Equity Research: Boway Alloy (601137.SH)

Rating: Outperform (Maintained)
Sector: Non-Ferrous Metals / Advanced New Materials
Date: October 2025
Analysts: Liu Mengluan, Ma Keyuan (Guosen Securities Economic Institute)

Executive Summary

Boway Alloy (601137.SH), a leading integrated manufacturer of advanced copper alloy materials and new energy photovoltaic (PV) components, reported its financial results for the first three quarters of 2025. The company’s performance during this period reflects a distinct divergence between its two core business segments: the New Materials division demonstrated robust growth in both volume and profitability, driven by product structure optimization and strong demand from high-end applications; conversely, the New Energy (PV) segment faced significant headwinds due to geopolitical trade barriers and transitional operational costs associated with its US manufacturing expansion.

For the first nine months of 2025, Boway Alloy achieved total revenue of RMB 15.47 billion, representing a year-over-year (YoY) increase of 6.07%. However, net profit attributable to shareholders of the parent company amounted to RMB 881 million, a decline of 19.76% YoY. Deducting non-recurring items, the net profit stood at RMB 881 million, down 16.73% YoY. The third quarter (3Q25) alone saw revenue of RMB 5.25 billion (-8.12% YoY, flat QoQ) and net profit of RMB 205 million (-55.53% YoY, -43.0% QoQ). This sequential and annual contraction in profitability was primarily attributed to the temporary margin compression in the PV business, specifically impacting exports from Vietnam to the US due to elevated anti-dumping and countervailing duties, alongside the high initial costs of ramping up production at the new US facility.

Despite the short-term earnings pressure, the fundamental investment thesis for Boway Alloy remains intact. The company’s core competency in high-performance copper alloys continues to strengthen, benefiting from structural shifts in the electronics, automotive, and AI-related hardware sectors. Furthermore, the strategic localization of PV capacity in the United States, while costly in the near term, positions the company to capture long-term value in the US market, bypassing future trade restrictions. Management has effectively optimized operating expenses, with the combined sales, administrative, R&D, and financial expense ratios declining by 0.43 percentage points YoY in the first three quarters.

We maintain our "Outperform" rating on Boway Alloy. We project revenues of RMB 19.32 billion, RMB 23.95 billion, and RMB 25.10 billion for 2025, 2026, and 2027, respectively. Corresponding net profits are forecasted at RMB 1.21 billion, RMB 1.39 billion, and RMB 1.74 billion. At the current share price of RMB 22.51, the stock trades at forward P/E multiples of approximately 15.3x (2025E), 13.3x (2026E), and 10.6x (2027E). Given the high entry barriers in the special copper alloy market and the strategic advantage of its US-based PV supply chain, we believe the current valuation does not fully reflect the company’s long-term earnings recovery potential and technological moat.

Key Takeaways

1. Financial Performance Analysis: A Tale of Two Segments

The financial results for 9M2025 and 3Q2025 highlight the complex operational landscape Boway Alloy navigates. While top-line revenue growth remained positive on a cumulative basis, profitability metrics were suppressed by specific, identifiable factors in the New Energy segment.

1.1 Revenue and Profit Trends

• Cumulative Performance (9M2025):

  • Revenue: RMB 15.47 billion (+6.07% YoY). The modest growth indicates stable demand across the portfolio, though the mix shift towards lower-margin or higher-cost transitional phases impacted the bottom line.
  • Net Profit: RMB 881 million (-19.76% YoY).
  • Deducted Net Profit: RMB 881 million (-16.73% YoY). The closeness of net profit and deducted net profit suggests that non-recurring gains/losses were minimal, indicating that the profit decline is operational rather than accounting-driven.

• Quarterly Performance (3Q2025):

  • Revenue: RMB 5.25 billion (-8.12% YoY, ~0% QoQ). The sequential stability suggests that demand volume has not collapsed, but pricing power or product mix may have shifted.
  • Net Profit: RMB 205 million (-55.53% YoY, -43.0% QoQ).
  • Deducted Net Profit: RMB 226 million (-49.83% YoY, -35.10% QoQ).

