Equity Research: Keqiang Shares (920665.BJ)

Date: December 16, 2025
Ticker: 920665.BJ (Beijing Stock Exchange)
Current Price: CNY 19.95
Market Cap: CNY 2.59 Billion
Rating: Outperform (Downgraded from Buy)
Target Price Implied P/E (2025E): 55.8x

Executive Summary

Keqiang Shares (920665.BJ), a specialized manufacturer of high-performance rubber products, is navigating a complex macroeconomic and industry-specific landscape characterized by intense price competition in the photovoltaic (PV) sector, offset by stabilizing demand in rail transit and emerging opportunities in petrochemical sealing applications. While the company maintains a robust balance sheet and strong market positions in niche segments, near-term profitability has been pressured by margin compression in its core silicone board business.

In this update, we downgrade our rating to "Outperform" (from "Buy") primarily due to valuation concerns following recent price appreciation and downward revisions to earnings forecasts. We now project Net Profit Attributable to Parent Company shareholders of CNY 46 million, CNY 49 million, and CNY 53 million for 2025, 2026, and 2027, respectively. These figures represent a significant downward adjustment from our previous estimates of CNY 70 million, CNY 84 million, and CNY 104 million. The revision reflects the persistent "involution" (hyper-competition) in the PV supply chain, which has forced component manufacturers to pass cost reductions upstream, thereby squeezing supplier margins.

Despite the near-term headwinds, several structural positives remain intact:
1. Leading Indicators of Recovery: Contract liabilities surged by 61.66% year-to-date through Q3 2025, reaching CNY 8.78 million, suggesting improved order visibility and potential revenue recognition in subsequent quarters.
2. Policy-Driven PV Stabilization: Industry-wide initiatives led by the China Photovoltaic Industry Association (CPIA) to establish cost-based bidding floors are beginning to curb irrational price wars. Production cuts across polysilicon, wafers, cells, and modules in late 2025 indicate a supply-side correction that may stabilize prices for auxiliary materials like silicone boards.
3. Diversification Success: The company’s strategic expansion into petrochemical sealing and high-end rail transit interiors is yielding tangible results, with new wins at Sinopec subsidiaries and the successful deployment of interior materials in the CR450 high-speed rail project.

At the current price of CNY 19.95, the stock trades at a Forward P/E of approximately 55.8x for 2025. While this multiple reflects the premium associated with its niche technology and Beijing Stock Exchange liquidity dynamics, it leaves limited margin of safety given the revised earnings trajectory. We advise investors to monitor the efficacy of PV industry self-discipline measures and the conversion of the elevated contract liabilities into recognized revenue as key catalysts for future re-rating.

Key Takeaways

1. Financial Performance: Resilience Amidst Margin Pressure

Third Quarter 2025 Analysis
Keqiang Shares reported mixed results for the third quarter of 2025, highlighting the dichotomy between top-line stability and bottom-line pressure.

• Revenue Stability: In Q3 2025, the company generated revenue of CNY 85.12 million, representing a year-over-year (YoY) increase of 1.78% and a quarter-over-quarter (QoQ) increase of 0.84%. For the first nine months of 2025, total revenue stood at CNY 235 million, a slight YoY decline of 6.93%. The sequential growth in Q3 suggests that volume demand remains relatively stable, even as pricing power erodes.
• Profitability Decline: Net profit attributable to shareholders in Q3 2025 was CNY 9.96 million, down 15.26% YoY and 17.35% QoQ. For the first three quarters of 2025, cumulative net profit was CNY 32.05 million, a substantial YoY drop of 35.73%.
• Margin Compression Driver: The primary driver of profit deterioration was the sustained decline in selling prices for silicone boards, a core product used in PV module lamination. PV module manufacturers, grappling with their own losses, have aggressively negotiated lower prices with suppliers and adopted "lowest bid wins" strategies in tenders. Consequently, revenue from silicone boards fell by 14.11% in the first nine months, while the gross margin for this segment contracted by 5.41 percentage points.

