First Applied Materials (603806.SH): Resilient Core Margins Amidst Cyclical Headwinds; Electronic Materials Poised for Accelerated Growth

Date: September 9, 2025
Rating: BUY (Maintained)
Target Price: CNY 21.30
Current Price: CNY 16.10
Analyst: Zeng Duohong, Guo Yanan | Dongwu Securities Research Institute

Executive Summary

First Applied Materials Co., Ltd. ("First Applied" or the "Company"), a global leader in photovoltaic (PV) encapsulation materials and an emerging powerhouse in electronic functional materials, reported its financial results for the first half of 2025 (1H25). While top-line revenue and net profit experienced year-over-year declines due to broader industry pricing pressures and seasonal factors, the Company demonstrated remarkable operational resilience. Crucially, its core PV film business maintained profitability metrics superior to industry peers, and its second growth curve—specifically photosensitive dry film and aluminum-plastic film—exhibited robust expansion, signaling a successful diversification strategy.

In 1H25, First Applied recorded total revenue of CNY 7.96 billion, a year-over-year (YoY) decrease of 26.1%, and attributable net profit of CNY 500 million, down 46.6% YoY. The gross margin stood at 12.2%, contracting by 4.5 percentage points (pct) YoY, while the net attributable margin was 6.2%, down 2.4 pct YoY. A deeper dive into the second quarter (2Q25) reveals a sequential recovery in shipment volumes driven by pre-installation rushes in the PV sector, although profitability was temporarily impacted by significant asset and credit impairment provisions. Specifically, 2Q25 revenue reached CNY 4.33 billion (down 20.4% YoY, up 19.6% quarter-over-quarter [QoQ]), with attributable net profit of CNY 90 million (down 76.7% YoY, down 76.4% QoQ).

Despite the headline earnings decline, our analysis highlights three critical structural positives that underpin our maintained BUY rating:

1. Market Leadership & Margin Resilience: Even after accounting for CNY 193 million in impairments in 2Q25, the Company’s PV film unit profit remained estimated at CNY 0.3–0.4 per square meter. This performance significantly outperforms competitors, reinforcing First Applied’s cost leadership and pricing power in a commoditized market.
2. Strategic Global Expansion: The commissioning of the second phase of its Thailand facility in May 2025 has expanded its combined Thailand-Vietnam production capacity to 600 million square meters. This strategic move not only mitigates geopolitical trade risks but also positions the Company to capture growing demand in the Middle East and Indian markets. We project overseas shipment contribution to rise to over 20% in 2025, a 12 pct increase YoY.
3. Second Curve Inflection Point: The electronic materials segment, particularly photosensitive dry film, is approaching a volume-driven inflection point. With 1H25 shipments of photosensitive dry film reaching 90 million square meters (+22% YoY) and aluminum-plastic film at 6.66 million square meters (+19% YoY), the Company is successfully leveraging the boom in consumer electronics PCBs and AI computing hardware. We estimate the Company’s global market share in photosensitive dry film remains at 10–15%, offering substantial room for penetration, with projected annual growth rates exceeding 30% from 2025 onwards.

We maintain our earnings forecasts for 2025–2027, projecting attributable net profits of CNY 1.63 billion, CNY 2.23 billion, and CNY 2.95 billion, representing YoY growth of 24.6%, 36.7%, and 32.4%, respectively. At the current price of CNY 16.10, the stock trades at approximately 26x 2025E P/E and 19x 2026E P/E. Applying a target multiple of 25x 2026E earnings, we derive a target price of CNY 21.30, implying an upside potential of roughly 32%. The investment thesis is anchored on the dual engines of stabilized PV margins and high-growth electronic materials, warranting a continued overweight position.

Key Takeaways

1. Financial Performance Analysis: Navigating the Cycle

1.1 Revenue and Profitability Trends

The 1H25 financial results reflect the ongoing consolidation phase in the global PV supply chain. While demand remains robust, intense competition and inventory adjustments have pressured average selling prices (ASPs).

• 1H25 Overview:

  • Revenue: CNY 7.96 billion (-26.1% YoY). The decline is primarily attributed to lower ASPs for PV films rather than a collapse in volume, as global PV installations continue to grow.
  • Net Profit: CNY 500 million (-46.6% YoY). The sharper decline in profit compared to revenue indicates margin compression.
  • Margins: Gross margin declined to 12.2% (-4.5 pct YoY); Net margin declined to 6.2% (-2.4 pct YoY). This compression is consistent with industry-wide trends where raw material cost pass-through mechanisms lag behind product price declines.

