Industry Chain Reading Method: Fundamental Analysis Framework

Problem It Addresses

When analyzing an unfamiliar industry, information often arrives before structure: news, single-stock performance, and short-term narratives can shape the conclusion too early. Fundamental analysis also often mixes industry-level and company-level questions, such as using single-year PE for cyclical stocks or equating high technical complexity with high profitability. Industry Chain Reading Method: Fundamental Analysis Framework aims to move the judgment process forward: ask industry structure first, then company numbers.

How the Skill Works

The skill uses a six-question framework as the main spine. It starts with classification checks, then chooses the entry point by industry type: regulatory-driven industries start at Q5, technology-driven at Q4, resource-driven at Q1, and structurally stable industries at Q2 + Q3. It then deepens the analysis through industry-chain maps, profit distribution, competitive structure, moats, and valuation methods, producing an industry judgment card.

Key steps include:
- Classification: cross-check product/service, technology path, lifecycle, geographic value-chain position, and competitive structure to avoid single-label bias.
- Six-question scan: cover size and growth, value-chain profit pool, moats, technology evolution, regulation and domestic substitution, and valuation narrative.
- Industry-chain anatomy: map nodes, relationships, representative players, and profit concentration; distinguish main lines, cross-cutting support, platforms, and technical bottlenecks.
- Profit and competition validation: use 6 profit mechanisms, 8 forces plus 1 dynamic, and 7 moat types to identify where profits are durable.
- ROIC and valuation fit: test economic returns and select PE, PB, DCF, EV/EBITDA, or industry-specific indicators by lifecycle stage.

Boundaries and Notes

This is a methodology framework, not investment advice or an automatic data source. All figures depend on public data at the analysis date; citations must state source, definition, and time point. Complex companies may need SOTP; cyclical stocks should not be judged by single-year PE alone; policy-driven domestic substitution is not automatically equivalent to investment returns.