Table 1: Quarterly & Cumulative Financial Highlights (2025)

Source: Company Reports, Kaiyuan Securities Research Institute

The divergence between revenue stability and profit decline underscores the severity of the pricing environment in the PV supply chain. However, the modest QoQ revenue growth indicates that the company has maintained its market share, likely due to the critical nature of its products in the lamination process where quality consistency is paramount.

2. Operational Bright Spots: Contract Liabilities Surge

A critical leading indicator in Keqiang’s recent financials is the significant expansion in Contract Liabilities. As of the end of Q3 2025, contract liabilities totaled CNY 8.78 million, representing a 61.66% increase compared to the beginning of the year.

• Implication: Contract liabilities primarily consist of advance payments received from customers for goods not yet delivered. A surge of this magnitude typically signals robust order intake and strong customer commitment. It suggests that despite the pricing pressures, demand for Keqiang’s specialized rubber products remains healthy, and the company has successfully secured orders for future delivery.
• Future Revenue Visibility: This buildup provides a cushion for future revenue recognition. As these orders are fulfilled in Q4 2025 and into 2026, they will contribute to top-line growth, potentially offsetting some of the seasonal weaknesses or further pricing declines. Investors should view this metric as a positive counterbalance to the negative sentiment surrounding PV margin compression.

3. Industry Dynamics: The PV "Anti-Involution" Pivot

The photovoltaic sector, a key downstream application for Keqiang’s silicone boards, is undergoing a structural shift aimed at curbing destructive competition.

Policy Intervention and Market Response
On October 14, 2024, the China Photovoltaic Industry Association (CPIA) convened a special symposium in Shanghai titled "Preventing 'Involutionary' Malignant Competition in the Industry." This marked a pivotal moment where industry leaders collectively agreed to establish cost prices as the red line for bidding. This self-disciplinary mechanism aims to prevent companies from bidding below cost to gain market share, a practice that has devastated profitability across the supply chain.

Supply Side Correction Data (December 2025)
Recent data from Shanghai Metals Market (SMM) indicates that the industry is actively reducing production to align supply with demand, a necessary step for price stabilization:

• Polysilicon Production: Down 0.96% Month-over-Month (MoM).
• Wafer Production: Down 15.95% MoM.
• Cell Production: Down 12.61% MoM.
• Module Production: Down 13.58% MoM.

Investment Implication for Keqiang
The reduction in upstream and midstream production suggests that the inventory overhang is being addressed. As production volumes normalize and pricing floors are enforced, the extreme pressure on auxiliary material suppliers like Keqiang is expected to ease. While a full recovery in margins may take time, the risk of further drastic price cuts is diminishing. We anticipate that the "anti-involution" policies will begin to show effects in early 2026, potentially marking an inflection point for silicone board pricing and profitability.

4. Diversification Strategy: Petrochemical and Rail Transit Wins

Keqiang Shares is successfully executing its strategy to reduce reliance on the volatile PV sector by expanding into high-barrier, stable-demand industries such as petrochemicals and rail transit.

Petrochemical Sealing Breakthroughs
The company has strengthened its position as a trusted supplier to major state-owned energy enterprises, including Sinopec and PetroChina. In Q3 2025, Keqiang secured several significant bids for rubber sealing products:
* Yangzi Petrochemical: Won bids for sealing devices.
* Yizheng Oil Transmission Station: Secured contracts for tank guide (gauging) pipe sealing devices and large storage tank accessories.
* Sinopec Qingdao Petrochemical: Won bids for sealing caps.

These wins validate the company’s technical capabilities in handling harsh chemical environments and high-pressure systems. The petrochemical sector offers longer product life cycles and less frequent price renegotiations compared to PV, providing a more stable revenue base.