• 2Q25 Sequential Dynamics:

  • Revenue Recovery: 2Q25 revenue of CNY 4.33 billion represents a 19.6% QoQ increase. This sequential improvement aligns with the traditional "rush-to-install" phenomenon in the PV sector ahead of policy deadlines or seasonal peaks.
  • Profit Volatility: 2Q25 net profit of CNY 90 million saw a significant QoQ drop (-76.4%). However, this figure is distorted by one-off items. Excluding the CNY 193 million in asset and credit impairment losses, the underlying operational profit would be substantially higher.
  • Margin Pressure: 2Q25 gross margin fell to 11.4% (-1.7 pct QoQ). This reflects the mix shift and continued pricing pressure, yet the Company managed to maintain positive unit economics where many peers struggled to break even.

1.2 Expense Control and Operational Efficiency

First Applied has demonstrated disciplined cost management amidst revenue headwinds.

• Operating Expenses: Total period expenses in 1H25 were CNY 420 million, a decrease of 18.9% YoY. The expense ratio was 5.3%, an increase of 0.5 pct YoY due to the denominator effect (lower revenue), but absolutely lower in value.
• 2Q25 Expense Trend: In 2Q25, period expenses were CNY 230 million, down 21.4% YoY and up 15.8% QoQ. The expense ratio stabilized at 5.3%, showing a slight sequential improvement (-0.2 pct QoQ). This indicates that the Company is actively optimizing its cost structure, protecting the bottom line during downturns.
• R&D Investment: Despite cost-cutting measures, R&D expenditure remains robust, supporting the development of next-generation POE (Polyolefin Elastomer) films and high-end electronic materials. This commitment to innovation is critical for maintaining its technological moat.

1.3 Cash Flow and Capital Allocation

• Operating Cash Flow: 1H25 operating cash flow was negative CNY 890 million, a significant deterioration from the prior year (-198.2% YoY). 2Q25 operating cash flow was negative CNY 450 million. This negative cash flow is largely driven by working capital fluctuations, including increased accounts receivable and inventory buildup in anticipation of H2 demand, as well as timing differences in payments to suppliers versus collections from customers.
• Capital Expenditure (CapEx): 1H25 CapEx totaled CNY 180 million (-62% YoY), with 2Q25 CapEx at CNY 100 million. The reduction in CapEx suggests that the major expansion phases for existing projects are nearing completion, which should lead to improved free cash flow generation in the coming quarters as depreciation stabilizes and new capacity begins to contribute to revenue.
• Inventory Levels: Inventory at the end of 1H25 stood at CNY 1.96 billion, an increase of 4.9% from the beginning of the year. This modest increase is manageable and aligns with the sequential rise in shipments in 2Q25. It does not signal dangerous overstocking but rather proactive positioning for the H2 peak season.

2. Core Business Driver: PV Encapsulation Films

2.1 Shipment Volume and Market Share

The PV film business remains the cash cow of First Applied, providing the scale and cash flow necessary to fund its diversification efforts.

• 1H25 Shipments:

  • PV Films: 1.387 billion square meters, essentially flat YoY. This stability in volume, despite a 26% drop in revenue, confirms that the primary driver of revenue decline was price, not demand. The Company has successfully defended its market share in a shrinking revenue pool.
  • Backsheets: 34 million square meters, down 50% YoY. The decline in backsheets is strategic, as the industry shifts towards double-glass modules and transparent backsheet alternatives, where POE/EPE films are preferred. First Applied is cannibalizing its own lower-margin backsheet business with higher-value film products, a positive long-term trend.

• 2Q25 Volume Surge:

  • PV film shipments in 2Q25 reached approximately 760 million square meters, a sequential increase of over 20%. This surge validates the "rush-to-install" narrative and demonstrates the Company’s ability to ramp up production quickly to meet demand spikes.

• Unit Profitability Analysis:

  • Impairment Impact: The Company recorded CNY 193 million in asset and credit impairments in 2Q25. These are non-cash charges related to older inventory write-downs and receivable provisions.
  • Adjusted Unit Profit: After adding back these impairments, we estimate the net profit per square meter for PV films in 2Q25 to be in the range of CNY 0.30 – 0.40.
  • Competitive Advantage: While this represents a sequential decline, it is crucial to note that many smaller competitors are currently operating at breakeven or negative unit profits. First Applied’s ability to generate positive unit economics in a distressed market underscores its superior manufacturing efficiency, scale advantages, and supply chain management. This "last man standing" profitability ensures that the Company will gain further market share as weaker players exit the market.

