Investment Rating - The report gives a "Buy" rating for the company, with a target price of HKD 5.73, indicating a potential upside of 61% from the current price [6]. Core Viewpoints - The company is a leading player in the pearl pigment materials industry in China, expanding its global presence through strategic acquisitions, including the recent acquisition of Korean company CQV and plans to acquire Merck's surface solutions business in Germany [3][10]. - The demand for pearl materials is growing, with a clear trend towards synthetic mica replacing traditional pigments, driven by their superior optical properties and environmental advantages [4][55]. - The company has established significant technological barriers and competitive advantages through continuous R&D investment, leading to a diverse product matrix and strong market positioning [5][63]. Summary by Sections 1. Company Overview - The company is recognized as a national high-tech enterprise specializing in the R&D, production, and sales of pearl materials and synthetic mica, with over 2,100 product varieties sold to more than 150 countries [3][10]. - Revenue has grown from CNY 441 million in 2019 to CNY 1.649 billion in 2024, with a compound annual growth rate (CAGR) of 30.2% [3][20]. 2. Market Demand and Trends - The global pearl materials market reached CNY 23.5 billion in 2023, with a CAGR of 14.1% from 2016 to 2023, expected to grow to CNY 44 billion by 2030 [4][37]. - Synthetic mica-based pearl materials are gaining market share due to their high purity and durability, with a market share of 17.6% in China as of 2023 [4][55]. 3. Competitive Advantages - The company leads the industry in synthetic mica production technology, with R&D expenditures projected to reach CNY 90 million in 2024, accounting for 5.4% of revenue [5][67]. - The integration of CQV has significantly improved revenue and profitability, with CQV's revenue and net profit increasing by 17.7% and 170.5% respectively in 2024 [5][73]. 4. Financial Projections - Revenue projections for 2025-2027 are CNY 2.201 billion, CNY 2.883 billion, and CNY 3.659 billion, with growth rates of 33.5%, 31%, and 26.9% respectively [6][76]. - Net profit projections for the same period are CNY 335 million, CNY 450 million, and CNY 584 million, with growth rates of 37.7%, 35%, and 29.7% respectively [6][76].

Investment Rating - The report assigns a "Buy" rating to the company, with a target price of HKD 5.79, indicating a potential upside of 64% from the current price [3]. Core Insights - The company, Global New Materials International, is a leading player in the pearlescent materials sector, with a strong focus on international expansion through mergers and acquisitions [1][6]. - The company has demonstrated impressive revenue growth, with a projected compound annual growth rate (CAGR) of 30.2% from 2019 to 2024, increasing from CNY 441 million in 2019 to CNY 1.649 billion in 2024 [1][13]. - The company maintains a stable gross margin around 50%, expected to reach 53% in 2024, reflecting strong profitability [1][20]. Summary by Sections Section 1: Company Overview and Growth Strategy - Global New Materials International is recognized as a national high-tech enterprise specializing in the research, production, and sales of pearlescent materials and synthetic mica [6]. - The company has successfully completed acquisitions, including that of South Korea's CQV, enhancing its global market presence [1][9]. - The company’s revenue is expected to continue growing, with estimates of CNY 2.229 billion, CNY 2.900 billion, and CNY 3.631 billion for 2025, 2026, and 2027 respectively, reflecting growth rates of 35.2%, 30.1%, and 25.2% [3][13]. Section 2: Market Potential and Industry Dynamics - The global market for pearlescent materials was valued at CNY 23.5 billion in 2023, with a projected CAGR of 9.4% from 2023 to 2030, reaching CNY 44 billion by 2030 [2][50]. - Pearlescent materials are increasingly replacing traditional pigments due to their superior color and functionality, with diverse applications across various industries [2][28]. - The industry has high barriers to entry, with production processes being complex and requiring significant technical expertise, which helps maintain stable pricing and market share for leading companies [2][50]. Section 3: Research and Development Focus - The company places a strong emphasis on R&D, with expenditures increasing from CNY 23 million in 2019 to CNY 75 million in 2023, reflecting a CAGR of 34% [56]. - The company has developed a comprehensive product portfolio, with over 2,100 types of pearlescent materials, of which more than 50% are high-end products [61]. - Continuous innovation in product development and production processes is expected to drive future growth and maintain competitive advantages [56][62]. Section 4: Financial Projections and Valuation - The company’s net profit is projected to grow from CNY 242 million in 2024 to CNY 617 million by 2027, with corresponding growth rates of 33.4%, 39.0%, and 34.7% [3][15]. - The report estimates a reasonable price-to-earnings (PE) ratio of 20 for 2025, indicating strong valuation potential compared to peers [3]. - The company’s gross margin is expected to improve, reaching 53% in 2024, driven by cost reduction and efficiency improvements [20][21].

