Polymer Materials (688503.SH): Navigating the Transition – Copper Paste Breakthroughs Offset Near-Term Margin Pressure

Date: August 28, 2025
Ticker: 688503.SH (STAR Market)
Sector: Photovoltaics / Advanced Materials
Rating: OUTPERFORM (Maintained)
Target Price: CNY 49.99
Current Price: CNY 49.99 (as of Aug 27, 2025)

Executive Summary

Polymer Materials (688503.SH), the undisputed leader in China’s photovoltaic (PV) conductive paste market, released its interim financial results for the first half of 2025 on August 26, 2025. The report reveals a company in the midst of a critical structural transition. While top-line revenue remained relatively resilient despite industry-wide headwinds, profitability faced significant compression due to intense competition in the silver paste segment and the ongoing costs associated with R&D intensification.

Key Financial Highlights (1H 2025):
* Revenue: CNY 6.435 billion, representing a year-over-year (YoY) decline of 4.87%.
* Net Profit Attributable to Shareholders: CNY 181 million, a substantial YoY decline of 39.58%.
* Deducted Non-Recurring Net Profit: CNY 156 million, down 52.66% YoY.
* Q2 2025 Sequential Trend: Revenue showed signs of stabilization with a quarter-over-quarter (QoQ) increase of 14.94%, although profitability metrics remained under pressure, with Q2 deducted net profit falling 23.60% QoQ.

Despite the near-term earnings volatility, our investment thesis remains anchored in Polymer Materials’ technological moat and its successful diversification beyond traditional silver pastes. The company has achieved a pivotal milestone in the "silver-less" revolution: the commercialization and small-scale shipment of copper-based conductive pastes. This development positions Polymer Materials not merely as a beneficiary of the current N-type cell iteration (TOPCon/HJT) but as a primary architect of the next-generation cost-reduction paradigm in PV manufacturing.

Furthermore, the company’s non-PV businesses, particularly in high-end electronic pastes and functional materials, are gaining traction, breaking foreign monopolies in specific niches and providing a nascent second growth curve. We maintain our OUTPERFORM rating, viewing the current valuation (30x 2025E P/E) as an attractive entry point for long-term investors willing to look past transient margin pressures in exchange for exposure to the disruptive potential of copper metallization and diversified material science capabilities.

We project revenues of CNY 13.41 billion, CNY 14.41 billion, and CNY 15.39 billion for 2025, 2026, and 2027, respectively. Corresponding net profits are forecast at CNY 402 million, CNY 549 million, and CNY 689 million. The anticipated recovery in profitability from 2026 onwards is driven by the scaling of high-margin N-type products, the cost advantages of copper paste adoption, and operational efficiencies in the expanding electronic materials portfolio.

Key Takeaways

1. Financial Performance Analysis: Resilience Amidst Sectoral Deflation

The 1H 2025 results reflect the broader challenges facing the PV supply chain, characterized by overcapacity and aggressive price competition. However, Polymer Materials demonstrated relative resilience in revenue retention compared to the sharper decline in profits, indicating that volume growth partially offset price erosion.

Revenue Dynamics

In 1H 2025, the company generated CNY 6.435 billion in revenue, a modest 4.87% decline YoY. This performance is notable given the severe deflationary environment in the PV sector. The slight contraction suggests that while average selling prices (ASPs) for silver pastes have decreased due to lower silver prices and competitive bidding, shipment volumes have likely increased, supported by the global expansion of N-type cell capacity where Polymer Materials holds a dominant market share.

The second quarter (2Q 2025) showed a sequential recovery in top-line growth. Revenue reached CNY 3.441 billion, up 14.94% QoQ. This sequential improvement signals that demand conditions may be stabilizing or that the company is successfully capturing market share from weaker competitors exiting the market. The YoY decline of 9.72% in 2Q reflects the high base effect from the previous year’s peak demand cycle.

Profitability Compression

The divergence between revenue stability and profit decline is the core narrative of this reporting period.
* Net Profit: Fell 39.58% YoY to CNY 181 million in 1H 2025.
* Core Profitability (Deducted Non-Recurring): Declined 52.66% YoY to CNY 156 million.
* Q2 Specifics: Q2 net profit was CNY 91 million (down 59.22% YoY, up 1.51% QoQ). Crucially, Q2 deducted non-recurring net profit fell 23.60% QoQ to CNY 68 million.

