Equity Research: Jingsheng Electromechanical (300316.SZ)

Date: September 7, 2025
Analyst: Zhou Ershuang, Li Wenyi (Dongwu Securities)
Rating: BUY (Maintained)
Current Price: CNY 35.00
Target Price Implied Valuation: Dynamic P/E of 46x (2025E), 37x (2026E), 30x (2027E)

Executive Summary

New Growth Catalyst: NVIDIA’s Potential Adoption of SiC Interposers in Next-Gen GPUs

We maintain our BUY rating on Jingsheng Electromechanical (300316.SZ), driven by a significant structural shift in the advanced packaging landscape. Recent industry developments indicate that NVIDIA plans to replace traditional silicon (Si) interposers with Silicon Carbide (SiC) interposers in its next-generation GPU CoWoS (Chip-on-Wafer-on-Substrate) processes, with commercial adoption expected by 2027. This transition addresses critical thermal management challenges inherent in high-performance computing (HPC) chips. As a leader in crystal growth equipment and materials, Jingsheng has successfully achieved technological breakthroughs in 12-inch conductive SiC crystal growth, positioning it to capture substantial value from this emerging application sector.

While the company faces short-term headwinds reflected in our revised earnings forecasts for 2025 due to slower equipment acceptance cycles in the photovoltaic (PV) sector, the long-term investment thesis is strengthening. The diversification into semiconductor materials, specifically large-size SiC substrates, provides a high-margin growth engine that offsets cyclicality in traditional businesses. We project net profit attributable to shareholders to recover from CNY 1.01 billion in 2025 to CNY 1.54 billion in 2027, representing a compound annual growth rate (CAGR) of approximately 23.6% over the forecast period.

Key Investment Highlights:
1. Technological Moat in Large-Size SiC: Jingsheng has overcome core technical barriers in 12-inch SiC crystal growth, including temperature field uniformity and crystal cracking, successfully producing 12-inch conductive SiC crystals. This capability places the company at the forefront of the supply chain for next-gen advanced packaging.
2. Expanding Total Addressable Market (TAM): The shift from Si to SiC interposers in AI GPUs creates a new, high-value demand stream for SiC substrates, distinct from the traditional power electronics market.
3. Valuation Appeal: Despite near-term earnings pressure, the current valuation reflects the cyclical trough. The forward-looking P/E multiples compress significantly as earnings recover in 2026-2027, offering an attractive entry point for long-term investors focused on the semiconductor material supercycle.

Key Takeaways

1. The Paradigm Shift: Why SiC Interposers for AI GPUs?

The evolution of NVIDIA’s GPU architecture from H100 to B200 and beyond has been defined by the increasing reliance on CoWoS packaging technology. CoWoS enables the high-density integration of logic dies (GPUs) and memory stacks (HBM) within a single package, significantly enhancing bandwidth and energy efficiency while reducing form factor. However, as GPU power densities escalate to meet the demands of large language models (LLMs) and AI training, thermal management has become the primary bottleneck.

Thermal Limitations of Silicon Interposers:
Traditional silicon interposers, while effective for electrical connectivity, possess relatively low thermal conductivity (~150 W/m·K). In high-power scenarios, the concentration of heat within the dense chip stack leads to thermal throttling, limiting performance reliability and lifespan.

The SiC Advantage:
Silicon Carbide emerges as the superior material solution for next-generation interposers due to two critical physical properties:

• Superior Thermal Conductivity: Single-crystal SiC boasts a thermal conductivity of 490 W/m·K, which is 2–3 times higher than that of silicon. This property allows for efficient heat dissipation away from the GPU core, enabling higher sustained clock speeds and improved system stability.
• Enhanced Process Window for High Aspect Ratio Vias: SiC exhibits superior chemical resistance compared to silicon. This allows for more aggressive etching processes to create Through-Silicon Vias (TSVs) with significantly higher aspect ratios.
  • Data Point: According to industry data cited from Nelson Scientific, a 350 μm thick SiC substrate can achieve an aspect ratio of 109:1. In contrast, conventional silicon interposers typically max out at an aspect ratio of 17:1.
  • Implication: Higher aspect ratios enable denser vertical interconnects without increasing the lateral footprint, allowing for further miniaturization of the CoWoS package or the integration of more complex circuitry within the same area.