Rail Transit and High-End Manufacturing
In the rail transit sector, Keqiang continues to benefit from the steady modernization of China’s high-speed rail network.
* CR450 Project: The brand "SiNavo" (New Nuowei), under the affiliate Wuxi Keyue New Material Technology Co., Ltd., successfully landed its Valocore interior materials in the "Preferred First Class" seats of the new CR450 high-speed train model.
* Strategic Significance: The CR450 is a flagship project representing the next generation of Chinese high-speed rail technology. Supplying interior materials for this platform enhances Keqiang’s brand prestige and opens doors for future rolling stock projects. Additionally, the company’s existing products, such as vehicle gangway canopies, continue to see steady demand as rail infrastructure maintenance and expansion proceed.

Other Strategic Applications
Keqiang’s products are also utilized in aerospace applications, including the Long March 6A carrier rocket, demonstrating the high reliability and performance standards of its rubber formulations. This diversification into aerospace, rail, and petrochemicals creates a multi-pillar growth engine that mitigates sector-specific risks.

5. Revised Earnings Forecasts and Valuation

Given the persistent margin pressure in the PV segment and the time required for the "anti-involution" measures to fully translate into improved profitability, we have materially adjusted our financial forecasts.

Earnings Revision
We have lowered our net profit estimates for the next three years:

• 2025E: Revised down to CNY 46 million (from CNY 70 million).
• 2026E: Revised down to CNY 49 million (from CNY 84 million).
• 2027E: Revised down to CNY 53 million (from CNY 104 million).

This represents a downward revision of approximately 34-49% across the forecast period. The revisions reflect a more conservative assumption regarding the recovery timeline of silicone board margins and a cautious outlook on overall industrial demand.

Valuation Metrics
Based on the current share price of CNY 19.95 and the revised earnings per share (EPS) forecasts, the valuation multiples are as follows:

Table 2: Valuation Matrix

Source: Kaiyuan Securities Research Institute Estimates

Valuation Commentary
* High Multiple Context: The forward P/E of 55.8x for 2025 is elevated compared to historical averages and broader manufacturing peers. This premium is partly attributable to the Beijing Stock Exchange (BSE) listing, which often exhibits higher volatility and different liquidity dynamics compared to the main boards. It also reflects the market’s expectation of a turnaround in the PV sector.
* Downgrade Rationale: While the long-term story remains intact, the current valuation leaves little room for error. Any further delay in the PV margin recovery or failure to convert contract liabilities into high-margin revenue could lead to multiple contraction. Hence, we downgrade to "Outperform" to reflect a more balanced risk-reward profile. We believe the stock is fairly valued at current levels, with upside dependent on the successful execution of the diversification strategy and a faster-than-expected PV recovery.

Risks / Headwinds

Investors should carefully consider the following risks, which could adversely impact Keqiang Shares’ financial performance and stock price:

1. Product Gross Margin Decline Risk

• PV Sector Dependency: Despite diversification efforts, the PV segment remains a significant contributor to revenue. If the "anti-involution" policies fail to stabilize prices, or if module manufacturers continue to exert extreme pressure on suppliers, silicone board margins could deteriorate further.
• Raw Material Volatility: Fluctuations in the prices of raw materials such as silicone rubber, synthetic rubber, and chemicals could squeeze margins if the company cannot pass these costs onto customers. Given the current buyer’s market in PV, pass-through ability is limited.

2. Accounts Receivable Bad Debt Risk

• Customer Financial Health: Many downstream customers in the PV and construction sectors are facing liquidity challenges. An increase in delayed payments or defaults could lead to higher provision for bad debts, directly impacting net profit.
• Extended DSO: If Days Sales Outstanding (DSO) increases significantly, it could strain operating cash flows, necessitating higher working capital financing.

3. Inventory Impairment Risk

• Obsolescence: Rapid technological changes in the PV industry (e.g., shifts in module design or lamination techniques) could render existing inventory obsolete.
• Price Declines: If finished goods inventory is held during a period of falling selling prices, the company may need to write down inventory values, impacting gross margins. The current inventory levels (CNY 82 million estimated for 2025E) require careful monitoring against sales velocity.