2.2 Global Capacity Expansion and Geographic Diversification

First Applied is aggressively expanding its overseas footprint to mitigate trade barriers and serve local markets more effectively.

• Thailand Phase II Commissioning: In early May 2025, the second phase of the Thailand production base was officially commissioned. This expansion is a pivotal milestone in the Company’s global strategy.
• Combined SEA Capacity: The combined production capacity of the Thailand and Vietnam bases has now reached 600 million square meters annually. This scale allows First Applied to serve as a reliable supplier for module manufacturers who have also relocated assembly operations to Southeast Asia to avoid US/EU tariffs on Chinese-origin goods.
• Market Access: The Southeast Asian bases are strategically positioned to supply not only traditional export markets (US, Europe) but also emerging high-growth regions such as the Middle East and India. These regions are launching ambitious solar initiatives, and local supply chains are underdeveloped, offering First Applied a first-mover advantage.
• Outlook for 2025:
  • Total Shipments: We forecast total PV film shipments for 2025 to exceed 3.0 billion square meters, representing a YoY growth of over 10%. This growth is driven by the global increase in GW installations and the Company’s gaining share.
  • Overseas Contribution: The proportion of shipments originating from overseas facilities is expected to rise to >20% in 2025, a significant increase of 12 pct YoY. This shift will enhance the Company’s resilience against domestic price wars and improve its overall margin profile, as overseas markets often command slightly higher premiums due to logistical and tariff considerations.

3. Second Growth Curve: Electronic Materials Explosion

The most compelling aspect of First Applied’s investment thesis lies in its successful transition from a pure-play PV material supplier to a diversified platform for advanced functional materials. The electronic materials segment is no longer a niche experiment but a rapidly scaling business line.

3.1 Photosensitive Dry Film: Approaching the Inflection Point

Photosensitive dry film is a critical material in the Printed Circuit Board (PCB) manufacturing process, used for imaging circuit patterns. The market has historically been dominated by Japanese and American firms (e.g., Hitachi Chemical, DuPont). First Applied has made significant inroads, driven by cost competitiveness and improving technical specifications.

• Shipment Growth:

  • 1H25 Volume: Shipments reached 90 million square meters, a YoY increase of 22%.
  • Trajectory: This consistent double-digit growth indicates strong customer adoption and qualification success with major PCB manufacturers.

• Market Share and Potential:

  • Current Position: We estimate First Applied’s global market share in photosensitive dry film is currently between 10% and 15%.
  • Runway for Growth: Given that the top global players still hold significant shares, there is ample room for First Applied to expand its footprint, particularly in the mid-to-high-end segments.
  • Growth Forecast: We project the photosensitive dry film business to maintain an annual growth rate of >30% in 2025 and beyond. This outpaces the general PCB market growth, indicating share gains.

• Driver: AI and High-End Consumer Electronics:

  • The resurgence in consumer electronics (smartphones, PCs) and the explosive demand for AI servers and data center hardware are driving requirements for higher-layer-count, high-density interconnect (HDI) PCBs.
  • These advanced PCBs require higher-performance photosensitive films with better resolution and thermal stability. First Applied’s R&D efforts have yielded products that meet these stringent requirements.
  • Margin Expansion: As the mix shifts towards these high-end applications, the Average Selling Price (ASP) and gross margin of the dry film business are expected to improve sequentially. The current margins may appear modest, but the operating leverage from volume growth and product mix upgrade will drive significant profit expansion in 2026–2027.

3.2 Aluminum-Plastic Film: Steady Progress in Battery Packaging

Aluminum-plastic film is the key packaging material for pouch-type lithium-ion batteries, used extensively in consumer electronics and increasingly in electric vehicles (EVs) and energy storage systems (ESS).

• Shipment Growth:

  • 1H25 Volume: Shipments totaled 6.66 million square meters, a YoY increase of 19%.
  • Context: While the absolute volume is smaller than dry film, the growth rate is healthy. The EV battery market has seen some slowdown in growth rates globally, but the shift towards pouch cells in certain premium EV models and consumer devices supports steady demand.