2. Quantifying the Opportunity: New Demand Dynamics

The adoption of SiC interposers opens a completely new incremental market for SiC substrates, decoupling a portion of SiC demand from the traditional electric vehicle (EV) and industrial power sectors.

Market Sizing Framework:
To illustrate the potential volume impact, we analyze the demand based on NVIDIA’s current and future product roadmaps:

• Baseline Scenario (H100 Equivalent):

  • Current H100 GPUs utilize an interposer area of approximately 2,500 mm² (equivalent to 3x reticle size).
  • Assuming a standard 12-inch SiC wafer can yield approximately 21 interposers of this size.
  • With NVIDIA shipping an estimated 1.6 million H100 units in 2024, a hypothetical full replacement with SiC interposers would generate a demand for roughly 76,190 SiC substrates annually just for this single product line.

• Future Growth Scenario (2027+):

  • TSMC is projected to launch 7x reticle size CoWoS technology by 2027 to integrate even larger clusters of processing and memory units.
  • This expansion increases the interposer area to approximately 14,400 mm².
  • While the yield per wafer will decrease due to the larger area, the total surface area of SiC required per GPU will increase substantially. Furthermore, the adoption rate across NVIDIA’s entire high-end portfolio (including Blackwell and subsequent architectures) will drive exponential growth in substrate demand.

This new application segment commands a premium pricing structure due to the stringent quality requirements for defect density and thermal performance in HPC applications, potentially enhancing the profitability of SiC material suppliers like Jingsheng.

3. Jingsheng’s Competitive Position: From Equipment to Materials

Jingsheng Electromechanical has strategically evolved from a pure-play equipment manufacturer to an integrated "Equipment + Materials" platform. This vertical integration is crucial for capturing value in the SiC supply chain.

Technological Breakthroughs in 12-Inch SiC:
The industry is currently transitioning from 6-inch and 8-inch SiC wafers to 12-inch (300mm) wafers to reduce cost-per-die and improve scalability. Jingsheng has reported significant milestones:
* Core Problem Resolution: The company has successfully addressed key challenges in 12-inch crystal growth, specifically temperature field non-uniformity and crystal cracking. These are historically the most difficult hurdles in scaling SiC crystal diameter due to the material's high hardness and brittle nature.
* Successful Production: Jingsheng has successfully grown 12-inch conductive SiC crystals. Conductive substrates are essential for vertical power devices and, increasingly, for specialized semiconductor applications requiring specific electrical properties.
* Capacity Expansion: The company is actively expanding its production capacity for both 6-inch and 8-inch SiC substrates while ramping up pilot lines for 12-inch production. This proactive capacity build-out ensures readiness for the anticipated demand surge from 2027 onwards.

Synergy with Equipment Business:
As a leading supplier of crystal growth furnaces, Jingsheng possesses deep proprietary knowledge of the thermal dynamics and process parameters required for high-quality SiC growth. This internal feedback loop allows for faster iteration and optimization of material production processes compared to pure-play material competitors who must rely on third-party equipment vendors.

4. Financial Analysis & Forecast Revision

Our financial model reflects a transitional period for Jingsheng. The year 2025 is characterized by a digestion of orders and a slowdown in the photovoltaic equipment cycle, leading to a temporary dip in revenue and profitability. However, the trajectory turns positive in 2026 and 2027 as semiconductor material revenues scale and equipment orders normalize.

