Key takeaway

The company has been deeply engaged in import substitution of key innovative semiconductor materials, with core products comprehensively covering integrated circuit manufacturing, monocrystalline silicon wafer manufacturing, advanced packaging, and third-generation semiconductors. The company’ s 2026 semi-annual results indicate that earnings have entered the realization stage:1) CMP polishing slurry and cleaning solution revenue achieved substantial growth; 2) Bulk deliveries of CMP polishing pads and high-end wafer photoresist continued to increase; 3) Photosensitive PSPI and TFE-INK for semiconductor display materials achieved the first batch supply deployment on China’s first G8.6 AMOLED production line.

Event

The company announced its 1H26 earnings preview. In 1H26, the company expects to achieve operating revenue of RMB1.925bn, up approximately 11% YoY; it expects to record net profit attributable to shareholders of the parent company of RMB510mn to RMB540mn, up 63.96% to 73.61% YoY; it expects to record non-recurring net profit attributable to shareholders of the parent company of RMB483mn to RMB513mn, up 64.42% to 74.64% YoY. Excluding profit from the divested printer consumables terminal business, net profit attributable to shareholders of the parent company in 1H26 increased by more than 80% YoY.

Quick Take

Multi-dimensional business synergy drove growth, with net profit attributable to shareholders of the parent company expected to achieve strong growth in 1H26. In 1H26, the company expects to achieve operating revenue of RMB1.925bn, up approximately 11% YoY; excluding profit from the divested printer consumables terminal business, net profit attributable to shareholders of the parent company in 1H26 increased by more than 80% YoY. The semiconductor materials business maintained solid growth momentum. Among them, CMP polishing slurry (including cleaning solution, excluding in-house abrasive particles) achieved combined revenue growth of 63% YoY and delivered scaled profit of approximately RMB47mn, while monthly sales in June exceeded RMB40mn, reaching a record high; CMP polishing pad revenue increased by 57% YoY, and June monthly shipments exceeded 50,000 pieces for the first time, also reaching a record high; high-end wafer photoresist secured procurement orders of approximately 1,000 gallons, with bulk delivery scale continuing to expand. From the business structure perspective, newly acquired Shenzhen Haofei recorded revenue growth of approximately 60% YoY in 1H26 (consolidated from March to June), with significantly improved profitability; after divesting the printer consumables terminal business, the company’s color polymer toner and consumables chip businesses developed steadily, with resources fully focused on the core semiconductor materials business, providing extremely strong overall earnings support.

Looking ahead, the company continues to accelerate its platform-based capacity expansion, and is expected to maintain a strong growth momentum. In terms of industrial projects, the company recently launched the construction project for the third soft polishing pad production line at the Qianjiang industrial park, focusing on the new application areas of CMP polishing pads for glass substrates and polishing pads with diameters exceeding 2 meters for large-size high-end products; meanwhile, the company is rapidly advancing the capacity expansion project of Shenzhen Haofei at the Xiantao industrial park, and the currently produced anode binder has already begun small-volume shipments. In terms of new products and core incubation projects, the company has cumulatively developed more than 40 high-end wafer photoresists, with nearly 30 products submitted to customers for validation testing, while the number of product models under customerside testing doubled YoY, and the company has also simultaneously deployed several supporting lithography auxiliary materials such as BARC and SOC; on the lithium battery materials business side, the company is actively addressing industry pain points in cooperation with leading domestic downstream enterprises and is currently focusing on the development of multiple innovative functional materials related to lithium battery safety, thermal management, electrical performance, and energy density enhancement.

Investment recommendation: The company continues to advance expansion into new fields and globalized business development. The semiconductor materials segment is expected to maintain a steady growth trend. We forecast net profit attributable to shareholders of the parent company at RMB1.212bn, RMB1.679bn, and RMB2.249bn for 2026-2028, corresponding to PE multiples of 65.0x, 46.9x, and 35.0x, respectively. Considering that the company is a leading domestic CMP polishing pad enterprise and that its new materials business is growing rapidly, we initiate coverage with a “Buy” rating.

Risks:

1. Risks from downstream demand fluctuations and the macroeconomic environment

Affected by global macroeconomic fluctuations and industry cycle volatility, if the recovery pace of downstream demand remains sluggish in the future, or if factors such as insufficient capacity utilization rates at downstream display panel manufacturers persist during the same period, revenue from some of the company’s materials businesses may experience phased fluctuations, thereby posing challenges to the stability of the company’s operating performance.

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

As the company’s newly added capacity for key products such as CMP polishing pads for glass substrates, large-size polishing pads, and anode binders is gradually completed and put into operation, if downstream demand release falls short of expectations and the new capacity cannot achieve sufficient utilization and efficiency gains, the additional fixed asset depreciation and related construction costs may have a significant adverse impact on the company’s overall profitability.

3. Risks related to technology R&D and new product validation cycles

Semiconductor materials and innovative lithium battery functional materials are typical technologyintensive fields, featuring rapid technology iteration, high R&D investment, and relatively long downstream validation cycles. The R&D and industrialization of the company's high-end wafer photoresists and supporting lithography auxiliary materials, as well as multiple innovative lithium battery functional materials and other new products, require key processes such as customer sample delivery and validation testing. If circumstances such as technology route adjustments or validation progress falling short of expectations arise during this period, prior R&D investment may fail to generate benefits in a timely manner, thereby resulting in missed market business opportunities.

4、Sensitivity analysis

The company's core business is the polishing pad business. Under the optimistic scenario, if the polishing pad business maintains revenue growth of 70% and gross margin of 60%, exceeding expecta tions overall, the company is expected to achieve YoY growth of approximately 26%/75% in revenue/net profit, respectively, in 2026; under the pessimistic scenario, if the polishing pad business achieves revenue growth of approximately 50% and gross margin of 60%, the company is expected to achieve YoY growth of approximately 15%/61% in revenue/net profit, respectively, in 2026; under the neutral scenario, if the company's polishing pad business achieves revenue growth of approximately 60% (close to the 57% revenue growth in 1H26) and gross margin of 60%, the company is expected to achieve YoY growth of approximately 20%/68% in revenue/net profit, respectively, in 2026.