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China Equity Strategy - Key Findings Summary:

1. Q1 2025 A-Share Earnings Growth: Overall earnings increased by 3.5% YoY, reversing prior quarterly declines. Non-financial sectors saw a 4.2% YoY improvement driver
   income turning positive.

2. Sector Performance Highlights:

   • Non-Financials: Many sectors saw earnings growth (e.g., computer, steel, building materials, agriculture). AI-related sectors experienced rapid growth (e.g., computer/media/electronics/machinery).
   • Boards: Main Board (+4%), ChiNext Board (+18% YoY); STAR Board continues YoY declines.
   • Top-Down Analysis: GDP growth pull is tied to non-financial revenue/earnings drag via sector-specific overseas exposure (notably auto, machinery, electronics, home appliances).

3. Key Equity Strategy Observations:

   • Tactically balance value and growth due to multiple uncertainties.
   • In short-term, large caps favored over small caps due to higher earnings visibility amidst shrinking turnover.
   • Sectors with policy tailwinds (domestic consumption, self-reliance, dividends, national defense) are favored.
   • Caution on sectors with slowing export growth.

4. Valuation and Risk Statement:

   • Valuation models include DCF, Gordon growth, and multiples (PE/EV/EBITDA/P/BV).
   • Risks noted: Property hard landing, currency deprecation-linked capital flight, slow structural reforms.
   • MDA (Market Discount Approach): Expected return = MRA + 5%, where MRA = local market rate + delta.

Relevant Data Charts:

• Figure 10/11: Overall earnings growth and the non-financial earnings revision upward (2017, 2019, 2021).
• Figure 17: Overseas revenue contribution (% of total sector revenue) increasing significantly (2024).
• Figure 6/7: Overall/Board earnings growth trajectory.

Disclaimer:

• Report contains forward-looking statements based on current data and assumptions.
• UBS maintains independence but potential conflicts exist (e.g., co-coverage).
• Past performance does not guarantee future results.
• Valuation estimates are UBS's projections only.