This margin compression is attributable to three primary factors:
1. Product Mix Transition: The rapid shift from P-type to N-type (TOPCon/HJT) cells requires higher technical specifications. While N-type pastes command a premium, the initial ramp-up phases often involve higher yield losses and R&D amortization.
2. Competitive Intensity: The silver paste market, while consolidated, remains fiercely competitive. Competitors are engaging in price wars to secure contracts with major cell manufacturers, squeezing gross margins.
3. R&D Investment: As detailed later, the company is heavily investing in next-generation technologies (Copper paste, X-BC, Perovskite). These expenses hit the P&L immediately, while the revenue benefits are lagged.

*Note: 1H 2024 figures derived from reported YoY % changes for contextual analysis.

The QoQ decline in deducted net profit in 2Q (-23.60%) despite revenue growth (+14.94%) suggests that operating leverage has temporarily turned negative, possibly due to one-off expenses, inventory write-downs, or increased sales incentives to lock in H2 orders. Investors should monitor 3Q 2025 closely to see if this margin trend reverses as the new product mix matures.

2. Technological Moat: Dominance in N-Type Iterations

Polymer Materials’ core competitive advantage lies in its ability to iterate product formulations in lockstep with, and often ahead of, cell technology advancements. The company has successfully entrenched itself in all major N-type technology pathways: TOPCon, HJT, and X-BC.

A. TOPCon: The Cash Cow Engine

TOPCon (Tunnel Oxide Passivated Contact) is currently the mainstream technology for high-efficiency crystalline silicon cells. Polymer Materials has secured a leading position here through several key innovations:
* LECO Sintering Silver Paste: The company has achieved mass production of silver pastes compatible with Laser Enhanced Contact Opening (LECO) technology. LECO is critical for reducing contact resistance and boosting cell efficiency in TOPCon architectures. By mastering this formulation, Polymer Materials ensures its paste is not just a commodity but a performance-enabling component.
* Fine Line Printing Solutions: The launch of "dense grid narrow line width" back-side fine grid silver paste allows for reduced silver consumption without compromising conductivity. This directly addresses the cell makers' primary pain point: cost reduction.
* P+ Poly Contact Series: The mass production of P+ type Poly contact silver paste further solidifies their comprehensive coverage of TOPCon process requirements.

The success in TOPCon is vital because it provides the cash flow necessary to fund riskier R&D ventures. As TOPCon capacity expands globally, Polymer Materials’ volume visibility remains high, even if unit margins are under pressure.

B. HJT (Heterojunction): Leading the Low-Silver Revolution

HJT technology is highly sensitive to silver consumption due to its low-temperature processing requirements, which traditionally prevent the use of standard high-temperature silver pastes. Polymer Materials has made significant strides in reducing the silver content in HJT pastes, a key driver for HJT’s economic viability.
* Silver-Coated Copper (Ag-Cu) Paste: The company has achieved mass production of low-cost pastes with silver content of 20% and below. This is a monumental shift. By replacing pure silver with silver-coated copper, the material cost is drastically reduced.
* Performance Metrics: The report highlights significant reductions in bulk resistivity and contact resistivity for these Ag-Cu pastes. Lower resistivity means higher cell efficiency, making the product commercially attractive despite the complexity of handling copper (which oxidizes easily).
* Process Innovation: The completion of metal mesh printing technology upgrades enables 8-12μm opening printing. Finer lines mean less paste usage per cell. Furthermore, the development and mass production of 0BB (Zero Busbar) technology ultra-low silver content main grids represent the cutting edge of HJT metallization. 0BB eliminates traditional busbars, relying entirely on fine fingers and interconnect ribbons, which requires extremely precise and conductive pastes. Polymer Materials’ ability to deliver this solution positions it as a preferred supplier for next-gen HJT lines.

C. X-BC (Back Contact): Capturing the Premium Segment

Back Contact (BC) technologies, including IBC and HPBC, move all contacts to the rear of the cell, maximizing front-side light absorption. This architecture demands specialized pastes for both P-type and N-type regions.
* Mass Production Achievement: Polymer Materials has completed the mass production of high-efficiency silver pastes for both P-region and N-region steel plate printing in X-BC cells.
* Strategic Importance: BC technology is being championed by industry giants like LONGi and Aiko Solar. By securing a foothold in BC paste supply, Polymer Materials diversifies its customer base beyond the TOPCon-heavy mainstream and taps into the premium, high-efficiency segment of the market.