• Competitive Landscape:

  • This market has also been historically dominated by Japanese suppliers (e.g., DNP, Showa Denko). First Applied is one of the few domestic Chinese suppliers capable of mass-producing high-quality aluminum-plastic film.
  • Import substitution remains a powerful tailwind. As Chinese battery manufacturers (CATL, BYD, etc.) seek to secure their supply chains and reduce costs, they are increasingly qualifying domestic suppliers like First Applied.

• Synergies:

  • The production of aluminum-plastic film leverages some of the Company’s expertise in polymer processing and adhesion technologies developed for PV films, creating R&D and manufacturing synergies.

3.3 Strategic Implications of the Second Curve

The rapid growth of electronic materials fundamentally changes the valuation framework for First Applied.

1. De-risking: Reduces dependence on the highly cyclical PV industry. When PV margins compress, electronic materials (which have different demand drivers) can provide earnings stability.
2. Valuation Re-rating: PV material companies typically trade at lower P/E multiples (15–20x) due to perceived commoditization. Electronic material companies, especially those with high barriers to entry and exposure to AI/semiconductor themes, often command higher multiples (25–35x). As the revenue contribution from electronic materials grows, the blended valuation multiple of First Applied should expand.
3. Technology Platform: Success in dry film and aluminum-plastic film validates the Company’s core competency in developing and commercializing complex polymer-based functional materials. This platform approach suggests potential for future entries into other niche electronic materials (e.g., semiconductor packaging materials, optical films), creating a long-term pipeline of growth options.

4. Valuation and Financial Forecasts

4.1 Earnings Predictions

We maintain our earnings forecasts for the next three years, reflecting confidence in the volume growth of PV films and the accelerating contribution from electronic materials.

• 2025E: We expect a moderate recovery in revenue (+12.6%) and a stronger recovery in profit (+24.6%) as impairments normalize and overseas capacity ramps up.
• 2026E: Profit growth accelerates to 36.7% driven by full-year contribution from Thailand Phase II, higher overseas mix, and significant operating leverage in the electronic materials segment.
• 2027E: Sustained growth of 32.4% as the Company solidifies its position in high-end electronic materials and benefits from the next cycle of PV technology upgrades (e.g., BC, HJT modules requiring specialized films).

4.2 Valuation Methodology

We employ a relative valuation approach using the Price-to-Earnings (P/E) multiple, benchmarked against historical averages and peer comparables in both the PV materials and electronic chemicals sectors.

• Peer Comparison:

  • Traditional PV film peers trade at forward P/Es of 15–20x, reflecting low growth expectations and margin pressure.
  • Electronic material peers with similar growth profiles (20–30% CAGR) trade at 25–30x P/E.
  • First Applied is a hybrid. Given that >80% of its profit still comes from PV films, a pure electronic material multiple is inappropriate. However, given the >30% growth in its second curve and its market leadership, it deserves a premium to traditional PV peers.

• Target Multiple: We assign a target P/E of 25x on 2026E earnings. This multiple reflects:

  1. The certainty of its PV market leadership and cash flow generation.
  2. The high-growth optionality provided by the electronic materials business.
  3. The improving quality of earnings (higher overseas mix, higher tech content).

• Target Price Calculation:

  • 2026E EPS: CNY 0.85
  • Target P/E: 25x
  • Target Price: CNY 0.85 * 25 = CNY 21.25 (Rounded to CNY 21.30)

• Upside Potential:

  • Current Price: CNY 16.10
  • Target Price: CNY 21.30
  • Upside: ~32.3%

4.3 Balance Sheet Strength

First Applied maintains a robust balance sheet, providing flexibility for further expansion and R&D investment.

• Asset Structure: As of 2024A, total assets were CNY 21.2 billion, with current assets comprising CNY 15.9 billion. The company holds significant cash and transactional financial assets (CNY 7.6 billion), ensuring liquidity.
• Liabilities: Total liabilities are low at CNY 4.6 billion, with an asset-liability ratio of only 21.66% (2024A). We forecast this ratio to decrease further to 16.59% by 2027E, indicating a very conservative capital structure with minimal financial risk.
• ROE Trends: Return on Equity (ROE) is projected to improve from 7.97% in 2024A to 12.70% in 2027E, driven by higher net margins and efficient asset turnover. This trend supports the case for valuation re-rating.

