Goldman Sachs: "Anti-Involution" Expected to Inject New Momentum into Corporate Profits

Shanghai Securities News, China Securities Network (Reporter Tang Libin) - A research report released by Goldman Sachs on August 20 stated that "anti-involution" is expected to inject new momentum into the profits of Chinese companies. The institution analyzed that, from an industry perspective, under the scenario of normalized profit margins, potential supply reduction and industry consolidation are expected to drive a 53% overall increase in profits for relevant industries by 2027; in an optimistic scenario, the market's profit growth could reach 14%.

Goldman Sachs stated that "anti-involution" could enhance corporate profitability through three interrelated channels: more favorable revenue and pricing environments, strengthened capital expenditure discipline to boost free cash flow, and a more benign and concentrated industry competitive landscape. The institution noted that, from a market perspective, Chinese companies have begun to reduce new capital expenditures and allocate more cash to shareholder returns, while some industries have already proposed new solutions for rationalizing capacity.

How to identify companies benefiting from "anti-involution" initiatives? Goldman Sachs believes that although representative stocks under the "anti-involution" theme have recently outperformed the broader market, the market capitalization of some industries still discounts normalized levels, particularly in cement, photovoltaic, and chemical industries. The institution's industry framework indicates that the policy upside potential for these industries is attractively priced.

Additionally, Goldman Sachs screened 20 stocks with buy ratings from 10 industries, which are well-positioned to benefit from the "anti-involution" policy tailwinds. In terms of investment themes, Goldman Sachs reiterated its strategic optimism toward China's top ten private enterprises, as industry leaders should achieve greater gains during industry consolidation.