D. Perovskite: Future-Proofing the Portfolio

While still in the early stages of commercialization, Perovskite solar cells represent the theoretical efficiency ceiling for PV. Polymer Materials is actively positioning itself for this future wave.
* Low-Temperature Curing: The company has developed back electrode pastes capable of ultra-low temperature curing for single-junction Perovskite cells. This is crucial because Perovskite layers are thermally sensitive.
* Customer Validation: The report notes "significant recognition" from single-junction Perovskite battery manufacturers. This validation is a leading indicator of future commercial contracts.
* Tandem Cell Readiness: Beyond single-junction, the company has developed adapted ultra-low temperature curing pastes for Calcium/Silicon (Perovskite/Silicon) and Calcium/Calcium (Perovskite/Perovskite) tandem cells. As tandem technology moves from lab to fab, Polymer Materials’ early R&D lead could translate into a near-monopoly in this niche high-value segment.

3. The Copper Paste Breakthrough: A Paradigm Shift

The most significant strategic development in this report is the progress in pure copper paste technology. While Silver-Coated Copper (Ag-Cu) is a transitional solution, pure copper paste represents the ultimate goal for "silver-less" metallization, offering the lowest possible material cost.

• First-Mover Advantage: Polymer Materials claims to be the first to introduce copper paste products suitable for PV batteries. This "first-mover" status is critical in establishing industry standards and locking in early adopters.
• Customization and Know-How: The company is not offering a one-size-fits-all product. It is custom-developing copper pastes for different technical routes and customer needs. More importantly, it has mastered the holistic "Know-how" encompassing:
  1. Material Formulation: Preventing oxidation and ensuring adhesion.
  2. Equipment Matching: Adapting screen printers and sintering furnaces for copper’s different thermal and rheological properties.
  3. Process Parameters: Optimizing firing profiles to achieve low contact resistance without damaging the cell.
• Commercial Traction: The paste is already undergoing internal testing at multiple top-tier customers and has achieved small-scale shipments. This transition from "lab sample" to "production line trial" is the highest hurdle in semiconductor and PV material qualification. Successful small-scale shipments de-risk the technology and pave the way for volume adoption in 2026-2027.
• Technological Synergy: The optimization of copper paste is being driven by next-generation technologies like full-opening mesh screens and 0BB. These technologies require pastes with specific viscosity and particle size distributions, areas where Polymer Materials is leveraging its existing expertise.

Investment Implication: The successful导入 (import/adoption) of copper paste will fundamentally alter the company’s margin structure. Copper is significantly cheaper than silver. Even if the processing cost is higher, the overall gross margin percentage on copper paste could be superior due to the lower absolute cost base and the high value-add of the proprietary formulation. This is a key driver for our projected margin recovery in 2026-2027.

4. Diversification: Non-PV Conductive Pastes as the Second Growth Curve

Recognizing the cyclicality of the PV industry, Polymer Materials has aggressively expanded into non-PV functional materials, specifically targeting the intersection of new energy and electronics. This segment is managed through subsidiaries like Delangju and Jiangju, and it is showing promising signs of maturation.

A. Photovoltaic Auxiliary Materials (Delangju)

• Product Portfolio: New generation PV module encapsulation positioning adhesives, insulating adhesives, and battery protection adhesives.
• Competitive Edge: In Electrically Conductive Adhesives (ECA), the company has established a performance lead. These materials are essential for module reliability and longevity, creating a sticky customer relationship beyond just the cell-level paste.

B. High-End Electronic Pastes (Jiangju)

This is the most exciting diversification play. Jiangju has broken the monopoly of overseas enterprises (primarily Japanese and American firms) in several high-value electronic paste categories.
* Product Matrix:
* RF Devices: Pastes for radio frequency components, critical for 5G infrastructure.
* Chip Components: For passive components like capacitors and inductors.
* PDLC (Polymer Dispersed Liquid Crystal): Used in smart glass and electrically dimmable windows.
* EC (Electrochromic) Conductive Glue: For smart windows and displays.
* LTCC (Low-Temperature Co-fired Ceramic): Essential for advanced packaging and sensors.
* High-Performance Thermal Materials: For heat dissipation in high-power electronics.
* Market Penetration: In 1H 2025, Jiangju entered the supply chains of head customers in multiple product fields. The report cites "product performance" and "service response speed" as key competitive advantages over foreign incumbents. In the Chinese market, supply chain security and localization are powerful tailwinds for domestic suppliers who can match international quality.
* Strategic Value: The electronic paste market is generally less cyclical than PV and commands higher gross margins due to higher technical barriers and smaller volumes. As this business scales, it will act as a stabilizer for Polymer Materials’ earnings, reducing volatility and enhancing valuation multiples.

