3 2025, with the CPI declining further to -0.23% year-on-year, while the PPI drop narrowed to -2.9% due to “anti-internal competition” policies, showing slight improvement. Externally, exports measured in RMB grew by 8.0%/4.8%/8.4% in July, August, and September respectively, remaining resilient. Overall, the bank expects that, driven by base effects, the year-on-year growth rate of non-financial A-share earnings in Q3 2025 may improve over Q2. Reference indicators include: 1) Industrial enterprise profits rose 0.9% year-on-year from January to August 2025, with August’s monthly figure rebounding sharply from negative growth to 20.4%, largely influenced by base effects and other profit/loss factors. 2) As of October 16, based on incomplete statistics of key A-share companies covered by CICC (approximately 719 firms), projected year-on-year growth rates for Q3 single-quarter net profits attributable to shareholders of all A-shares/non-financial companies are 5.8%/8.2% (versus 1.6%/-1.6% for all A-shares/non-financials in Q2 2025), with sample growth generally higher than broader market performance.
In the financial sector, non-banking businesses are expected to continue benefiting from high market activity; in non-financial sectors, gold and technology hardware may emerge as structural highlights, upstream and midstream sectors could be affected by pricing factors, and the phased reduction of trade-in policies may dampen downstream consumer spending. Structurally: 1) Gradual implementation of anti-internal competition policies is expected to boost earnings in upstream and midstream industries, with the gold sector continuing to outperform. The contraction in PPI year-on-year narrowed in Q2, temporarily driving up commodity prices and leading to a smaller downward revision of profitability in upstream and midstream industries. The bank anticipates that further policy progress will improve the performance of upstream and midstream enterprises. The nonferrous metals sector benefited significantly from rising price expectations, particularly gold, which kept breaking new highs due to frequent geopolitical frictions and the deepening de-dollarization trend, becoming a potential structural highlight. 2) Certain segments of the new energy sector in midstream manufacturing may see turning points in earnings, while export-oriented industries maintain resilience. Continuous capacity reductions in the new energy sector are gradually resolving supply-demand imbalances, with photovoltaic equipment reducing losses and battery fundamentals improving. The bank expects sustained earnings recovery. Regarding exports, although Q3 export growth slowed marginally compared to Q2, it remained resilient overall, maintaining higher growth rates to non-U.S. regions to offset declines in U.S.-bound exports. 3) Consumer demand across industries remains weak. With the phasing-out of trade-in policies and a higher base effect from last year, retail sales growth continued to decline in Q3, with July and August figures at 3.7% and 3.4% year-on-year, respectively. The bank predicts ongoing differentiation within the consumer sector, with emerging consumption fields showing relatively strong performance and other areas remaining subdued. 4) The TMT sector demonstrates robust momentum. Continued support for scientific innovation policies and the advancement of AI industry trends have led to increased capital expenditure in some tech areas, driving up sector sentiment. Profit expectations for leading electronics and communications companies have improved. The bank expects semiconductor and computing power-related fields to maintain high growth rates.
What are the highlights in specific sub-sectors? Based on feedback from CICC industry analysts: 1) Energy and raw materials industries: In the nonferrous metals sector, expectations of improving demand led to a gradual recovery in prices, with gold hitting new highs, positioning the sector for strong earnings performance. Coal prices rebounded due to tightened supply and better demand prospects, with coal profitability potentially recovering marginally. Chemical products saw weaker demand in Q3, with prices falling both year-on-year and quarter-on-quarter, resulting in flat overall profitability. However, segments like refrigerants and phosphate fertilizers benefited from rising commodity prices, posting year-on-year growth. Weak demand combined with sluggish property and infrastructure weighed on steel and building materials profitability, but ongoing capacity clearance and further implementation of anti-internal competition policies could bring some benefits.
2) Midstream manufacturing: In power equipment, lithium battery shipments grew steadily quarter-on-quarter in Q3, with prices remaining stable and some segments seeing early price hikes. Energy storage grew rapidly supported by policies, with overseas demand gradually picking up. Industrial control orders performed relatively well, though realizing earnings transmission will take time, with robotics and AIDC progressing steadily. Some power equipment firms were impacted by post-rush installation seasonality and high bases, but those with strong overseas presence are poised for an earnings harvest. In the photovoltaic supply chain, “anti-internal competition” drove price rebounds in main and auxiliary materials, improving profitability. Downstream module pricing faced pressure but leading firms benefited from low-cost inventory advantages and reduced overseas disruptions, presenting upside potential. Inverters and energy storage demand remained positive, with sequential earnings expected to grow steadily. In machinery, demand stabilization and structural opportunities in external demand pointed to strong earnings certainty. In transportation, shipping performance varied, with oil transport, dry bulk, and short-haul container shipping performing strongly. Anti-internal competition pricing measures supported courier earnings in Q3. Areas with potential upside include lithium iron phosphate cathodes and 3C equipment; process industries and food packaging equipment may underperform.