4. Execution Risk in New Markets

• Petrochemical & Rail Penetration: While recent wins are promising, scaling up these businesses to materially offset PV weakness takes time. Failure to secure follow-on orders or expand the client base in these sectors could limit the effectiveness of the diversification strategy.
• R&D Commercialization: The success of new products like the Valocore interior materials depends on continued adoption by OEMs. Any setbacks in qualification or commercial rollout could dampen growth expectations.

5. Macro-economic and Policy Risks

• Industrial Demand Slowdown: A broader slowdown in China’s industrial activity could reduce demand for rubber seals in petrochemicals and machinery.
• Regulatory Changes: Changes in environmental regulations or safety standards could increase compliance costs or require costly modifications to production processes.

Rating / Sector Outlook

Sector Outlook: Cautiously Optimistic on Turnaround

The specialized rubber and polymer materials sector is currently in a transition phase. The dominant theme is the structural adjustment of the PV supply chain.

• Short-Term (6-12 Months): We expect continued pressure on margins for suppliers exposed to the PV sector. However, the worst of the price declines may be behind us, given the production cuts and industry self-discipline measures initiated in late 2024 and continuing through 2025. The sector is likely to bottom out in terms of profitability in H1 2026.
• Medium-Term (1-3 Years): Companies with diversified downstream exposure (like Keqiang) are better positioned to weather the storm. The growth drivers will shift from pure volume expansion in PV to value-added applications in rail, aerospace, and high-end industrial sealing. The sector is likely to consolidate, with technologically superior players gaining market share from weaker competitors who cannot survive the margin squeeze.

Investment Rating: Outperform (Downgraded)

We maintain an Outperform rating but have downgraded it from "Buy" to reflect the heightened valuation risk and revised earnings trajectory.

• Why Not "Buy"? The previous "Buy" rating was predicated on a faster recovery in PV margins and higher earnings estimates. With the P/E ratio exceeding 50x and earnings forecasts cut by ~35-50%, the upside potential relative to the downside risk is less compelling in the immediate term.
• Why Not "Neutral"? We retain a positive outlook due to the strong leading indicators (contract liabilities), the tangible success in diversification (Sinopec/CR450 wins), and the high probability of a PV sector inflection point. The company’s strong balance sheet (net cash position) and niche market leadership provide a defensive floor that pure-play PV suppliers lack.

Recommendation for Institutional Investors:
* Existing Holders: Maintain positions but monitor quarterly margin trends closely. Use any rallies driven by PV sentiment to rebalance if valuation becomes excessive.
* New Investors: Consider accumulating on dips, particularly if the stock corrects to levels offering a more attractive entry multiple (e.g., below 45x Forward P/E). Focus on the conversion of contract liabilities in Q4 2025 and Q1 2026 reports as confirmation of the turnaround.

Investment View

Core Investment Logic

Keqiang Shares represents a classic case of a niche market leader navigating a cyclical downturn. The investment thesis rests on three pillars:

1. Resilience Through Specialization: Keqiang is not a commodity rubber producer; it is a solutions provider for high-performance applications. Its products in PV lamination, rail gangways, and petrochemical sealing require rigorous certification and technical expertise. This creates high switching costs for customers and provides a moat against low-cost entrants. Even in a price war, customers prioritize reliability and quality for critical components, allowing Keqiang to retain market share even if margins compress.

2. Counter-Cyclical Diversification: The company’s proactive expansion into petrochemicals and rail transit is de-risking its business model. The wins in Q3 2025 are not just one-off events but evidence of a deepening penetration into these stable, high-barrier sectors. As the PV cycle recovers, these new segments will provide a higher baseline of earnings, reducing the volatility of future profit streams.