The sharp deceleration in profit growth relative to revenue underscores the impact of margin compression. The divergence between the resilient New Materials business and the struggling PV business is the central narrative of this reporting period.

1.2 Profitability Metrics: Margin Compression

Profitability ratios declined notably in 3Q2025, reflecting the immediate impact of the PV segment's challenges.

• Gross Margin Analysis: The gross margin contraction of 2.53 percentage points YoY for the first nine months, and an additional 2.67 percentage points sequentially in Q3, is significant. This is primarily driven by:

  1. PV Segment: The imposition of high double-reverse (anti-dumping and countervailing) duties by the US on PV cells and modules exported from Vietnam severely eroded margins on these shipments. Additionally, the US-based manufacturing facility, which commenced production in Q3, is in the early ramp-up phase. Initial production runs typically incur higher unit costs due to lower utilization rates, learning curve inefficiencies, and fixed cost absorption issues. These costs have not yet been offset by economies of scale.
  2. Materials Segment: While the materials segment improved its product mix, the overall blended margin was dragged down by the heavier weight of the underperforming PV segment in the quarterly mix.

• Net Margin Analysis: The net margin followed a similar downward trajectory, falling to 3.89% in Q3. This indicates that while operating expenses were controlled, the gross profit erosion was too substantial to be absorbed entirely by expense savings.

2. Operational Efficiency and Balance Sheet Health

Despite the pressure on gross margins, Boway Alloy demonstrated disciplined cost management in its operating expenses, although balance sheet leverage increased to support strategic expansion.

2.1 Expense Ratio Optimization

The company successfully reduced its period expense ratios, showcasing improved operational efficiency in administration and sales channels.

• Interpretation: The aggregate decline of 0.43 percentage points in period expense ratios is a positive signal. It suggests that management is actively controlling overheads despite the revenue headwinds.
• R&D Commitment: Maintaining an R&D expense ratio of 2.31% indicates a continued commitment to innovation, which is critical for sustaining the technological moat in the high-end copper alloy market. This spending supports the development of next-generation materials for AI servers, high-speed connectors, and new energy vehicles, ensuring long-term competitiveness.
• Financial Expenses: The low financial expense ratio of 0.25% suggests that interest costs are currently manageable, although this may change as debt levels adjust (see below).

2.2 Balance Sheet and Cash Flow Dynamics

• Leverage Increase: The asset-liability ratio rose to 55.54% as of the end of Q3 2025, an increase of 4.22 percentage points from the end of 2024.
  • Driver: This increase is largely attributable to the capital-intensive nature of the US PV factory construction and the subsequent working capital requirements for raw material stocking. It reflects active investment in future capacity rather than deteriorating solvency.
• Operating Cash Flow Strain: Net cash flow from operating activities for the first three quarters was -RMB 1.232 billion, a significant year-over-year decline.
  • Primary Cause: The negative cash flow is explicitly linked to the New Energy US Factory. As the facility began operations, the company needed to build up inventory reserves of raw materials and work-in-progress to ensure smooth production continuity. This "stockpiling" phase temporarily ties up cash in inventory before it is converted into receivables and eventually cash upon sales.
  • Outlook: This is expected to be a transient phenomenon. As the US factory moves from the ramp-up phase to stable mass production, inventory turnover should normalize, and operating cash flow is projected to recover in subsequent periods.

3. Business Segment Deep Dive

3.1 New Energy (PV) Business: Short-Term Pain for Long-Term Gain

The New Energy segment was the primary drag on 3Q2025 performance. Understanding the specific drivers of this underperformance is crucial for assessing the forward-looking risk/reward profile.

