Sustainability Analysis of Corporate Profit Improvement Strategy in Tianhong Club Selected Portfolio for 2026

Based on an in-depth analysis of the portfolio’s outstanding performance in 2025 and a comprehensive assessment of the macro environment and market prospects for 2026, I believe that

. Below is my systematic analysis:

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• Annual return rate of 67.42%, significantly outperforming the performance benchmark by 47.06%
• Sharpe ratio of 2.18, indicating excellent risk control capability

• Q1 overweight gold stocks
  : Benefited from safe-haven demand and geopolitical tensions
• Switched to rare earths in April
  : Accurate prediction and response to tariff policies
• Returned to gold in August-September
  : Seized the opportunity of escalating geopolitical risks
• Deployed aviation in October
  : Forward-looking layout for cycle reversal

• Low-position layout of cycle reversal assets
• Risk management with strict volatility control
• Strong policy sensitivity and good at grasping macro inflection points

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1. Strong Policy Support

• The focus of expanding domestic demand policies will further tilt toward service consumption
• The 15th Five-Year Plan proposal clearly puts forward vigorously boosting consumption and striving to significantly increase the household consumption rate

2. Base Effect and Consumption Recovery

• The growth rate of household consumption in total retail sales of consumer goods (TRS) has basically stabilized in 2025
• Service prices are expected to show stronger resilience, benefiting from the tilt of expanding domestic demand policies and the increase in proportion after base period adjustment

3. Opportunities in Specific Segments

• Tourism and OTA
  : Tourism bears the strategic expectation of boosting consumption, and OTA platforms serve as key channels for policy subsidies
• Hotel industry
  : Has both consumption and strong cycle attributes, and is at the low point of a large-scale cycle
• Duty-free sector
  : The downtown duty-free shop policy is expected to bring new growth to port cities such as Beijing and Shanghai
• Local life and catering
  : Under the trend of consumption substitution, mass catering brands and tea brands with efficient franchise models have alpha returns

• Group consumption (government and enterprise consumption) remains weak, with a cumulative growth of only 0.8%
• Slowdown in household income growth may restrict the slope of consumption recovery

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1. Clear Expectation of Moderate CPI Recovery

• CPI is expected to rise from about -0.1% in 2025 to 0.5%-0.6% in 2026
• The carry-over effect will turn from a drag to a support, with an average of about 0.3%, an increase of 0.7 percentage points compared with 2025

2. Low Base Effect

• The year-on-year growth rates of CPI and PPI in 2025 are at low levels, forming a low base effect for 2026
• The GDP deflator is expected to rise moderately from about -1% in 2025 to close to 0.0%

3. Improvement of Price Transmission Mechanism

• Driven by the “anti-involution” policy, some industries have shown signs of net profit margin recovery
• The downward pork cycle has lasted for 12 months; historical patterns show a 14-22 month cycle, and it is expected to reverse upward in 2026

• Food and beverage
  : Especially the meat product segment with expected pork price recovery
• Service price-sensitive industries
  : Catering and accommodation, cultural tourism, health services, etc.
• Midstream manufacturing
  : PPI decline narrows or turns positive, and profit margin elasticity is greater than revenue elasticity

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1. Policy Becomes Key Work in 2026

• The central government has repeatedly emphasized “preventing vicious competition”, and “anti-involution” will become core work
• Existing industry self-discipline and standard leadership: The Photovoltaic Industry Association issued a cost “red line” of 0.68 yuan/W

2. New Stage of Supply-Side Reform

• This round of “anti-involution” is different from the administrative de-capacity in 2016; it is a reshaping of quality standards based on market rules
• Focus on midstream manufacturing; the gap between supply and demand growth rates turned positive in 2025

3. Clear Logic Chain for Corporate Profit Recovery

• Anti-involution policy restricts vicious supply
• Pork cycle and inventory cycle bottoming out drive price recovery
• PPI decline narrows and turns positive
• Corporate revenue growth rate回升, profit margin moves from recovery to expansion

• Photovoltaic, lithium battery, power battery
  : Industry self-discipline conventions resist low-price competition
• Aviation sector
  : Tight supply-demand balance, ultra-high load factor transmitted to ticket prices
• Midstream manufacturing
  : Four forces of gross profit margin improvement, external demand support, policy optimization, and technology cycle

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• Nominal GDP growth rate was about 4.0% in 2025, and is expected to rise to 4.5% in 2026
• CPI turning positive will help nominal GDP growth rate rise by 0.8 percentage points to 4.5%

• China Merchants Securities predicts that the profit growth rate of industrial enterprises above designated size will reach about 10% in 2026
• PPI usually leads the profit of industrial enterprises above designated size by about 3 months
• A 1 percentage point year-on-year increase in PPI can directly drive a 2.8 percentage point increase in corporate profit growth rate