3. Policy-Driven Inflection Point: The Chinese government and industry associations are increasingly intolerant of "involutionary" competition that destroys industry value. The CPIA’s actions are a clear signal that the status quo is unsustainable. For investors, this policy put option provides a degree of confidence that the downside risk to margins is capped. The subsequent production cuts confirm that the industry is acting on these signals.

Detailed Business Segment Analysis

A. Photovoltaic Silicone Boards (Core Cash Cow, Under Pressure)

• Role: Silicone boards are essential for the vacuum lamination process in PV module manufacturing. They must withstand high temperatures and vacuum pressure repeatedly.
• Current Status: The segment is experiencing a "volume stable, price down" dynamic. The 14.11% revenue drop in 9M 2025 is primarily price-driven.
• Outlook: We expect prices to stabilize in H2 2026. The 61.66% increase in contract liabilities suggests that customers are locking in supply, possibly anticipating future price stability or shortages. Once prices stabilize, even a small improvement in ASP (Average Selling Price) will flow directly to the bottom line due to operating leverage.

B. Rubber Sealing Products (Growth Engine)

• Role: Seals for tanks, pipes, and machinery in petrochemical and industrial applications.
• Current Status: Strong momentum. Recent bids with Sinopec and PetroChina subsidiaries demonstrate competitive strength.
• Outlook: This segment is expected to grow at a double-digit rate in 2026-2027. The margins here are typically more stable than PV, as contracts are often longer-term and less subject to spot market volatility. This segment will increasingly contribute to profit mix, improving overall quality of earnings.

C. Rail Transit & Aerospace (Premium Brand Builder)

• Role: Gangway canopies, interior materials (Valocore), and aerospace components.
• Current Status: Steady demand from rail maintenance and new builds. The CR450 win is a prestigious endorsement.
• Outlook: While revenue contribution may be smaller than PV, the strategic value is high. It enhances the company’s reputation for high-quality engineering, which supports cross-selling into other high-end industrial sectors.

Financial Health and Balance Sheet Strength

Keqiang Shares boasts a robust balance sheet, which is a critical advantage in a downturn.

• Low Leverage: The asset-liability ratio is low, estimated at 13.7% for 2025E. The company has minimal interest-bearing debt (short-term borrowings are negligible in 2025E).
• Strong Liquidity: The current ratio is projected at 4.6x and the quick ratio at 3.9x for 2025E. This indicates ample liquidity to meet short-term obligations and fund working capital needs without external financing.
• Cash Position: The company maintains a healthy cash balance (estimated CNY 167 million in 2025E), providing flexibility for R&D investment, capacity upgrades, or potential M&A opportunities to accelerate diversification.
• Operating Cash Flow: Despite the profit decline, operating cash flow remains positive (estimated CNY 48 million in 2025E), indicating that earnings quality is still reasonable and the company is effectively managing working capital.

Table 3: Key Balance Sheet & Cash Flow Metrics (2025E-2027E)

Note: The high CapEx in 2025-2026 suggests the company is investing in future capacity or technology, which may weigh on free cash flow temporarily but supports long-term growth.

Catalysts for Re-Rating

1. Q4 2025 / Q1 2026 Earnings Beat: If the company reports better-than-expected margins due to the lag effect of price stabilization or cost controls, it could trigger a positive reassessment.
2. PV Price Index Stabilization: Public data showing a sustained halt in the decline of silicone board or PV module prices would validate the "anti-involution" narrative.
3. Major New Contracts: Announcement of large-scale, multi-year contracts in the petrochemical or rail sectors would reinforce the diversification thesis.
4. Dividend Policy: Given the strong cash position, any announcement of increased dividends or share buybacks could attract income-focused investors and support the stock price.

Conclusion

Keqiang Shares is a high-quality enterprise facing temporary headwinds from a cyclical downturn in its primary end-market. The management’s response—diversifying into petrochemicals and rail, maintaining R&D spend, and securing strong order books—is prudent and strategically sound. The surge in contract liabilities is a compelling leading indicator that the worst of the demand shock may be over.

