Riding on the Semiconductor Materials Upcycle; Upgrade to OW

Research evidence excerpt

Riding on the Semiconductor Materials Upcycle; Upgrade to OW

IdeaMLiPF6 players globally by sales volume. Based on our estimates and consensus, these two

names currently trade at an average of 15x 2027e P/E (using Morgan Stanley Research

estimates for Tinci and FactSet consensus estimates for Do-Fluoride). Thus, we adopt this

valuation multiple to value Capchem's electrolyte business, because we think Capchem's

electrolyte business should exhibit similar margin trends to its peers, given a very

transparent pricing in this market.

(2) Fluorine chemicals business: Capchem's fluorine chemicals business focuses on

higher-end products, so we benchmark its valuation against leading A-share high-end

fluorine chemical names. We view Haohua (600378.SS) and Juhua (600160.SS) as the

closest peers. Based on FactSet consensus estimates, these two names currently trade at

an average of 23x 2027e P/E. We believe Capchem's fluorine chemical business fluorine

chemicals business warrants a premium valuation given its more advanced product

portfolio and stronger profitability. The segment's gross profit margin exceeds 60%,

compared with approximately 25-30% for its peers. We therefore assign a 30x 2027e P/E

to Capchem's fluorine chemicals business (vs 15x 2025e P/E previously), reflecting its

superior margin profile. Valuation for domestic fluorine chemical players that have to

semiconductor materials exposure have also expanded significantly YTD. For example,

Haohua's forward P/E has risen from 23x at the beginning of 2026 to 35x currently, based

on FactSet data. We therefore think this supports our decision to apply a higher valuation

multiple for Capchem's fluorine chemicals business.

(3) Electronic chemicals: Given strong market sentiment in the China semiconductor and