A-share markets are currently experiencing pronounced structural divergence, with funds rotating between sectors like AI, innovative drugs, and cyclical stocks under limited liquidity conditions. This whipsaw effect has significantly raised the difficulty for investors navigating the market.

The era of broad-based rallies appears to be fading; simply picking a hot sector no longer guarantees returns. Success now demands sharper stock selection, precise timing, and rigorous position management. Chasing momentum often leads to encountering one-day sector rotations, while relying solely on index movements to gauge market health can misrepresent the actual profit-making environment.

A growing consensus among institutions is that the market will see differentiated recovery rather than a comprehensive upswing. Future gains will likely stem from sectors with strong fundamentals and confirmed earnings, while the premium on pure speculative themes will continue to compress. So, which companies could see significant share price appreciation? Recent brokerage reports offer some directional clues.

35 Companies with Over 50% Projected Upside

On Friday, August 21, major indices including the Shanghai Composite, Shenzhen Component, ChiNext, and STAR 50 all closed higher on shrinking volume, yet total turnover was only 1.89 trillion yuan—marking the ninth session this year with turnover below the 2 trillion yuan threshold. The number of declining stocks also outnumbered advancers.

How are institutions currently viewing individual investment opportunities? Beyond second-quarter holdings disclosed alongside interim reports, Wind data shows that since August, brokerages have issued "Buy" ratings for 533 A-share companies. After excluding reports without named research institutions or analysts, 463 companies have recently received Buy ratings.

Further analysis reveals that some brokerages have provided forward-looking price targets in their reports. Based on current closing prices, 293 companies have brokerage target prices indicating upside potential, with 35 companies showing expected upside exceeding 50% from their current share prices.

Leading the upside expectations is Kaiying Network, with Guotai Junan Securities setting a target price of 34.72 yuan per share in its August 9 report. The rationale cites the company's interim earnings forecast, which shows strong performance from its games like "Flame Awakening," "A New Beginning of the Legend of Sword and Fairy," and "Three Kingdoms: Hearts United," alongside its user platform business. The company expects significant revenue and profit growth, with first-half net profit attributable to shareholders projected between 1.3 billion and 1.56 billion yuan, a year-on-year increase of 36.84% to 64.2%. The company also has a robust pipeline of new products; on July 29, its classic martial arts MMORPG "Heroes of the Hot Blood: NEXT" launched across all platforms in South Korea, quickly topping the iOS download charts. The highly anticipated "The Graver Robbers Chronicles: Departure" is scheduled for full-platform public testing on August 11. Additional upcoming titles, including "Douluo Dalu: Legend of the Evil Spirit" and "Gu Long's Heroes," are expected to contribute incremental revenue and profit in the second half. The implementation of equity incentives is also seen enhancing the company's long-term profitability.

Another company with a projected doubling in share price is Yilan Lithium, for which Soochow Securities set a target price of 37 yuan in its August 18 report. Soochow noted that the company's first-half net profit attributable to shareholders grew 53.39% year-on-year, in line with expectations. During the period, lithium battery revenue reached 500 million yuan, up 58% year-on-year, with shipments of nearly 400 million cells, a 27% increase. The average price per cell rose 25% to 6.4 yuan, and gross margin improved 1.2 percentage points to 22.8%, contributing 340 million yuan in net profit. The brokerage forecasts lithium battery shipments could reach 950 million cells by 2026, with full-tab cells accounting for approximately 15% of that, potentially contributing over 1 billion yuan in profit.

Overall, companies recently favored by brokerages with high projected upside are predominantly from the technology sector. However, unlike the one-sided rally seen in the first half of the year, the tech sector is now experiencing significant internal structural divergence following a period of valuation correction.

Can the Tech Rebound Reach New Highs?

The global AI super-cycle continues its strong advance, but recent market volatility has prompted investors to temper their enthusiasm. The focus is shifting from the grand narrative of technological revolution to discussions about the sustainability and potential risks of the AI boom. Whether the tech rebound can hit new highs has become a central market question.

Some investors believe the current tech rally is merely a B-wave rebound and advocate for taking profits. Conversely, others argue that the AI industry trend is still in its infancy, suggesting the tech sector retains the potential to reach new highs.

According to Zheshang Securities, U.S. stocks have recovered a significant portion of the losses incurred from June to July, Korean stocks show moderate recovery, while A-shares have lagged in their rebound. Since the Nasdaq's rebound began on July 29, earnings have improved substantially while valuations have declined, indicating high-quality price recovery that may be sustainable. If the Nasdaq reaches new highs, it could boost sentiment across the tech sector.

Looking at public fund holdings, data from the 2026 second-quarter reports shows that mutual funds' overweight position in electronics and communications stands at 20.37% (relative to the CSI 800 benchmark). This is higher than the 16.38% overweight in core assets (food & beverage, power equipment, and pharmaceuticals) during the third quarter of 2021. Weekly data on the turnover share of the top 5% of stocks remains near the 50% threshold, reflecting relatively high crowding in the communications and electronics sectors. However, as trading crowding eases and Korean markets complete their deleveraging process, consensus on AI computing power has strengthened slightly compared to earlier levels.

Reduced expectations for rate hikes and improved trading structures have contributed to a marginal recovery in consensus around the AI trade. Sustained improvement in fundamental factors remains a key driver for the continuation of this rally. Given that technical patterns and crowding levels are slightly inferior to 2021, and consensus scores have not yet fully recovered while style rotation is ongoing, the probability of the tech sector achieving an independent new high is less than 50%. This rebound may represent a B-wave rally with considerable elasticity. However, expectations could shift under two scenarios: first, if unexpected positive fundamental events occur—such as a new AI narrative at the industry level or further reductions in Fed rate hike expectations on the liquidity front; second, if broad-based indices (such as the Shanghai Composite or the overall A-share market) reach new highs, thereby lifting the tech sector indices along with them.