Key takeaway

High-speed electronic materials are now scaling up into mass production. We look forward to the company's diversified business segments gaining traction and delivering growth (1) Electronic materials and insulating materials have benefited from the continuous upgrades in AI computing power, the rapid growth of new energy vehicles(NEVs), and the ongoing development of ultra-high-voltage (UHV) power transmission infrastructure, driving stronger demand for high-performance electronic materials. In 2025, the company achieved revenue of RMB590mn from high-speed electronic materials, representing a substantial YoY increase of 125.07%. 2) Core new materials such as optical films have become a growth engine driven by high technical barriers and the continuous release of new capacity. Specifically, mid-to-high-end optical-grade polyester base films turned losses into profits in 2025; businesses such as polypropylene films for UHV and new energy, as well as eco-friendly flame retardant and electrical insulation materials maintained steady growth; new projects such as optical base films for polarizers and MLCCs, and ultra-thin polypropylene films were transferred to fixed assets and put into production on schedule, and the industrialization of core incubating projects such as photoresist monomers and proton exchange membranes was accelerated.

Quick Take

Focus on the core business of new chemical materials, profitability is expected to continuously improve. At present, computing power upgrades and the continuous expansion of NEVs and UHV construction are boosting downstream demand for advanced new chemical materials such as high-performance electronic materials and UHV insulation materials. In this context, multiple core products of the company show outstanding competitive advantages, such as bismaleimide resin, active ester resin, and polyphenylene ether resin, which are used in global mainstream server systems including Nvidia, Huawei, Apple, and Intel. With the iterative upgrade of new-generation servers and improved demand for consumer electronics terminals, the penetration rate of high value-added products developed and produced by the company—such as electrical polypropylene films for UHV, ultra-thin electronic polypropylene films for NEVs, high-speed electronic resins, and mid-to-high-end optical polyester base films — continues to rise among downstream customers. The significant brand competitive advantage drives a substantial increase in overall profitability.

Driven by both electronic materials and optical films, the company ushers in high-quality development. The company's various business segments exhibited differentiated growth trends. In 2025, the electronic materials business grew by 45.23% YoY, and the GPM reached 20.07%, up 5.91 pcts YoY, of which the sales revenue of high-speed electronic materials surged by 125.07% YoY; the company focused on optical-grade polyester base films with high technical barriers, and the optical film materials business turned profitable, with revenue growing by 26.11% YoY and a GPM of 10.42%; the sales revenue of polypropylene films increased by 16.47% YoY; the environmentally friendly flame retardant materials and electrical insulation materials businesses remained stable, with revenue growing by 7.48% and 2.79% YoY respectively.

Looking ahead, the company continues to accelerate its platform-based capacity expansion. The company has successfully completed fixed-asset transfer and commenced commercial production for three key industrialization projects as scheduled: the 25,000-ton-per-annum optical-grade polyester base film project for polarizers, the 20,000-ton-per-annum ultra-thin MLCC optical-grade polyester base film technical transformation project, and EMTech's Chengdu Innovation Center and Production Base (Phase I) – Line 1 for 3,000 tons of ultra-thin polypropylene film, all of which have now established stable operating capacity. Concurrently, the main civil works and equipment debugging for both the Phase I Line 2 (3,000-ton ultra-thin polypropylene film) and the Phase II (25,000-ton high-end optical polyester base film) projects at EMTech's Chengdu Innovation Center and Production Base are advancing in an orderly fashion. The 20,000-ton-perannum electronic materials project for high-speed communication substrates also remains on schedule. With the gradual growth of new capacity and the pilot testing and industrialization of core incubating projects such as photoresist monomers and proton exchange membranes, the company is expected to further consolidate its leading position in the domestic new materials market and fully unleash its incremental profitability.

Investment recommendation: The company continues to advance the exploration in new fields and its global expansion, and its electronic materials and optical film segments are expected to maintain a steady growth trend. We estimate the company will achieve a net profit attributable to the parent company of RMB770mn, RMB966mn, and RMB1.259bn in 2026-2028, implying PE ratios of 71.6x, 57.1x, and 43.8x, respectively. Considering the company is a core player in electronic-grade resin and its performance is expected to grow rapidly, we initiate coverage with a "Buy" rating.

Risks:

I. Raw material price fluctuations

The company's primary raw materials are bulk chemical commodities such as polyester chips, methanol, and PTA, with raw material costs accounting for a higher proportion of total costs. Their purchase prices are highly correlated with international crude oil prices. Due to global macroeconomic fluctuations and volatile international oil prices in 2025, the company's main raw material prices exhibited significant volatility, thereby posing challenges to the stability of the company's operating performance.

II. Risks in major project construction and capacity ramp-up

During the implementation of its industrialization construction projects, the company remains exposed to risks arising from multiple factors, including changes in the macroeconomic environment, adjustments to industrial policies, rising construction costs, fluctuations in market demand, and accelerated technological iteration. These external challenges, coupled with internal risks such as insufficient support from the R&D and sales departments, could result in project delays, budget overruns, underutilized capacity, and final production outcomes falling short of expectations.

III. R&D and intellectual property risks

The new chemical material industry is a technology-intensive field, characterized by rapid technological iteration, high R&D spending, and longer downstream verification cycles. New product R&D projects must go through multiple critical stages, including bench-scale trials, pilot-scale tests, industrial-scale implementation, and customer qualification. During this process, if technology roadmap sees optimization, R&D progress falls short of expectations, or industrial adaptation outcomes is unsatisfactory, it may result in a failure to convert upfront R&D investments into returns in a timely manner, thereby missing market opportunities.

IV. Sensitivity analysis

The company's current primary growth driver comes from its electronic materials business. Under an optimistic scenario, assuming the company's electronic materials business achieves approximately 50% revenue growth in 2026, with GPM rising to 40% due to an increased share of high-speed materials, the company's total revenue and profit would grow by approximately 24% and 184% YoY, respectively. Under a base-case scenario, assuming approximately 40% revenue growth in the electronic materials business, total revenue and profit would grow by approximately 21% and 170% YoY, respectively. Under a pessimistic scenario, assuming only approximately 20% revenue growth in the electronic materials business, total revenue and profit would grow by approximately 15% and 142% YoY, respectively.