• Trade Barrier Impact (Vietnam Export Channel):

  • The US Department of Commerce has imposed stringent anti-dumping and countervailing duties on solar products originating from Southeast Asia, including Vietnam.
  • Boway Alloy’s existing export channel from Vietnam to the US faced these heightened tariffs in Q3. Since tariff costs are often partially absorbed by manufacturers to maintain market share, or passed on only partially to customers, the immediate effect was a sharp contraction in gross margins for these specific shipments.
  • Strategic Implication: This validates the necessity of Boway’s strategy to localize production within the US. Reliance on Southeast Asian exports is no longer a sustainable long-term model for accessing the lucrative US market.

• US Factory Ramp-Up Costs:

  • The company’s US-based battery and module manufacturing facility commenced production in Q3 2025.
  • Cost Structure: Early-stage production is characterized by high per-unit costs. Factors include:
    • Lower yield rates during process optimization.
    • Under-utilization of fixed assets (depreciation remains constant while output is low).
    • Higher labor and logistical costs associated with starting up a new greenfield or brownfield site.
  • Profitability Distortion: The report explicitly states that Q3 results "do not reflect true profitability." This implies that the losses or low margins recorded are accounting artifacts of the start-up phase rather than indicative of the facility's long-term economic potential. Once the facility reaches nameplate capacity and stabilizes yields, margins are expected to expand significantly, especially given the premium pricing available in the US domestic market for locally produced solar components.

• Future Outlook for PV:

  • The transition from Vietnam-based exports to US-based domestic production is a critical inflection point. While Q3 and potentially Q4 2025 may remain pressured, 2026 is poised to be a year of margin recovery as the US facility scales.
  • The US Inflation Reduction Act (IRA) and other local content requirements favor domestically manufactured solar components, providing a structural tailwind for Boway’s US operations once fully operational.

3.2 New Materials Business: The Core Growth Engine

In stark contrast to the PV segment, the New Materials business delivered strong performance, characterized by volume growth, profit expansion, and product mix improvement.

• Volume and Profit Growth:

  • The segment reported a significant YoY increase in net profit.
  • Sales volumes increased, indicating robust demand for Boway’s copper alloy products.
  • This growth occurred despite the broader macroeconomic uncertainties, highlighting the resilience of demand in Boway’s target niche markets.

• Product Structure Optimization:

  • Boway Alloy is successfully shifting its sales mix towards higher-value-added products. This includes specialized copper alloys used in:
    • Consumer Electronics: High-speed connectors for smartphones and laptops.
    • Automotive: Connectors and busbars for Electric Vehicles (EVs) and autonomous driving systems.
    • AI & Data Centers: Critical components for high-performance computing servers, where thermal conductivity and electrical reliability are paramount.
  • Technological Moat: The company’s ability to produce these high-precision alloys creates a high barrier to entry. Competitors struggle to match Boway’s consistency, quality, and scale in these specialized grades. This moat allows Boway to maintain healthier margins in the materials segment compared to commodity copper processors.

• Strategic Alignment with Mega-Trends:

  • AI Boom: The surge in AI infrastructure spending globally drives demand for advanced interconnect solutions. Boway’s materials are essential for the high-speed data transmission required in AI clusters.
  • Electrification: The ongoing transition to EVs increases the content of copper alloys per vehicle (for wiring, batteries, and charging infrastructure).
  • Import Substitution: In China, there is a continued push for domestic substitution of high-end electronic materials, benefiting local leaders like Boway.

4. Valuation and Financial Forecasts

We maintain our earnings forecasts for Boway Alloy, believing that the market has already priced in the short-term PV headwinds, while undervaluing the long-term structural growth of the materials business and the eventual profitability of the US PV plant.

4.1 Revenue and Profit Projections (2025-2027)

• 2025E Logic: We project a slight decline in net profit (-10.5%) due to the full-year impact of PV margin compression in H2 2025 and the one-time ramp-up costs of the US factory. Revenue growth is modest (3.54%) as the PV volume growth is offset by potential pricing pressures or mix shifts.
• 2026E Logic: A strong rebound is anticipated. Revenue is expected to jump by ~24% as the US PV factory reaches full capacity and contributes meaningful sales. Net profit growth of 15.1% will be driven by operating leverage in the US plant and continued steady growth in the high-margin materials segment.
• 2027E Logic: Sustainable growth continues with a 24.75% profit increase, driven by mature operations in both segments and potential new product launches in the materials division.