Core Viewpoint - 环球新材国际 (06616) reported strong financial performance for the fiscal year 2024, with significant growth in revenue and net profit, although cash flow from operating activities showed a slight decline [2]. Financial Performance - The company achieved total revenue of 1.662 billion yuan, representing a year-on-year increase of 51.15% [2]. - The net profit attributable to shareholders was 242 million yuan, reflecting a year-on-year growth of 33.37% [2]. - The net cash flow from operating activities was 272 million yuan, which decreased by 3.93% compared to the previous year [23]. Earnings and Ratios - Basic earnings per share were 0.19 yuan, and the weighted average return on equity was 7.34%, an increase of 0.79 percentage points from the previous year [2][19]. - As of April 29, the price-to-earnings ratio (TTM) was approximately 18.52 times, the price-to-book ratio (TTM) was about 1.33 times, and the price-to-sales ratio (TTM) was around 2.72 times [2]. Revenue Composition - For 2024, the revenue composition indicated that operations in China contributed 1.3322 billion yuan, while operations in South Korea accounted for 316.6 million yuan [14]. Cash Flow and Financing - The net cash flow from financing activities was 1.502 billion yuan, an increase of 250 million yuan compared to the previous year [23]. - The net cash flow from investment activities was -1.549 billion yuan, compared to -55.07 million yuan in the same period last year [23]. Asset and Liability Changes - As of the end of 2024, cash and cash equivalents increased by 7.41%, while the proportion of cash to total assets decreased by 13.36 percentage points [32]. - Long-term borrowings increased by 1,090.94%, and short-term borrowings rose by 159.15%, indicating a significant increase in leverage [36]. - The current ratio was 2.79, and the quick ratio was 2.59, suggesting a strong liquidity position [39].

Equity and Reserves - Total equity attributable to the owners of the company increased to RMB 3,376,497 thousand in 2024 from RMB 3,156,490 thousand in 2023, representing a growth of approximately 7%[3] - The company’s reserves increased to RMB 3,272,796 thousand in 2024 from RMB 3,052,789 thousand in 2023, showing a growth of about 7%[3] - The company’s total equity and liabilities reached RMB 4,353,125 thousand in 2024, up from RMB 4,085,145 thousand in 2023, indicating an increase of approximately 7%[3] Non-controlling Interests - Non-controlling interests rose to RMB 976,628 thousand in 2024, up from RMB 928,655 thousand in 2023, indicating an increase of about 5%[3] Liabilities - Total non-current liabilities surged to RMB 1,486,284 thousand in 2024, compared to RMB 435,457 thousand in 2023, reflecting a significant increase of approximately 241%[4] - Current liabilities also increased to RMB 1,215,099 thousand in 2024 from RMB 634,680 thousand in 2023, marking an increase of around 92%[4] - The company’s total liabilities increased significantly, with current liabilities alone rising to RMB 1,215,099 thousand in 2024, compared to RMB 634,680 thousand in 2023[4] Assets and Borrowings - Total assets and liabilities amounted to RMB 7,054,508 thousand in 2024, up from RMB 5,155,282 thousand in 2023, which is an increase of approximately 37%[4] - Bank loans and other borrowings for non-current liabilities rose sharply to RMB 1,126,800 thousand in 2024 from RMB 94,614 thousand in 2023, a staggering increase of about 1,090%[4] Trade Payables - The company reported a significant increase in trade payables, which reached RMB 89,013 thousand in 2024, compared to RMB 33,257 thousand in 2023, representing an increase of approximately 168%[4]

