Earnings season brings surprises! JPMorgan: The market's profit expectations for Chinese companies are too low!

JPMorgan's recently released report suggests that current market expectations for Chinese corporate earnings growth in the fourth quarter of 2025 are too low, and there is significant potential for upward revision in the future. According to Wind Trading Desk, the report points out that earnings disclosures remain in the early stages. As of February 10th, only 3% of the MSCI China Index and 10% of the CSI 300 Index constituents by market cap have released Q4 2025 results. Based on performance in the first three quarters, the MSCI China EPS grew 8% year-on-year; this implies a fourth-quarter growth rate of -8%, while the market consensus for the full year is +2%. This means as long as actual fourth-quarter results exceed this relatively low base, there is ample room for positive surprises. For the CSI 300, third-quarter EPS grew 11% year-on-year, pushing cumulative growth for the first three quarters to 9%, laying a solid foundation for full-year results. By industry, the current downward pressure on earnings expectations is highly concentrated in the financial sector. In Q3, the MSCI China Finance sector saw a 39% year-on-year increase, while the market consensus for Q4 is only -18%, a sequential decline of 58 percentage points. The report believes this implied assumption may be overly pessimistic, and financial sector performance is highly likely to surpass current expectations. By contrast, the real estate, utilities, and healthcare sectors need to achieve the largest sequential growth jumps to meet full-year consensus targets, and thus also have room for upside surprises. JPMorgan states that as more companies disclose their earnings, market consensus is expected to be revised upward. Industry Divergence: Structural Highlights Among Disclosed Companies As of February 9th, a total of 3,059 A-share companies have issued 2025 earnings forecasts. About 36% are positive, including 625 companies predicting significant increases, 96 expecting slight increases/continued profits, and 375 expecting to swing from loss to profit. Positive forecasts collectively signal a recovery in business conditions. The five industries with the highest proportion of positive forecasts are: capital markets (84%), driven by a rebound in brokerage investment banking and proprietary trading profits; industrial groups (71%), fueled by rising commodity prices, cost optimization, and narrowing impairment losses; electric utilities (67%), benefiting from falling coal prices and expanding renewable energy capacity; aviation (60%), supported by rebounding travel demand; and auto parts (57%), with sales boosted by new energy subsidies and product innovation. Negative forecasts are highly concentrated in sectors with declining business conditions. The oil and gas/consumer fuels sector has only 17% positive forecasts, mainly due to a lower energy price center in 2025; real estate (17%) is constrained by shrinking sales and continued asset impairments; air logistics (17%) faces both falling demand and intensified competition; beverages (16%) are hit by weak high-end demand; diversified retail (16%) is dragged down by losses in commercial real estate investment and falling rental income. Early signals from earnings season are emerging, with many industry leaders delivering better-than-expected results. The banking sector is strongly rebounding. China Merchants Bank, Nanjing Bank, Industrial Bank, CITIC Bank, and SPD Bank all exceeded expectations, with net interest income recovery becoming the core growth engine. K-12 education soared, with both New Oriental and TAL Education outperforming expectations; TAL’s non-GAAP operating profit reached $104 million, about four times the market consensus. JPMorgan notes that the current earnings season is still in the early disclosure phase. As more companies report results, market understanding of industry differentiation and leading company capabilities is expected to deepen further. ~~~~~~~~~~~~~~~~~~~~~~~~ The above content comes from [Wind Trading Desk](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ). For more detailed analysis—including real-time commentary and frontline research—please join [Wind Trading Desk Annual Membership](https://wallstreetcn.com/shop/item/1000309). Risk Warning and Disclaimer The market involves risk and investment should be made with caution. This article does not constitute personal investment advice, nor does it consider the individual investment objectives, financial situation, or needs of any particular user. Users should determine whether any opinions, views, or conclusions in this article are suitable for their specific situation. Any investment made based on this article is at your own risk.