4.2 Valuation Multiples

At the current closing price of RMB 22.51, the valuation metrics are as follows:

• P/E Analysis: The forward P/E of 15.3x for 2025 might appear elevated compared to the historical average if viewed in isolation. However, this multiple is distorted by the temporary earnings dip. Looking at 2026E (13.3x) and 2027E (10.6x), the valuation becomes increasingly attractive. A 10.6x P/E for a company with a projected 24.75% earnings growth rate in 2027 represents a compelling PEG (Price/Earnings-to-Growth) ratio well below 1.0, suggesting undervaluation.
• P/B Analysis: The Price-to-Book ratio is trending downwards from 2.48x to 1.61x over the forecast period. For a technology-driven materials company with high ROE potential (projected to return to >15% by 2027), a P/B of 1.61x is reasonable to cheap, offering a margin of safety.
• ROE Trajectory: The projected dip in ROE to 13.1% in 2025 aligns with the profit decline. The recovery to 15.2% by 2027 confirms the expectation that the company’s capital efficiency will improve as the new US assets become productive.

4.3 Cash Flow and Dividend Sustainability

• Free Cash Flow: After a period of heavy capex (estimated at RMB 1 billion annually in 2025-2027), enterprise free cash flow is projected to turn strongly positive by 2027 (RMB 2.35 billion). This indicates that the current investment cycle is nearing completion, and the company will soon enter a cash-generation phase.
• Dividends: The dividend yield is projected to rise from 2.0% in 2025 to 2.9% in 2027. This increasing yield, coupled with earnings growth, provides a supportive floor for the stock price and appeals to income-oriented institutional investors.

Risks / Headwinds

While the long-term outlook is positive, investors must be aware of several key risks that could impact Boway Alloy’s performance in the near to medium term.

1. Geopolitical and Trade Policy Risks (High Impact)

• US Trade Policy Volatility: The core investment thesis for the PV segment relies on the ability to sell US-manufactured products into the US market. Any changes in US trade policy, such as the removal of IRA subsidies, the imposition of new tariffs on upstream materials (even if assembled in the US), or stricter rules of origin, could negatively impact the profitability of the US factory.
• Expansion of Anti-Dumping Duties: If the US expands the scope of anti-dumping investigations to include other countries or closes loopholes that Boway might utilize for supply chain flexibility, the company’s global cost optimization strategies could be constrained.
• China-US Relations: Broader geopolitical tensions could lead to secondary sanctions or restrictions on technology transfers, potentially affecting the New Materials segment if it supplies sensitive electronic components.

2. Operational Execution Risks (Medium-High Impact)

• US Factory Ramp-Up Delays: The forecast assumes the US factory reaches efficient production levels in 2026. If there are technical hurdles, labor shortages, regulatory delays, or supply chain bottlenecks in the US, the ramp-up could be slower than expected. This would extend the period of negative margin contribution and delay the breakeven point.
• Cost Overruns: Operating in the US involves higher labor, compliance, and energy costs compared to Asia. If these costs exceed initial projections, the long-term margin profile of the US PV business may be lower than anticipated.

3. Market Demand and Pricing Risks (Medium Impact)

• PV Industry Overcapacity: The global solar industry is currently experiencing significant overcapacity, leading to intense price competition. Even with US localization, if global module prices collapse further, it could exert downward pressure on pricing power in the US market, albeit to a lesser extent than in Europe or Asia.
• Downstream Demand Slowdown:
  • Materials Segment: A slowdown in the consumer electronics sector (smartphones, PCs) or a deceleration in EV adoption rates could reduce demand for Boway’s copper alloys.
  • AI Capex Slowdown: If major tech companies reduce capital expenditure on AI infrastructure, the demand for high-end connector materials could soften.
• Raw Material Price Volatility: As a processor of copper and other metals, Boway is exposed to fluctuations in raw material prices. While the company uses hedging strategies and pass-through mechanisms, extreme volatility can still impact short-term margins and working capital requirements.