Revenue and Profit Trends

Analysis of 2025 Dip:
The projected 31.53% decline in revenue and 59.89% decline in net profit for 2025 is primarily attributed to:
1. PV Equipment Cycle: The global photovoltaic industry is undergoing a period of overcapacity correction, leading to delayed equipment deliveries and acceptance by downstream clients. This impacts Jingsheng’s largest revenue segment.
2. R&D and Capacity Investment: Continued heavy investment in SiC R&D and capacity expansion incurs upfront costs before significant revenue contribution from the new SiC interposer market materializes.
3. Asset Impairment: The forecast includes provisions for asset impairment losses (estimated at CNY 260 million in 2025), reflecting prudent accounting for inventory and receivables in a slowing market environment.

Recovery Trajectory (2026-2027):
* Revenue Recovery: We expect revenue to grow by 8.71% in 2026 and accelerate to 13.11% in 2027. This recovery is driven by the stabilization of the PV equipment market and the ramp-up of semiconductor material sales.
* Margin Expansion: Gross margins are projected to expand from 24.79% in 2025 to 27.02% in 2027. This improvement reflects a favorable product mix shift towards higher-margin semiconductor materials and services, as well as operating leverage as fixed costs are spread over higher revenue bases.
* Profit Growth: Net profit is expected to grow at a CAGR of ~23.6% from 2025 to 2027, outpacing revenue growth due to margin expansion and improved operational efficiency.

Balance Sheet Strength

Jingsheng maintains a robust balance sheet, providing the financial flexibility to fund R&D and capacity expansion without excessive leverage.

• Liquidity Improvement: Cash and cash equivalents are projected to nearly double from CNY 3.46 billion in 2024 to CNY 7.71 billion in 2025, primarily driven by strong operating cash flow generation (forecasted at CNY 5.16 billion in 2025) despite lower net income. This indicates strong working capital management and collection capabilities.
• Low Leverage: The debt-to-asset ratio is trending downward, stabilizing around 38-39%. This conservative leverage profile minimizes financial risk and interest expense burden, supporting sustainable growth.

Cash Flow Dynamics

• Strong OCF Generation: The significant jump in Operating Cash Flow in 2025 (CNY 5.16 billion) compared to 2024 (CNY 1.77 billion) is notable. This is largely driven by a positive change in working capital (CNY 2.93 billion inflow), suggesting a reduction in inventory levels and efficient collection of receivables as the company navigates the slower sales environment.
• Disciplined CapEx: Capital expenditures are forecasted to stabilize at CNY 400 million annually from 2025 to 2027. This indicates that the major phase of capacity expansion for SiC and other new businesses is maturing, shifting the focus from heavy investment to monetization.

Risks / Headwinds

While the long-term outlook is positive, investors must consider the following risks that could impact the company’s performance and stock price:

1. Technology Adoption Risk (SiC in CoWoS)

• Delay in Commercialization: The report notes that NVIDIA expects to introduce SiC interposers in 2027. Any delay in this timeline due to technical yield issues, cost constraints, or alternative cooling solutions (e.g., advanced liquid cooling, glass interposers) could postpone the realization of this new revenue stream.
• Competitive Materials: Glass substrates are also being explored by Intel and others for advanced packaging due to their flatness and electrical properties. If glass proves to be a more cost-effective or technically viable solution for interposers, the TAM for SiC in this specific application could be smaller than anticipated.

2. Execution and R&D Risk

• Yield Challenges: Scaling 12-inch SiC crystal growth is extremely difficult. Maintaining high yields and low defect densities at commercial scale is a significant engineering challenge. Failure to achieve competitive yields could erode margins and delay market penetration.
• Cost Competitiveness: SiC substrates are significantly more expensive than silicon. If the cost premium cannot be justified by the performance gains in every application, adoption may be limited to only the highest-end SKUs, restricting volume growth.

3. Cyclical Downside in Core Businesses

• Photovoltaic Sector Volatility: A significant portion of Jingsheng’s current revenue still comes from PV equipment. The global PV industry is prone to severe cyclicality and overcapacity. A prolonged downturn in PV capex could lead to further order cancellations or delays, impacting cash flow and earnings more severely than modeled.
• Semiconductor Equipment Cycle: While the semiconductor sector is generally resilient, geopolitical tensions and export controls could impact the demand for certain types of equipment or restrict access to key markets.

