According to Zhito Finance APP, gtja released a research report stating that government procurement of domestic products will give a 20% price discount, and domestically produced brands with a higher localization rate of key components are expected to narrow the price range with imported products during the bidding process. The definition of domestic products depends on the cost of production components and production processes. At the same time, key components are crucial in determining whether they are considered domestic products, and the price discounts are expected to accelerate the localization of upstream core components. Recommended high-end scientific instrument manufacturers targeting universities, research institutes, and other government procurement entities.

Event: The Ministry of Finance is drafting a notice on the standards and implementation policies related to domestically produced products in the field of government procurement (draft for public comment).

GTJA's main opinions include:

Products produced within China, with key components and processes completed in China, are considered domestic products.

1) Government procurement refers to the purchase of goods, engineering, and services using public funds by national agencies, institutions, and organizations at all levels. Universities, research institutes, environmental monitoring stations, customs, and other entities are all within the scope of government procurement.

2) The draft for public comment clarifies the definition of domestic products, stating that the entire production process from the procurement of raw materials and components to the finished product in China constitutes a domestic product, provided that the component costs of products produced in China meet the stipulated proportion requirements. For specific products, requirements will also be established for key components being produced in China and key processes being completed in China, in order to qualify as domestic products. The definition of domestic products depends on the cost of production components and production processes, and products from both domestic and foreign enterprises that meet the requirements can be identified as domestic products.

Government procurement grants a 20% price discount for domestic products, which is expected to narrow the bidding price range for domestic products, and key components and assembly processes are anticipated to accelerate localization.

1) The draft for consultation proposes that, ① in government procurement activities where both domestic and foreign products compete, a 20% price reduction will be applied to domestic product quotes, and the adjusted price will be used for evaluation. ② If a procurement project or package includes multiple products, and the total cost of products meeting domestic product standards provided by a supplier accounts for over 80% of the supplier’s total product cost, a 20% price reduction will be applied to the overall products provided by that supplier, with the adjusted price used for evaluation.

2) The price gap between domestic products and overseas brands is expected to narrow. Key components and processes are crucial in determining whether a product is classified as domestic, which is likely to push upstream core components to accelerate localization.

Standards apply to industrial manufactured goods and will be established in phases.

1) The current standards for government procurement of domestic products apply to goods, mainly industrial manufactured goods, excluding agricultural, forestry, animal husbandry, fishery products, and mineral products.

2) The Ministry of Finance and relevant departments will formulate component cost ratio requirements for products produced in China, as well as key component and key process requirements for specific products within 3 to 5 years. Until then, as long as a product is produced in China, it will be regarded as a domestic product in government procurement activities.

Investment advice

Recommended companies include ncs testing technology (300797.SZ), beijing sdl technology (002658.SZ), and beijing labtech instruments (688056.SH).

Risk warning: changes in industry policies, project progress not meeting expectations.