4. Financial Risks (Low-Medium Impact)

• Interest Rate Exposure: With an asset-liability ratio rising to 55.54%, the company has a moderate level of leverage. If global interest rates remain higher for longer, or if borrowing costs in the US increase, financial expenses could rise, eating into net profits.
• Currency Fluctuations: Boway has significant overseas operations and sales (USD, EUR, etc.). Exchange rate fluctuations between the RMB, USD, and other currencies can create foreign exchange gains or losses, adding volatility to reported earnings.

5. Project Progress Risks

• Technology Iteration: The rapid pace of technological change in both PV (e.g., shift from PERC to TOPCon/HJT) and materials (new alloy formulations) requires continuous R&D success. Failure to keep pace with industry standards could erode the company’s competitive advantage.

Rating / Sector Outlook

Sector Outlook: Metal New Materials & Photovoltaics

• Advanced Copper Alloys: The sector outlook remains Positive. The secular trends of electrification, digitalization, and AI are driving structural demand for high-performance conductive materials. The barrier to entry in this segment is high due to the need for precise metallurgical control and certification processes with downstream clients. Leading players like Boway are well-positioned to gain market share from smaller, less technologically capable competitors.
• Photovoltaics: The sector outlook is Neutral to Cautious in the short term, but Positive for US-localized capacity. Globally, the PV industry is undergoing a painful consolidation phase due to overcapacity. However, the US market remains distinct due to trade barriers that protect domestic (or locally assembled) producers from the brunt of global price wars. Companies with established US manufacturing footprints are likely to enjoy better margins and stability than pure-play exporters from Asia.

Investment Rating: Outperform (Maintained)

We maintain our Outperform rating on Boway Alloy (601137.SH).

• Justification:
  1. Resilient Core Business: The New Materials segment is performing exceptionally well, demonstrating that the company’s foundational business is healthy and growing. This provides a stable earnings base and cash flow generator.
  2. Transitory Nature of PV Headwinds: The current profit decline in the PV segment is driven by identifiable, non-recurring factors (tariff shock on Vietnam exports, start-up costs of US plant). These are not structural defects in the business model but rather growing pains of a strategic expansion.
  3. Strategic Moat in US Market: By establishing manufacturing in the US, Boway is securing a long-term competitive advantage. As trade barriers persist, the value of local capacity will increase. The market is currently penalizing the stock for the short-term costs of this strategy, ignoring the long-term optionality it creates.
  4. Attractive Valuation on Forward Basis: The stock is trading at a discount to its long-term growth potential. The 2026E and 2027E P/E multiples of 13.3x and 10.6x, respectively, are attractive for a company with a dual-engine growth strategy and high technological barriers.

Investment View

1. Core Investment Logic

Boway Alloy represents a unique investment opportunity in the Chinese materials and renewable energy sector, characterized by a "Barbell Strategy":

• End 1: High-Tech Stability (New Materials): This business acts as the anchor. It benefits from secular tailwinds (AI, EV, 5G) and possesses a wide moat due to technical complexity. It generates steady cash flows and profits, insulating the company from the cyclicality of the solar industry. The continuous optimization of product structure towards higher-margin applications ensures that this segment will continue to deliver double-digit profit growth over the medium term.
• End 2: High-Growth Optionality (US PV Capacity): This business acts as the growth accelerator. While currently dragging on earnings, it represents a massive call option on the US energy transition. Once the US factory ramps up, it will unlock a high-margin revenue stream that is protected from global competition. The market’s current skepticism provides an entry point before this value is realized.