4. Valuation and Market Sentiment

• High Forward P/E: The stock trades at a forward P/E of 45.5x for 2025. While this is justified by the growth story, it leaves little room for error. Any miss in earnings expectations or negative news regarding the SiC rollout could lead to multiple compression.
• Market Liquidity: As a mid-cap stock, liquidity conditions in the A-share market can influence price volatility independently of fundamental performance.

Rating / Sector Outlook

Investment Rating: BUY (Maintained)

We reaffirm our BUY rating on Jingsheng Electromechanical. The recommendation is underpinned by the company’s successful transformation into a high-tech materials platform and its pivotal role in the emerging SiC interposer supply chain for AI hardware.

Valuation Analysis:

• Short-Term Valuation Pressure: The high P/E ratio in 2025 (45.5x) reflects the trough in earnings. Investors should view this as a transient metric rather than a permanent valuation state.
• Long-Term Value Creation: By 2027, the P/E ratio compresses to 29.8x, which is reasonable for a company with a 23%+ earnings growth rate and a strategic position in the AI supply chain. The P/B ratio declining to 2.25x suggests the market is not overly pricing in excessive book value inflation, providing a margin of safety.
• Peer Comparison: Compared to pure-play semiconductor equipment makers or traditional PV equipment suppliers, Jingsheng offers a unique hybrid exposure to both capital goods and high-growth materials. This diversification warrants a premium valuation relative to pure cyclicals.

Sector Outlook: Semiconductor Materials & Advanced Packaging

The semiconductor materials sector, particularly wide-bandgap semiconductors (SiC, GaN), is entering a phase of accelerated growth driven by two mega-trends:
1. Electrification: Continued adoption of EVs and renewable energy infrastructure drives demand for SiC power devices.
2. AI & HPC: The emergence of SiC interposers represents a third, high-value pillar of demand. As AI models grow in complexity, the thermal and electrical performance limits of silicon are being reached, necessitating advanced materials like SiC.

We believe the Advanced Packaging sub-sector will outperform the broader semiconductor industry in terms of growth rate and margin expansion. Companies that can supply high-quality, large-size substrates for these applications will enjoy pricing power and long-term contracts with leading foundries like TSMC and OSATs.

Investment View

Strategic Imperative: The "Pick-and-Shovel" Play for AI Hardware

Jingsheng Electromechanical represents a compelling "pick-and-shovel" investment opportunity in the AI infrastructure boom. While much attention is focused on GPU designers (NVIDIA) and foundries (TSMC), the enabling materials supply chain is equally critical and often less crowded.

1. The Moat is Widening:
Jingsheng’s ability to produce 12-inch SiC crystals is not just a technical achievement; it is a competitive moat. The know-how required to manage the thermal gradients and stress in such large crystals is accumulated over years of R&D. Competitors entering this space now will face a steep learning curve and high capital barriers. Jingsheng’s existing equipment business provides a self-reinforcing advantage in process optimization.

2. Diversification De-risks the Portfolio:
Historically, Jingsheng was viewed as a proxy for the PV cycle. The successful pivot to semiconductor materials changes this narrative. Even if the PV sector remains sluggish for another 12-18 months, the growth in semiconductor materials can provide a floor for earnings and a catalyst for re-rating. The projected recovery in 2026-2027 is not solely dependent on PV recovery but is bolstered by the new SiC applications.

3. Timing the Entry:
The current market price of CNY 35.00 reflects the near-term pain of the 2025 earnings dip. For institutional investors with a 2-3 year horizon, this presents an attractive entry point. The key catalysts to monitor are:
* Q3/Q4 2025: Confirmation of SiC substrate shipments to key customers for testing/validation.
* 2026: Official announcements from NVIDIA or TSMC regarding the qualification of SiC interposers in next-gen platforms.
* Margin Trends: Quarterly monitoring of gross margins to verify the mix shift towards higher-margin semiconductor products.