Risks / Headwinds

While the investment thesis is strong, investors must consider the following risks that could impact the Company’s performance and stock price:

1. Intensifying Competition in PV Films

• Risk: The PV film industry has low barriers to entry for standard EVA films, leading to potential overcapacity. If competitors engage in aggressive price wars to clear inventory, ASPs could fall faster than anticipated, squeezing margins below our estimates.
• Mitigation: First Applied’s cost leadership and shift towards high-barrier POE/EPE films mitigate this. However, if technological diffusion allows competitors to produce POE at scale, the premium for these products could erode.

2. Policy and Trade Barriers

• Risk: The Company’s overseas expansion is partly driven by trade restrictions (e.g., U.S. UFLPA, EU carbon border taxes). Any tightening of rules of origin or new tariffs on Southeast Asian exports could disrupt the supply chain and reduce the profitability of the Thailand/Vietnam bases.
• Mitigation: Diversification into Middle East and Indian markets reduces reliance on Western markets. Additionally, localizing supply chains further (e.g., potential future plants in other regions) could be a long-term solution.

3. Slower-than-Expected Adoption of Electronic Materials

• Risk: The electronic materials sector is characterized by long qualification cycles. If major PCB or battery manufacturers delay the qualification of First Applied’s new products, or if technical issues arise in high-end applications, the projected 30%+ growth in this segment may not materialize in the near term.
• Mitigation: The Company has already achieved significant shipments (90M sqm dry film), indicating that qualifications are largely complete for mainstream products. Continued R&D investment is key to staying ahead in high-end specs.

4. Raw Material Price Volatility

• Risk: The primary raw materials for PV films (EVA resin, POE resin) are derived from petroleum and chemical processes. Significant spikes in crude oil prices or supply disruptions in POE (which is still partially imported) could increase costs. If the Company cannot pass these costs downstream quickly enough, margins will suffer.
• Mitigation: First Applied has strong bargaining power with suppliers due to its scale. Long-term supply agreements and hedging strategies help manage volatility. The domestic production of POE resin in China is also increasing, which should stabilize supply and pricing in the long run.

5. Macroeconomic and Demand Risks

• Risk: A global economic slowdown could reduce demand for both solar installations (due to financing costs) and consumer electronics (discretionary spending). This would impact both core and second-curve businesses simultaneously.
• Mitigation: Solar energy is increasingly cost-competitive even without subsidies, providing a floor for demand. The AI-driven upgrade cycle in electronics may prove resilient to broader consumer weakness.

Rating / Sector Outlook

Sector Outlook: Photovoltaic Materials

The PV materials sector is currently in a phase of consolidation and clearing. After years of rapid expansion, supply exceeds demand in certain segments, leading to price erosion. However, this phase is healthy for industry leaders like First Applied.
* Short-term: Pressure on margins persists as inventory clears.
* Medium-term: Weaker competitors will exit, leading to improved concentration ratios. Leaders will regain pricing power.
* Long-term: Global energy transition trends remain intact. Demand for solar is expected to grow at a CAGR of 15–20% over the next decade. Technological shifts (N-type cells, double-glass modules) favor high-performance films, benefiting technologically advanced suppliers.

Sector Outlook: Electronic Functional Materials

This sector is experiencing structural growth driven by two mega-trends:
1. AI and Computing Power: The need for advanced PCBs in AI servers drives demand for high-end photosensitive films.
2. Import Substitution: China’s push for self-sufficiency in semiconductor and electronic supply chains creates a favorable policy and commercial environment for domestic leaders.
* Outlook: Highly positive. Companies that can break foreign monopolies and achieve scale will enjoy high growth rates and expanding margins.

Investment Rating: BUY (Maintained)

We maintain our BUY rating on First Applied (603806.SH). The Company is uniquely positioned to navigate the current PV downturn while capturing the upside of the electronic materials boom. Its financial health, market leadership, and strategic execution provide a high degree of visibility for future earnings growth. The current valuation offers an attractive entry point for long-term investors seeking exposure to both the green energy transition and the AI hardware supply chain.

Investment View

Core Investment Logic

1. "Alpha" in a "Beta" Downcycle:
In the current PV downcycle, most investors focus on the "Beta" (industry-wide decline). First Applied offers "Alpha" (individual outperformance). Its ability to maintain positive unit profits (CNY 0.3–0.4/sqm) while peers struggle is a testament to its operational excellence. As the cycle turns, this leadership will translate into disproportionate market share gains and profit elasticity. We view the current earnings dip as a temporary cyclical trough, not a structural decline.