2. Catalysts for Re-rating

Investors should monitor the following catalysts that could drive the stock price higher:

• Quarterly Margin Improvement in PV: Evidence in Q4 2025 or Q1 2026 that the US factory’s unit costs are declining and yields are improving. A sequential increase in PV gross margins would be a strong signal that the "trough" has passed.
• Announcement of Major Contracts: Securing large-scale supply agreements for the US-made PV modules with US utilities or commercial developers would validate the commercial viability of the new facility.
• New Product Launches in Materials: Breakthroughs in copper alloys for next-generation AI chips or solid-state battery connectors could re-rate the materials segment as a pure-play AI/tech beneficiary.
• Policy Support: Any reinforcement of the US Inflation Reduction Act (IRA) benefits or additional tariffs on imported solar goods would further enhance the competitive position of Boway’s US factory.

3. Strategic Recommendations for Institutional Investors

• Accumulate on Weakness: Given the temporary nature of the 3Q2025 earnings miss, any further price weakness driven by short-term sentiment offers an attractive buying opportunity. The long-term fundamentals remain robust.
• Focus on 2026 Recovery: Investment decisions should be based on the 2026-2027 earnings trajectory rather than the 2025 dip. The projected 15-25% earnings growth in those years is not fully reflected in the current multiple.
• Monitor Cash Flow Turnaround: Watch for the normalization of operating cash flow in Q4 2025 or Q1 2026. A return to positive operating cash flow will confirm that the inventory build-up phase is complete and working capital efficiency is improving.
• Hedge Against Trade Risk: While the US localization mitigates some trade risk, investors should remain aware of broader geopolitical developments. Diversification within the portfolio is advised.

4. Conclusion

Boway Alloy is navigating a critical transition period. The short-term financial pain is the price paid for long-term strategic positioning. The company is successfully pivoting its PV business from a vulnerable export model to a resilient local-production model, while simultaneously strengthening its leadership in the high-barrier copper alloy market.

The divergence between the struggling PV segment and the thriving Materials segment creates a mispricing opportunity. The market is overly focused on the transient PV headwinds and underappreciating the durability and growth potential of the Materials business. As the US factory matures and begins to contribute positively to earnings in 2026, we expect a significant re-rating of the stock.

We reaffirm our Outperform rating, with a view that Boway Alloy is well-positioned to deliver superior risk-adjusted returns over the next 12-24 months. The combination of a defensive, high-tech materials base and an offensive, high-growth US renewable energy platform makes it a compelling holding for institutional portfolios seeking exposure to both the AI/electrification megatrends and the US energy independence narrative.

Appendix: Detailed Financial Analysis & Data Tables

A. Income Statement Analysis (Historical & Forecast)

The following table details the projected income statement, highlighting the expected recovery in profitability.

(All figures in RMB Million)

Note: The dip in Gross Margin in 2025E reflects the PV headwinds. The expansion in 2026E and 2027E reflects the scaling of the US plant and higher-margin material sales.

B. Balance Sheet Strength

(All figures in RMB Million)

Note: The forecast shows a deleveraging trend post-2025 as retained earnings grow and capex stabilizes.

C. Cash Flow Statement Projection

(All figures in RMB Million)

Note: The heavy CapEx in 2025-2027 reflects the US factory investment. Operating cash flow recovery in 2027 is a key positive indicator.

D. Key Financial Ratios & Valuation Metrics

Detailed Strategic Analysis: The US PV Expansion

To provide deeper context for institutional investors, we elaborate on the strategic implications of Boway’s US expansion, which is the primary variable in our investment thesis.

1. The "Local-for-Local" Strategy

The global solar supply chain is fragmenting. The era of seamless global trade in solar components is ending, replaced by regionalized supply chains driven by security concerns and industrial policy.
* Europe: Developing its own manufacturing base via the Net Zero Industry Act.
* USA: Aggressively promoting domestic manufacturing via the IRA.
* China: Facing export barriers, forcing leading firms to go global ("Go Global 2.0") by building factories abroad.

