Key points of investment
The cooling industry has a broad market space, and many fields work together to contribute to the increase: The thermal conductivity and cooling industry is rapidly developing along with the expansion of electronic information technology applications. According to QY Research data, the global thermal management materials market will grow at a compound growth rate of 3.2% in 2028, and the market size will increase from US$11.58 billion in 2022 to US$13.98 billion in 2028. There are a wide range of terminals in the industry, including consumer electronics, automotive electronics, base stations, servers and data centers. In 2022, the market size of consumer electronics thermal management, automotive vehicle thermal materials and other thermal conductive materials was 12.47 billion yuan, 3.81 billion yuan, and 2.1 billion yuan respectively, accounting for 67.8%, 20.7%, and 11.4% respectively.
At the same time, the country strongly supports the development of the heat dissipation industry. The “14th Five-Year Plan” and “13th Five-Year Plan” all mention promoting the development of new materials. In 2022, the market size of thermal conductive materials in China was about 18.38 billion yuan, an increase of 1.0% over the previous year, and is expected to reach 22.23 billion yuan in 2024.
AI+ drives the comprehensive upgrading of the industry and opens up room for industry growth: With the popularity of AI+, industry upgrades have spawned a larger cooling application market, and higher performance requirements for integrated cooling solutions have ushered in the heat dissipation materials industry. The heat dissipation materials industry is constantly being updated and upgraded, and demand for excellent materials such as thermal conductive graphite, thermal interface materials, and heat pipe/VC heat dissipation materials/devices also continues to grow. The smartphone, AI PC, and optical module markets are growing significantly, and large computing power is driving high demand for cooling.
In terms of smartphones, major companies continue to improve cooling solutions. Counterpoint Research expects global AI phone shipments to exceed 550 million units in 2027, and the global AI phone thermal conductive material market is expected to reach 9.92 billion yuan by 2026. On the PC side, the share of AI PCs in PCs is expected to increase year by year. Canalys expects shipments to reach 210 million units in 2028, a compound growth rate of 44% in 24-28, and the global AI PC cooling market is expected to reach 39.3 billion yuan in 2026. Demand in the communications market is strong, and the optical module market is growing at an impressive rate. LIGHTCOUNTING estimates that the total value of cooling devices for 100G, 200G, 400G, and 800G optical modules worldwide will be US$310 million in 2026.
The products are widely used, and the layout is double cycle at home and abroad: the company's products are divided into thermal conductive materials, EMI shielding materials and other materials. It mainly solves problems such as heat dissipation, thermal conductivity, electromagnetic compatibility, bonding and sealing in electronic products. In terms of terminal applications, the company's products are widely used in consumer electronics, communications, automotive electronics, clean energy and other industries, covering various electronic devices from smartphones and tablets to data centers and new energy vehicles. The cross-advantages of multiple technologies have formed the company's unique competitive advantage, and have formed long-term stable high-quality customer resources in the communications field and consumer electronics field. At the same time, the company actively lays out a dual cycle at home and abroad, promoting the company's transformation from a single major customer strategy to a strategy that places equal emphasis on major customers and industries, using industry and capital as a starting point to enhance the company's core competitiveness.
Profit forecast and investment rating: As a leading enterprise in graphite products with high thermal conductivity, the company is expected to benefit from the rapid growth of the terminal product market in consumer electronics, digital infrastructure, intelligent transportation, clean energy, etc., as well as the development and penetration of AI technology to drive demand growth in the cooling industry. The company will give full play to its existing technical advantages and channel resources to seize more share. We expect the net profit from 2024-2026 to reach 1/3 billion yuan. The current market value of PE is 39/25/17 times, giving a “buy” rating for the first time.
Risk warning: risk of high customer and industry concentration, risk of exchange rate fluctuations, risk of increased market competition