• Huaan Securities predicts that the full A-share earnings growth rate will rise from 8.2% in 2025 to 10.3% in 2026
• Industrial Securities estimates that the non-financial net profit growth rate of full A-shares will rise sharply from 6.5% to 16.5% in 2026
• Huatai Securities expects the year-on-year growth rate of net profit attributable to parent companies of full A-share non-financial enterprises to be about 12.9% in 2026

• Market rise in 2025 mainly relied on valuation expansion
• The contribution of earnings will increase significantly in 2026, and the foundation for the rise will be healthier

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• Continuous real estate adjustment
  : Real estate investment is expected to decline by 8% for the whole year of 2026, and the drag on the economy still exists
• External demand uncertainty
  : Export growth rate may decline slightly from 4.5% in 2025 to 3.0%
• Weak group consumption
  : Government and enterprise consumption is at a low level, dragging down overall consumption

• Weakened motivation for further valuation expansion
  : M2 year-on-year growth rate falls from a high level, and liquidity support weakens
• Increased structural differentiation
  : The market will shift from general rise to structural deep cultivation, requiring higher fundamental research
• Trading volume plateau
  : After the jump in market trading volume in 2025, it is more likely to maintain a plateau in 2026

• “Anti-involution” policy effect: The policy execution level faces multiple constraints, and the boosting effect on CPI inflation may marginally weaken
• Industry differentiation
  : Different industries adopt differentiated strategies, and the effects may be uneven

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✅

• Market driving force shifts from “policy game” to “earnings-driven” in 2026
• Price recovery is the core variable; pay attention to the time when PPI turns positive (expected in Q3)

✅

• The risk control capability with a Sharpe ratio of 2.18 is the core competitiveness
• Continue to leverage risk control advantages against the backdrop of systematic decline in market volatility

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• Priority allocation: Tourism, aviation, hotels, duty-free
• Phased participation: Catering, local life
• Avoid over-allocation to sectors dragged down by group consumption

• Core allocation: Food and beverage, midstream manufacturing
• Flexible allocation: Targets related to pork prices
• Avoid energy chains affected by oil price pressure

• Key allocation: Industries with visible results such as photovoltaic, lithium battery, aviation
• Pay attention to new policies: Rare earths, new materials and other fields
• Dynamically track policy execution progress

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• AI industry chain, semiconductors, digital economy
• Benefit from the construction of a modern industrial system

• Power grid equipment, energy storage, construction machinery
• “Earn overseas money” increases both revenue and profit

• Insurance risk factors lowered
• Brokerage leverage restrictions relaxed

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• Avoid excessive exposure to a single industry
• Maintain moderate flexibility in sector rotation

• Strictly implement the principle of low-position layout
• Avoid chasing high in popular tracks

• Closely track the progress of “anti-involution” policies
• Dynamically adjust industry allocation weights

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1. ✅

   High Certainty of Profit Recovery
   • Nominal GDP recovery + PPI turning positive + anti-involution policy = corporate profit improvement
   • Multiple securities firms predict that the full A-share earnings growth rate will be 10%-16.5% in 2026

2. ✅

   Clear Logic of Three Main Lines
   • Service consumption: Policy support + base effect
   • CPI recovery: Low base + price transmission
   • Anti-involution: Policy-driven + supply-demand improvement

3. ✅

   Excellent Risk Control Capability
   • Sharpe ratio of 2.18 proves excellent risk management capability
   • Advantages are more obvious against the backdrop of declining market volatility

4. ⚠️

   Risks to Watch
   • Continuous real estate adjustment drags down the economy
   • Policy execution effect may be lower than expected
   • Market shifts from general rise to structural differentiation

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: Continue to adhere to the core strategy of corporate profit improvement, which is the most solid investment logic for the market in 2026.

• Q1
  : Focus on service consumption, benefiting from the Spring Festival peak season and policy support
• Q2-Q3
  : Increase allocation related to anti-involution, seize the opportunity of profit margin recovery before PPI turns positive
• Q4
  : Moderately allocate to industries related to CPI recovery, capture earnings elasticity brought by inflation return

: Maintain moderate diversification, avoid over-concentration in a single track, and strictly implement valuation discipline.

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: The “focus on corporate profit improvement” strategy of Tianhong Club Selected Portfolio will not only remain effective in 2026 but also is expected to show stronger vitality in the process of the market shifting from “valuation-driven” to “earnings-driven”. The key lies in dynamically adjusting the weight allocation of the three main lines according to changes in the macro environment while maintaining strict risk management discipline.

: It is recommended to allocate 30%-40% of funds to this strategy as core positions, and the remaining funds to other style strategies to achieve a more balanced risk-return profile.