2. The Optionality of the Second Curve is Becoming Reality:
For years, the "electronic materials" story was a promise. In 1H25, it became a tangible driver. The 22% growth in dry film and 19% growth in aluminum-plastic film are not trivial; they represent a scalable business. The key insight is that this growth is occurring alongside the PV business, not instead of it. This diversification reduces the volatility of the Company’s earnings profile. As the electronic materials segment grows to contribute 10–15% of total profits (from single digits today), the market will begin to value it separately, unlocking hidden value.

3. Global Supply Chain Reconfiguration Beneficiary:
First Applied is one of the few Chinese material suppliers with significant, operational overseas capacity (Thailand/Vietnam). As global module makers diversify their supply chains away from China proper to avoid tariffs, they must source from suppliers with overseas footprints. First Applied’s 600 million sqm SEA capacity makes it a mandatory partner for these global clients. This structural shift ensures long-term demand visibility and potentially higher margins due to the scarcity of qualified overseas suppliers.

4. Valuation Safety Margin:
At 26x 2025E P/E and 19x 2026E P/E, the stock is reasonably valued for a company with >25% expected earnings CAGR. The downside risk is limited by its strong balance sheet (net cash position, low debt) and dominant market share in PV films. The upside potential is significant if the electronic materials business accelerates or if PV margins recover faster than expected. The target price of CNY 21.30 offers a compelling risk-reward ratio.

Strategic Recommendations for Institutional Investors

• Accumulate on Weakness: Given the short-term noise around 2Q25 impairments and PV pricing, any further dips in the stock price provide an attractive buying opportunity. The fundamental trajectory remains upward.
• Monitor Quarterly Mix Shifts: Investors should closely track the gross margin trends in the electronic materials segment. An improvement in this margin will be a leading indicator of successful product mix upgrades and pricing power in high-end applications.
• Track Overseas Utilization Rates: The profitability of the Thailand/Vietnam bases will be key to overall margin recovery. Monitor announcements regarding utilization rates and new customer wins in the Middle East/India regions.
• Long-Term Hold: First Applied is transitioning from a cyclical commodity player to a diversified technology platform. This transformation takes time. Institutional investors with a 2–3 year horizon are best positioned to capture the full value of this transition.

Conclusion

First Applied Materials stands at a pivotal juncture. It has successfully weathered the initial storm of the PV industry’s consolidation, emerging with its market leadership intact and its profitability superior to peers. Simultaneously, it has ignited a second engine of growth in electronic materials, tapping into the high-value streams of AI and advanced electronics. The 1H25 results, while superficially weak due to cyclical factors, reveal a company that is structurally stronger, more diversified, and better positioned for global competition than ever before.

We believe the market is underestimating the speed and magnitude of the electronic materials contribution and over-penalizing the temporary PV margin compression. Our BUY rating and CNY 21.30 target price reflect our conviction that First Applied is poised for a sustained period of earnings growth and valuation re-rating. For institutional investors seeking a high-quality compounder in the new energy and advanced materials space, First Applied represents a core holding.

Appendix: Detailed Financial Data & Assumptions

A. Revenue Build-up Assumptions

B. Margin Assumptions

• Gross Margin: Expected to expand from 15.0% in 2025E to 17.2% in 2027E.
  • Drivers: Higher proportion of high-margin POE films; Economies of scale in electronic materials; Lower raw material costs relative to ASPs as cycle normalizes.
• Net Margin: Expected to expand from 7.6% in 2025E to 10.5% in 2027E.
  • Drivers: Operating leverage (fixed costs spread over higher revenue); Lower expense ratio as revenue grows; Reduced impairment charges.

C. Cash Flow Projections

• Operating Cash Flow: Expected to turn positive and strengthen in 2H25 and 2026 as working capital normalizes and profits grow.
• Free Cash Flow: With CapEx declining post-expansion, FCF is expected to improve significantly, allowing for potential dividend increases or share buybacks in the future, further enhancing shareholder returns.

D. Sensitivity Analysis

• Bear Case Assumptions: PV price war intensifies; Electronic materials growth slows to 15%; Margins compress further.
• Bull Case Assumptions: PV margins recover sharply; Electronic materials grow >40%; Market awards higher multiple for tech platform status.

Disclaimer: This report is based on information available as of September 9, 2025. The forecasts and opinions contained herein are subject to change without notice. Investors should conduct their own due diligence and consult with financial advisors before making investment decisions. Past performance is not indicative of future results.