5. Valuation and Financial Forecasts

We maintain our financial forecasts, which anticipate a "U-shaped" recovery in profitability. The near-term dip in 2025 reflects the current competitive landscape and R&D spend, while the subsequent growth in 2026-2027 captures the benefits of scale, product mix improvement, and copper paste adoption.

Forecast Assumptions

1. Revenue Growth: We project modest single-digit growth (7.4% in 2025, 7.4% in 2026, 6.8% in 2027). This conservative assumption accounts for potential ASP declines but assumes volume growth driven by global PV installation trends and market share gains in N-type and non-PV sectors.
2. Margin Recovery: Gross margins are expected to bottom out in 2025 at 8.15% before recovering to 9.23% in 2026 and 9.82% in 2027. This recovery is predicated on:
   • Higher proportion of high-value N-type (TOPCon/HJT/BC) pastes.
   • Cost savings from copper paste scaling.
   • Operating leverage in the electronic materials division.
3. Expense Control: R&D expenses will remain elevated (CNY 335M in 2025, rising to CNY 385M in 2027) to sustain technological leadership. However, as a percentage of revenue, they should stabilize. Selling and administrative expenses are forecast to grow slower than revenue, indicating improving operational efficiency.

Financial Summary Table

Valuation Analysis

At the current price of CNY 49.99, the stock trades at:
* 30x 2025E P/E: This appears expensive relative to the stagnant earnings growth in 2025. However, it must be viewed in the context of the company’s technological optionality. The market is pricing in the successful commercialization of copper paste and the dominance in N-type iterations.
* 22x 2026E P/E: As earnings rebound by 36.7% in 2026, the forward P/E compresses to a more attractive level. For a high-tech material company with a strong moat, a 20-25x P/E is historically reasonable.
* 18x 2027E P/E: By 2027, the valuation becomes compelling, assuming the execution of the copper paste strategy and the growth of the electronic materials business.

We believe the market is currently under-appreciating the magnitude of the copper paste opportunity and the stability provided by the non-PV diversification. The "OUTPERFORM" rating is justified by the asymmetric upside potential from these technological breakthroughs versus the limited downside given the company’s entrenched market position in silver pastes.

Risks / Headwinds

While the long-term outlook is positive, investors must be cognizant of several significant risks that could derail the investment thesis.

1. Downstream Demand Volatility

The PV industry is notoriously cyclical. Global solar installations are dependent on government subsidies, interest rates, and grid infrastructure capabilities.
* Risk: If global PV demand grows slower than expected (e.g., due to trade barriers in the US/EU or policy shifts in China), cell manufacturers will cut capex and reduce orders. This would lead to excess inventory and further price wars in the paste market.
* Impact: Direct hit to revenue volume and pricing power.

2. Intensifying Market Competition

The conductive paste market, while consolidated, has seen new entrants and aggressive expansion from existing players (e.g., DKEM, Giga Solar).
* Risk: Competitors may engage in predatory pricing to gain market share, especially in the mature TOPCon segment. This could prolong the margin compression seen in 1H 2025.
* Impact: Gross margins may fail to recover to the projected 9%+ levels, staying stuck in the 7-8% range, which would significantly impair earnings forecasts.

3. Copper Paste Adoption Delays

The transition to copper paste is technologically complex. Issues such as copper oxidation, poor adhesion, or reliability concerns in the field could slow down customer adoption.
* Risk: If top-tier customers delay the mass adoption of copper paste beyond 2026, the anticipated cost savings and margin expansion will be deferred.
* Impact: The company would remain reliant on silver-based pastes, exposing it to silver price volatility and limiting its differentiation. The "small-scale shipment" status is promising but not yet a guarantee of mass success.

4. Raw Material Price Fluctuations

Silver prices are volatile and influenced by macroeconomic factors, industrial demand, and speculative trading.
* Risk: A sharp spike in silver prices increases working capital requirements and can squeeze margins if the company cannot pass on costs immediately to customers. Conversely, a sharp drop in silver prices can lead to inventory write-downs.
* Impact: Earnings volatility and cash flow strain.

5. Technological Disruption

The PV industry is prone to disruptive technological shifts. While Polymer Materials is well-positioned in TOPCon, HJT, and BC, a sudden breakthrough in a completely different technology (e.g., a radical new perovskite structure that doesn't require screen printing, or a leap in thin-film technology) could render current paste technologies obsolete.
* Risk: Obsolescence of core product lines.
* Mitigation: The company’s R&D in perovskite pastes is a hedge against this, but execution risk remains.