However, the market has already priced in a significant portion of the expected recovery, resulting in a lofty valuation multiple. The downgrade to "Outperform" reflects a call for caution: while the long-term trajectory is positive, the near-term path to earnings recovery may be slower and more bumpy than previously anticipated. Investors should view Keqiang as a long-term hold with a focus on structural diversification benefits, rather than a short-term tactical trade on PV recovery. The key to unlocking further value lies in the company’s ability to demonstrate margin resilience in the coming quarters and successfully scale its non-PV businesses.

Appendix: Detailed Financial Forecasts

Income Statement Forecast (CNY Million)

Balance Sheet Forecast (CNY Million)

Cash Flow Forecast (CNY Million)

Key Financial Ratios

Analyst Certification and Disclosures

Analyst Certification:
The research analyst(s) responsible for this report hereby certify that all of the views expressed in this report accurately reflect their personal views about the subject securities or issuers. No part of the analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

Important Disclosures:
* Risk Rating: This report is rated R4 (Medium-High Risk) in accordance with the "Measures for the Suitability Management of Securities and Futures Investors" and the "Guidelines for the Implementation of Suitability Management for Securities Operating Institutions." It is intended solely for professional investors and ordinary investors with a risk tolerance level of C4 or C5.
* Conflict of Interest: Kaiyuan Securities may have business relationships with the companies mentioned in this report. Investors should assume that Kaiyuan Securities may seek or provide investment banking or other services to these companies.
* No Investment Advice: This report is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should make their own investment decisions based on their specific financial situation and risk tolerance, preferably in consultation with an independent financial advisor.

Disclaimer:
The information contained in this report is based on sources believed to be reliable, but Kaiyuan Securities does not guarantee its accuracy or completeness. The opinions and estimates included in this report reflect the judgment of the analysts as of the date of the report and are subject to change without notice. Past performance is not indicative of future results.

Deep Dive: Strategic Implications of the "Anti-Involution" Policy

To fully appreciate the investment case for Keqiang Shares, it is essential to understand the broader context of the "Anti-Involution" policy in the Chinese PV industry and how it specifically impacts auxiliary material suppliers.

The Mechanics of "Involution" in PV

"Involution" (Neijuan) in the PV sector refers to a state of intense, zero-sum competition where companies compete primarily on price rather than innovation or quality. This phenomenon arose due to:
1. Overcapacity: Massive expansions in polysilicon, wafer, cell, and module capacity outpaced global demand growth.
2. Homogenization: Technological convergence made it difficult for manufacturers to differentiate their products, leading to price being the primary decision factor for buyers.
3. Financial Pressure: Many players, backed by local government subsidies or aggressive lending, continued to produce at a loss to maintain market share and cash flow, exacerbating the oversupply.

For suppliers like Keqiang, this meant that module manufacturers, desperate to cut costs, passed every possible cent of savings upstream. Silicone boards, being a consumable auxiliary material, were easy targets for price negotiations.

How the Policy Changes the Game

The CPIA’s intervention is not just a verbal warning; it establishes a cost-based bidding floor. This has several implications:
1. Restoration of Pricing Power: Suppliers are no longer forced to bid below cost. This allows them to maintain minimum viable margins, preventing a race to the bottom that could lead to bankruptcy or quality compromises.
2. Supply Discipline: By linking bidding to cost, the policy encourages inefficient producers to exit the market or reduce output. The observed production cuts in Dec 2025 are a direct result of this discipline.
3. Quality Focus: When price is no longer the sole determinant, buyers may return to evaluating quality and reliability. This benefits established players like Keqiang, whose products have a proven track record in demanding applications.

