Key takeaway

Yoke technology’s core precursor business is expected to benefit from inflation along the AI industry chain, while the company’s semiconductor materials platform model is entering a harvest period. 1) Its core precursor business currently holds a leading global market share and is expected to achieve a significant increase in value amid wafer fab capacity expansion and continuous iteration and upgrading of precursor categories; 2) As a platform company, the value of its businesses continues to stand out amid strong downstream demand. Specifically, the precursor materials business has reached a globally leading position; major projects such as electronic specialty gases and semiconductor material delivery systems have broken through capacity bottlenecks; penetration of photoresist business channels is accelerating; and the LNG business is upgrading toward high value-added services.

Quick Take

The inflation transmission mechanism across the AI industry chain remains smooth, supporting optimism on continued margin improvement in the company’s core precursor business. The global semiconductor industry chain is currently undergoing a new round of inflation transmission. Multiple factors, including rising upstream raw material prices, increasing energy costs, and process technology upgrades, are driving up the cost base across the industry chain, while the surge in AIdriven computing demand and the start of a new wafer fab expansion cycle have strengthened rigid downstream demand for semiconductor materials, creating favorable conditions for downstream cost pass-through. Some of the company’s core raw materials are rare earth metals subject to Japan’s export controls, giving the company strong advantages in domestic material supply chains amid international competition. In addition, as a major supplier of key semiconductor materials such as precursor materials and electronic specialty gases, Yoke technology possesses strong pricing power and cost passthrough capabilities within the industry chain. As domestic substitution continues to deepen, the penetration rate of the company’s products among downstream customers is steadily increasing and customer stickiness is continuously strengthening, enabling the company to fully benefit from industry inflation transmission through simultaneous volume and price growth, thereby improving gross margin and profitability.

Leveraging its core precursor business, the new materials platform enterprise is making steady progress. The company’s business segments are showing differentiated growth trends. Specifically, the semiconductor materials business, centered on precursor materials, is expected to grow 8.0% YoY in 2025, with gross margin reaching 44.8%, up 9.4 pcts YoY, demonstrating strong earnings resilience; revenue growth in the photoresist business has been particularly notable, with 2025 revenue expected to surge 27.7% YoY; benefiting from sustained demand for large LNG carriers and ultra-low-temperature insulation composite materials for liquid cargo tanks, the company’s LNG insulation panel and engineering installation business is expected to grow 57% YoY in 2025. From the perspective of customer structure, the company’s core precursor business mainly sells to leading domestic and overseas semiconductor chip manufacturers such as Samsung Electronics. In 2025, the top five customers contributed a combined sales revenue of approximately RMB3.80bn, accounting for 44% of total annual sales revenue, reflecting the company’s deep ties with core customers.

Looking ahead, the company continues to advance its platform-based presence. In the precursor segment, related products under the localization project for semiconductor precursor materials of Jiangsu Shekoy Semiconductor have successively passed testing and validation by domestic customers, and production lines have gradually entered mass trial production; new capacity projects for photoresist, electronic specialty gases, silicon micropowder and other businesses are progressing smoothly. The raw material production line construction for the “39,000-ton semiconductor core materials project” of Huzhou Yoke Huafei Electronic Materials Co., Ltd. has been completed. Nine production lines under the “24,000-ton electronic materials project” of Yoke Shekoy (Chengdu) Electronic Materials Co., Ltd. have entered mass production. The 15,000-ton electronic specialty gas project of Inner Mongolia Kemeite is progressing smoothly and is expected to commence production in 3Q26.

Investment recommendation: As a platform-based new materials company, all downstream businesses are expected to fully benefit from the strong demand driven by AI computing power infrastructure. We expect the company to achieve net profit of RMB1.30bn, RMB1.74bn, and RMB2.36bn in 2026-2028, corresponding to PE of 73.3x, 54.4x, and 40.2x, respectively. Considering the strong prosperity of the company’s downstream sectors and the excellent customer structure of its core businesses, we assign a “Buy” rating.

Risks:

I. Risks from industry cyclicality fluctuations and intensified competition

The company’s electronic materials and LNG thermal insulation materials are significantly affected by the prosperity of the downstream semiconductor and liquefied natural gas industries. Both the semiconductor industry and the liquefied natural gas industry are characterized by cyclical technological and market development, and the semiconductor industry cycle is far more frequent than the economic cycle. Market demand for the company’s electronic materials business and LNG thermal insulation panel business is closely related to the development conditions of the aforementioned industries. Meanwhile, some enterprises with products similar to certain products of the company and with strong competitiveness have already emerged in the market, and industry competition is becoming increasingly intense. As the semiconductor and liquefied natural gas industries continue to develop, the possibility cannot be ruled out that more enterprises with relatively large scale and certain technological accumulation may enter the industries in which the company operates in the future, and the company may face relatively fierce market competition.

II. Risks related to major project construction and capacity ramp-up

The company’s ongoing projects, including the Inner Mongolia Kemeite electronic specialty gas project and the Huzhou 39kt semiconductor materials project, are key initiatives aimed at breaking capacity bottlenecks and deepening domestic substitution, involving substantial capital expenditure. If project construction is delayed due to factors such as environmental approval procedures, equipment delivery, or engineering works, or if postcompletion capacity ramp-up is slower than expected and yield improvement progresses slowly, the realization of investment returns may be postponed. More importantly, the release of new capacity requires matching downstream demand absorption capabilities. If production commencement coincides with a weak industry demand cycle, or customer qualification progress lags behind, it may result in idle capacity and rising fixed cost amortization pressure, affecting project investment returns and weighing on the company’s cash flow and financial condition.

III. Risks related to asset impairment pressure and constrained profit release

The company is facing asset impairment pressure. If semiconductor material prices continue to decline in the future, or if certain inventory products become unsalable due to technological iteration, inventory impairment losses may further expand. Meanwhile, the company’s accounts receivable balance has increased alongside business expansion. If downstream customers experience deteriorating operating conditions or extended payment collection cycles, credit impairment losses will also increase. In addition, the company needs to maintain consistently high R&D investment to preserve its technological leadership. Period expenses such as selling expense and administrative expense continue to increase steadily. If core businesses generate revenue growth without corresponding profit growth and expense ratios remain elevated, coupled with seasonal factors such as concentrated year-end expense recognition, the improvement of the company’s overall profitability will continue to face constraints, and the pace of profit release may fall short of market expectations.