6. Execution Risk in Non-PV Business

The expansion into electronic pastes involves competing with established global giants (like DuPont, Heraeus, Tanaka) who have deep relationships with electronics manufacturers.
* Risk: Failure to scale the non-PV business or inability to meet the stringent quality/reliability standards of the electronics industry.
* Impact: The anticipated "second growth curve" fails to materialize, leaving the company overly exposed to PV cyclicality.

Rating / Sector Outlook

Sector Outlook: Consolidation and Technological Differentiation

The global PV sector is undergoing a painful but necessary consolidation phase. Overcapacity in upstream polysilicon and wafers has cascaded down to cells and modules, squeezing margins across the board. However, this environment favors leaders with technological differentiation.
* N-Type Supercycle: The shift from P-type PERC to N-type (TOPCon/HJT/BC) is irreversible. Companies that can provide high-efficiency, low-cost metallization solutions for N-type cells will gain market share at the expense of laggards.
* Cost Reduction Imperative: With module prices at historic lows, every fraction of a cent in cost saving matters. This creates a strong tailwind for innovations like copper paste and fine-line printing.
* Material Science as a Moat: In a commoditized market, material science becomes the key differentiator. Paste formulation is not just chemistry; it is integrated process engineering. This barrier to entry protects incumbents like Polymer Materials.

Company Rating: OUTPERFORM

We maintain our OUTPERFORM rating on Polymer Materials (688503.SH).
* Rationale: The company is the clear leader in a consolidating market. Its technological roadmap is aligned with the industry’s direction (N-type, Copper, Perovskite). The near-term earnings weakness is a temporary phenomenon driven by transition costs and competition, not a structural decline. The successful small-scale shipment of copper paste is a catalyst that could re-rate the stock in the medium term.
* Target Price: CNY 49.99. This target is based on a blended valuation approach, primarily anchoring on a 22x P/E multiple applied to our 2026 EPS estimate of CNY 2.27, reflecting the expected earnings recovery and growth trajectory.

Investment View

Strategic Positioning: From "Silver Paste Supplier" to "Advanced Interconnect Solutions Provider"

Investors should view Polymer Materials not merely as a cyclical supplier of silver paste, but as a platform company for advanced interconnect materials. The core investment logic rests on three pillars:

1. The "Copper Option" is Real and Valuable

The market often discounts early-stage technologies until they reach mass production. Polymer Materials’ achievement of small-scale copper paste shipments is a critical inflection point.
* Why it matters: Copper paste is the "holy grail" of PV cost reduction. If Polymer Materials captures even 20-30% of the copper paste market as it ramps up in 2026-2027, the earnings impact will be disproportionate to the current revenue base.
* Action: Monitor quarterly updates for announcements on "mass production" or "major contract signings" for copper paste. This will be the primary stock price catalyst.

2. Diversification De-risks the Cycle

The progress in electronic pastes (RF, LTCC, PDLC) is underappreciated.
* Why it matters: The electronics materials market offers higher margins and lower correlation with PV cycles. As this business grows from a small base to a meaningful contributor (e.g., 10-15% of revenue), it will justify a higher valuation multiple, similar to pure-play electronic material companies.
* Action: Track the revenue contribution of the non-PV segment in future reports. Look for evidence of margin expansion in this segment.

3. Dominance in N-Type is a Cash Flow Fortress

Despite margin pressure, the company’s dominance in TOPCon and HJT pastes ensures steady cash flow.
* Why it matters: This cash flow funds the R&D for copper and perovskite without requiring dilutive equity raises. It also allows the company to weather the current price war better than smaller competitors.
* Action: View the current low profitability as a "investment phase" rather than a "decline phase." The strong balance sheet (Cash ratio improving to 0.41 by 2027E) supports this view.

Tactical Recommendation

• For Long-Term Investors: Accumulate on weakness. The current valuation (30x 2025E) reflects the near-term pain but does not fully price in the long-term optionality of copper paste and electronic materials. The risk-reward ratio is favorable for a 2-3 year holding period.
• For Short-Term Traders: Expect volatility. The 2Q 2025 profit miss may trigger short-term selling. However, any positive news regarding copper paste adoption or margin stabilization in 3Q 2025 could trigger a sharp rebound.
• Key Monitoring Metrics:
  1. Gross Margin Trend: Watch for sequential improvement in 2H 2025.
  2. Copper Paste Revenue: Any disclosure of specific revenue figures or major customer names for copper paste.
  3. Non-PV Revenue Growth: Rate of growth in the electronic materials segment.
  4. Silver Prices: Correlation between silver price movements and the company’s hedging strategies/margins.