Impact on Keqiang’s Silicone Board Segment

• Short-Term Pain: The transition period is painful. Existing contracts may still be at lower prices, and the backlog of low-margin orders needs to be cleared. This explains the continued margin pressure in Q3 2025.
• Medium-Term Stabilization: As new contracts are signed under the new self-discipline rules, average selling prices should stabilize. The 61.66% increase in contract liabilities suggests that customers are accepting these new terms, securing supply for the future.
• Long-Term Opportunity: A healthier PV industry is more sustainable. Keqiang can invest in R&D for next-generation silicone boards (e.g., longer life, higher temperature resistance) without the fear of immediate commoditization.

Deep Dive: Diversification into Petrochemicals and Rail

Keqiang’s diversification strategy is not merely a plan; it is delivering results. This section analyzes the strategic importance of these new verticals.

Petrochemical Sealing: A High-Barrier, Sticky Market

The petrochemical industry requires sealing solutions that can withstand extreme conditions: high pressure, corrosive chemicals, and wide temperature ranges.
* High Switching Costs: Once a seal is qualified and installed in a critical application (like a storage tank or pipeline), replacing it is costly and risky. Customers prefer to stick with proven suppliers.
* Longer Contract Cycles: Unlike the PV sector, where prices can fluctuate monthly, petrochemical contracts are often annual or multi-year, providing revenue visibility.
* State-Owned Enterprise (SOE) Relationships: Winning bids from Sinopec and PetroChina subsidiaries is a significant validation. These SOEs have stringent qualification processes. Successfully entering their supply chain opens doors to other large industrial players.
* Growth Potential: The Chinese petrochemical industry continues to expand, with new refineries and chemical plants being built. Keqiang is well-positioned to capture a share of this greenfield demand.

Rail Transit: Steady Demand and Prestige

China’s high-speed rail network is the largest in the world, and it requires continuous maintenance and upgrading.
* Aftermarket Demand: Beyond new train builds, there is a large and growing aftermarket for replacement parts like gangway canopies and seals. This provides a recurring revenue stream.
* Technological Leadership: The CR450 project is a showcase of China’s rail technology. Supplying interior materials for this project positions Keqiang as a technology leader. This brand equity can be leveraged to win bids in other high-end transportation sectors (e.g., urban metro, aviation).
* Policy Support: The Chinese government continues to invest in rail infrastructure as part of its economic stimulus and regional integration strategies. This provides a tailwind for demand.

Synergies Across Segments

Keqiang’s core competency is in formulating and processing high-performance rubber compounds. This expertise is transferable across sectors.
* R&D Efficiency: Innovations in one sector (e.g., heat resistance for PV) can be adapted for another (e.g., chemical resistance for petrochemicals).
* Manufacturing Flexibility: The company’s production facilities can be adjusted to produce different types of rubber products, allowing it to respond to shifting demand patterns.

Final Investment Recommendation

Summary:
Keqiang Shares is a resilient, well-managed company with a strong market position in niche rubber products. While the PV sector downturn has impacted near-term profitability, the company is successfully diversifying into more stable, high-barrier markets. The surge in contract liabilities and the industry-wide move towards price discipline in PV are positive signs for a future recovery.

Action:
* Rating: Outperform (Downgraded from Buy)
* Target Valuation: Current price implies a 2025E P/E of 55.8x. We believe this is fair given the growth prospects and risk profile.
* Strategy: Hold existing positions. New buyers should wait for a better entry point or clearer signs of margin recovery. Monitor Q4 2025 and Q1 2026 results for confirmation of the turnaround.

Key Monitoring Metrics:
1. Silicone Board Gross Margin: Look for stabilization or improvement.
2. Contract Liability Conversion: Track revenue growth in Q4 2025 and Q1 2026.
3. New Orders in Petrochemical/Rail: Continued wins in these sectors will validate the diversification strategy.
4. PV Industry Production Data: Monitor SMM data for further signs of supply-demand balancing.

This report is prepared by Kaiyuan Securities Research Institute. For any inquiries, please contact the analyst team.

Analyst: Zhu Haibin
Contact: zhuhaibin@kysec.cn
Certificate No.: S0790522080007

Kaiyuan Securities Research Institute
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