Boway’s move to build a battery and module factory in the US is a textbook example of "Go Global 2.0." It is not just about avoiding tariffs; it is about becoming an insider in the US market.

2. Competitive Advantage of US Production

• Premium Pricing: US-manufactured solar modules command a premium over imported ones due to scarcity and policy incentives. This pricing power can offset the higher labor and operational costs in the US.
• IRA Tax Credits: The US factory is likely eligible for Investment Tax Credits (ITC) and Production Tax Credits (PTC) under the IRA. These credits can significantly boost the project’s internal rate of return (IRR) and shorten the payback period. While not explicitly quantified in the short-term earnings due to accounting timing, they represent substantial hidden value.
• Customer Preference: US utilities and commercial buyers increasingly prefer domestically sourced components to mitigate supply chain risks and meet ESG criteria. Boway’s local presence enhances its brand credibility and customer stickiness.

3. Risk Mitigation

By localizing, Boway mitigates the risk of future trade wars. Even if the US imposes tariffs on all imports, including from Southeast Asia, Boway’s US factory will be exempt. This creates a "safe haven" for its US revenue stream.

4. Synergy with Materials Business

Boway’s expertise in metal processing (copper alloys) gives it a unique advantage in the manufacturing of solar components, particularly in the interconnection and busbar technologies. There is potential for cross-pollination of technology and supply chain efficiencies between the two divisions, although they operate largely independently.

Detailed Strategic Analysis: New Materials Leadership

1. Technological Barriers

High-performance copper alloys are not commodities. They require:
* Precise Alloying: Adding small amounts of elements (Ni, Si, Cr, etc.) to achieve specific properties.
* Advanced Processing: Complex heat treatment and mechanical working processes.
* Consistency: Downstream clients (e.g., Apple, Tesla, Huawei) require extremely tight tolerances.

Boway has spent decades refining these processes. Replicating this know-how is difficult and time-consuming for new entrants. This creates a wide moat.

2. Market Position

• Global Competitiveness: Boway competes with global giants like Wieland (Germany) and Mitsubishi Shindoh (Japan). It has successfully gained market share due to its cost advantage and improving quality.
• Domestic Dominance: In China, Boway is a clear leader in high-end copper alloys. As China pushes for self-sufficiency in critical materials, Boway is the primary beneficiary.

3. Growth Drivers

• AI Servers: High-speed connectors in AI servers require materials with high conductivity and strength. Boway is a key supplier in this niche.
• EVs: The shift to 800V architectures in EVs requires thicker, more conductive busbars and connectors, increasing copper content per vehicle.
• Mini-LED/Micro-LED: New display technologies require advanced lead frames and heat sinks, another area of Boway’s expertise.

Final Investment Conclusion

Boway Alloy is a high-quality company facing a temporary, self-inflicted (strategic) earnings dip. The market’s reaction to the 3Q2025 results appears excessive, failing to distinguish between transient operational costs and structural business health.

• The Bad News: PV margins are compressed due to tariffs and start-up costs. This is priced in.
• The Good News: The Materials business is thriving, and the US PV factory is a strategic asset that will generate high returns in the future. This is underpriced.

We recommend institutional investors accumulate shares at current levels, viewing the 2025 earnings dip as a buying opportunity. The path to higher valuations is clear: as the US factory ramps up in 2026, earnings will rebound, and the market will re-rate the stock to reflect its dual-engine growth profile.

Rating: Outperform
Target Price Implied Upside: Significant, based on 2026E earnings multiple expansion.

(End of Report)

Disclaimer

This report is prepared by Guosen Securities Economic Institute. The analysts certify that the views expressed in this report accurately reflect their personal views about the subject securities and issuers. No part of the analysts' compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

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. The information contained herein is based on sources believed to be reliable, but Guosen Securities does not guarantee its accuracy or completeness. Investors should make their own investment decisions based on their own research and consult with their financial advisors. Past performance is not indicative of future results.

Guosen Securities Co., Ltd.
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