Conclusion

Polymer Materials stands at the forefront of the PV industry’s technological evolution. While 1H 2025 results highlight the challenges of a hyper-competitive market, the underlying fundamentals—technological leadership, product diversification, and strategic innovation in copper metallization—remain intact. The company is successfully navigating the transition from the silver era to the copper era, and from a PV-only player to a broader advanced materials platform. We believe the market’s focus on short-term earnings noise is obscuring the significant long-term value creation potential. Therefore, we maintain our OUTPERFORM rating, confident that the company’s strategic initiatives will yield substantial returns in the 2026-2027 timeframe.

Appendix: Detailed Financial Analysis & Data Integrity

Balance Sheet Strength and Liquidity

A review of the balance sheet forecasts indicates a strengthening liquidity position, which is crucial for funding R&D and managing working capital in a low-margin environment.

• Cash Position: Monetary funds are projected to grow from CNY 622 million in 2024 to CNY 2,113 million in 2027. This robust cash buildup provides a safety net against operational shocks and reduces reliance on external debt.
• Working Capital Management: Accounts receivable are expected to grow in line with revenue (CNY 3,436M in 2024 to CNY 3,859M in 2027), suggesting stable collection periods. Inventory levels will rise (CNY 929M to CNY 1,660M) to support higher production volumes, but the inventory turnover days are forecast to stabilize at 45 days, indicating efficient management.
• Debt Structure: The company relies primarily on short-term borrowing (increasing from CNY 2,597M to CNY 3,897M). While this increases interest expense slightly, the absence of long-term debt suggests a flexible capital structure. The current ratio remains healthy above 1.8x, indicating sufficient short-term assets to cover liabilities.

Cash Flow Dynamics

The cash flow statement reveals the capital intensity of the growth phase.

• Operating Cash Flow (OCF): After a negative OCF of CNY -895 million in 2024 (likely due to heavy inventory build-up and receivables), OCF is projected to turn positive and grow to CNY 562 million by 2027. This turnaround is a critical sign of improving earnings quality and working capital efficiency.
• Capital Expenditure (CapEx): CapEx is managed prudently, ranging from CNY 125 million to 158 million annually. This suggests that the company is not engaging in reckless capacity expansion but rather focusing on technological upgrades and efficiency improvements.
• Free Cash Flow: With positive OCF and moderate CapEx, the company is expected to generate positive free cash flow in the coming years, enabling potential dividend increases or share buybacks, further enhancing shareholder value.

Sensitivity Analysis

To provide a more nuanced view, we consider two scenarios for the 2026-2027 period:

Base Case (Our Forecast):
* Copper paste achieves 10% market penetration in new HJT/TopCon lines by 2027.
* Gross margins recover to ~9.8%.
* Result: 2027 EPS of CNY 2.85, P/E of 18x.

Bull Case:
* Copper paste adoption accelerates, capturing 20%+ market share due to superior performance.
* Non-PV electronic materials grow faster, contributing 15% of total profit.
* Gross margins exceed 11% due to mix shift.
* Result: 2027 EPS could reach CNY 3.20+, implying a P/E of <16x at current prices. Significant upside.

Bear Case:
* Copper paste faces technical hurdles, delayed to 2028.
* Price war in silver paste intensifies, keeping gross margins below 8%.
* Non-PV business stagnates.
* Result: 2027 EPS remains flat at ~CNY 2.00. P/E expands to 25x+. Downside risk to CNY 40-45 range.

Given the company’s track record of R&D execution and the "small-scale shipment" milestone, we assign a higher probability to the Base and Bull cases.

Analyst Credentials and Disclaimer

This report is prepared by analysts Deng Yongkang, Zhu Biye, Wang Yiru, and Lin Yutao of Minsheng Securities Research Institute. All analysts hold valid securities investment consulting qualifications registered with the Securities Association of China. The views expressed are independent, objective, and based on rigorous research methodologies.

Important Disclosures:
* Minsheng Securities and its affiliates may hold positions in the securities mentioned and may provide investment banking or other services to the company.
* This report is for institutional clients only and does not constitute an offer to sell or a solicitation of an offer to buy any securities.
* Investors should conduct their own due diligence and consult with financial, legal, and tax advisors before making investment decisions.
* Past performance is not indicative of future results.

End of Report