3) Downstream consumption: In essential consumption, the food and beverage sector faced persistent demand pressures, resulting in lackluster overall performance. In healthcare, the widening gap between medical insurance revenue and expenditure constrained industry demand, with domestically focused firms facing relative pressure. Systematic improvements await a rebound in medical insurance income. In agriculture, forestry, animal husbandry, and fisheries, traditional hog cycle patterns have gradually weakened, with shorter cycles and reduced volatility becoming more pronounced. In discretionary consumption, traditional retail, tourism, catering, and branded apparel saw weaker performance amid soft domestic demand, while emerging consumption areas like beauty and trendy toys continued to outperform. Following the imposition of tariffs, home appliance and automobile exporters along the export chain improved sequentially, supported by trade-in policies and a flurry of new car launches aiding passenger vehicle performance. Commercial vehicles benefited from accelerated overseas deliveries, driving rapid profit growth. Potential outperformance is expected in robotic vacuum leaders, heavy-duty trucks, buses, and related supply chains.
4) TMT Sector: In the technology hardware segment, for semiconductor design, model iteration and the launch of new AIoT terminals suggest attention to related fields such as SoC and endpoint storage. New projects for domestic substitution and restocking in consumer electronics are supporting orders for semiconductor manufacturing. In consumer electronics, the mobile phone market has shown stable performance, but tariff changes remain a concern. Components with improved profitability include optics, structural parts, and ODM segments of the supply chain. Strong overseas demand for AI computing power suggests better profit elasticity for PCB and server ODM manufacturers. In the software sector, downstream customer stabilization and low base effects have led to steady performance improvement. In media, the industry enters a peak period for summer entertainment consumption, supported by favorable policies, driving upward momentum. The gaming sector shows standout performance, while other areas show divergence. In telecommunications, revenue growth has slowed, but profit growth outpaces revenue due to operators' cost control and slower depreciation. Areas with potential for upside surprises include: information innovation, AI infrastructure, online gaming, and summer entertainment consumption. 5) Financials and Real Estate: High activity in capital markets supports brokerage and credit business performance, with single-quarter profitability expected to see high year-on-year growth. Insurance is expected to maintain solid growth despite a high base from last year; banking profitability remains stable. For real estate, fundamentals remained weak in Q3, with profit margins still in a bottoming-out phase.
Based on the Q3 earnings report, focus on three investment themes: current internal growth expectations are relatively subdued, and the escalation of US-China tariffs increases external uncertainty. During the earnings season, investors may pay closer attention to fundamental developments, using the Q3 reports to identify structural highlights. Key areas of focus during the earnings disclosure phase include: 1) Bright spots in Q3 earnings reports, such as the gold sector, TMT sectors benefiting from high AI-related demand, and non-banking finance. 2) High-growth opportunities less correlated with economic cycles and external risks, such as the AI supply chain, white goods, construction machinery, and grid equipment targeting non-US economies with sufficient overseas production capacity. 3) Industries that have achieved supply-side consolidation ahead of others in a mild recovery environment, including industrial metals, lithium batteries, innovative drugs, commercial vehicles, rail transit equipment, and road and railway infrastructure.
Chart 1: CICC analysts’ earnings outlook across sectors
Chart 2: Disclosure progress of Q3 2024 earnings reports
Chart 3: Disclosure progress of Q3 2025 earnings forecasts
Chart 4: Proportion of earnings warnings for Q3 2025
Chart 5: Year-on-year growth of industrial enterprises' profits from January to August 2025 at +0.9%
Chart 6: Year-on-year growth rates of industrial enterprises' profits by sector from January to August
Chart 7: Changes in earnings expectations for industries in 2025 since Q3 2025
Chart 8: Changes in earnings expectations for industries in 2025 since the beginning of the year
Chart 9: Changes in forecasted net profit for CSI 300 components
Chart 10: Forecasted Net Profit Changes of Non-Financial Components in the CSI 300