Conclusion

Jingsheng Electromechanical is well-positioned to capitalize on the next wave of innovation in semiconductor packaging. The potential adoption of SiC interposers by NVIDIA is a game-changer that expands the TAM for SiC substrates beyond power electronics into the high-value realm of AI computing. While short-term financials are pressured by the PV cycle, the company’s strong balance sheet, technological leadership in 12-inch SiC, and disciplined capital allocation provide a solid foundation for long-term growth.

We recommend investors accumulate positions on weakness, viewing the 2025 earnings trough as a buying opportunity rather than a structural decline. The convergence of AI thermal needs and Jingsheng’s material science capabilities creates a powerful synergy that is likely to drive shareholder value creation through 2027 and beyond.

Appendix: Detailed Financial Models & Assumptions

Income Statement Drivers

• Revenue Assumptions:
  • 2025: Decline driven by a 40% YoY drop in PV equipment revenue assumptions, partially offset by a 15% growth in semiconductor equipment and materials.
  • 2026-2027: Gradual recovery in PV equipment (mid-single-digit growth) combined with accelerated growth in SiC materials (projected 50%+ CAGR from a small base).
• Cost of Goods Sold (COGS):
  • Gross margin compression in 2025 (24.79%) reflects lower utilization rates in equipment factories and higher R&D amortization.
  • Margin expansion in 2026-2027 assumes economies of scale in SiC production and improved pricing power as yields improve.
• Operating Expenses:
  • R&D: Maintained at high levels (approx. 6-7% of revenue) to sustain technological leadership in 12-inch SiC and next-gen crystal growth equipment.
  • S&A: Kept flat in absolute terms, leveraging operating leverage as revenue recovers.

Balance Sheet Assumptions

• Working Capital:
  • Inventory levels are assumed to decrease in 2025 as the company works through existing stock in a slower sales environment.
  • Receivables days are assumed to improve due to stricter credit control measures.
• CapEx:
  • Annual CapEx capped at CNY 400 million, focusing on finishing ongoing SiC capacity projects rather than initiating new greenfield sites. This supports free cash flow generation.

Sensitivity Analysis

To assess the robustness of our valuation, we conducted a sensitivity analysis on the key drivers: SiC adoption rate and PV equipment recovery speed.

• Bull Case Drivers: NVIDIA accelerates SiC timeline to 2026; Jingsheng achieves >20% yield in 12-inch production; PV market rebounds sharply.
• Bear Case Drivers: SiC interposer adoption postponed to 2028; Yield issues persist; PV overcapacity leads to further price wars in equipment.

Even in the Bear Case, the company remains profitable with a manageable debt load, highlighting the resilience of its business model.

Disclaimer & Regulatory Information

Important Disclosures:
This report is prepared by Dongwu Securities Co., Ltd. ("Dongwu Securities") for institutional clients only. It is not intended for retail investors. The information contained herein is based on sources believed to be reliable, but Dongwu Securities does not guarantee its accuracy or completeness. The opinions expressed are those of the analysts as of the date of publication and are subject to change without notice.

Investment Rating Definitions (Relative to Benchmark):
* Buy: Expected return > 15% relative to benchmark (CSI 300 for A-shares) over the next 6-12 months.
* Outperform: Expected return between 5% and 15%.
* Neutral: Expected return between -5% and 5%.
* Underperform: Expected return between -15% and -5%.
* Sell: Expected return < -15%.

Conflict of Interest:
Dongwu Securities and its affiliates may hold positions in the securities mentioned in this report and may engage in trading activities or provide investment banking services to the companies covered. Analysts certify that they have no direct or indirect interest in the securities mentioned and that their compensation is not linked to specific recommendations or views expressed in this report.

Copyright:
© 2025 Dongwu Securities Institute. All rights reserved. No part of this report may be reproduced, distributed, or transmitted in any form or by any means without the prior written permission of Dongwu Securities.

Note: All financial figures are in Renminbi (CNY) unless otherwise stated. Forecasts are estimates by Dongwu Securities Institute and should not be relied upon as guarantees of future performance.