Financial Performance - For the fiscal year ending December 31, 2024, the company reported stable growth in revenue, net profit, and cash flow, indicating a strong performance in the high-end pearlescent materials, artificial mica, and new energy materials sectors[7]. - In the fiscal year 2024, the company achieved revenue of approximately RMB 1,648.8 million, a year-on-year increase of about 55.0%[16]. - The net profit for fiscal year 2024 was approximately RMB 320.3 million, reflecting a year-on-year growth of about 50.2%[16]. - EBITDA for fiscal year 2024 was approximately RMB 612.9 million, an increase of about 65.9% compared to approximately RMB 369.6 million for the fiscal year 2023[17]. - Total revenue increased from approximately RMB 1,064.1 million in FY2023 to approximately RMB 1,648.8 million in FY2024, representing a year-on-year growth of about 55.0%[33]. - Revenue from the China operations accounted for approximately 80.8% of total revenue in FY2024, up from 90.3% in FY2023, with an increase from approximately RMB 960.9 million to approximately RMB 1,332.2 million, a growth of about 38.6%[33]. - Revenue from the Korea operations rose to approximately RMB 316.6 million in FY2024, representing 19.2% of total revenue, compared to approximately RMB 103.1 million and 9.7% in FY2023[33]. - Sales of pearlescent pigment products increased from approximately RMB 964.0 million in FY2023 to approximately RMB 1,528.3 million in FY2024, an increase of about RMB 564.3 million or approximately 58.5%[38]. - Sales of natural mica-based pearlescent pigments rose by approximately RMB 312.6 million, or about 78.2%, compared to FY2023[38]. - Sales of synthetic mica-based pearlescent pigments increased by approximately RMB 80.1 million, or about 18.3%, compared to FY2023[38]. - Sales of glass flake-based pearlescent pigments grew by approximately RMB 62.8 million, or about 79.1%, compared to FY2023[38]. - Sales of mica functional fillers increased from approximately RMB 83.8 million in FY2023 to approximately RMB 92.8 million in FY2024, a growth of about RMB 9.0 million or approximately 10.8%[39]. - The company reported a charitable donation of approximately RMB 0.1 million for the fiscal year 2024[116]. Strategic Initiatives - The company successfully launched the second phase of the seven-color pearlescent project with an annual production capacity of 30,000 tons and initiated the 100,000-ton artificial mica project in Tonglu, marking significant capacity expansion[8]. - The strategic acquisition of Merck Group's global surface solutions business is expected to enhance the company's technological and market resources, further driving international market penetration[8]. - The integration of the Korean pearlescent materials company CQV has led to significant synergies in market channels, product development, and supply chain management, improving operational performance[10]. - The company aims to implement a "Materials + Innovation + Full Scene" strategy, focusing on green manufacturing, advanced materials, and intelligent applications to achieve new heights in business growth[12]. - The company plans to continue expanding its market presence and product offerings, focusing on synthetic mica-based products and enhancing production capabilities through technological improvements[35]. - The company plans to allocate RMB 330.8 million from the net proceeds of its global offering for the acquisition of global surface solutions business, with the transaction value set at €665 million[51]. - The company will continue to evaluate the use of net proceeds to align with changing market conditions and ensure business growth[54]. - The company plans to enhance R&D investment and establish a global collaborative R&D mechanism in areas such as synthetic mica and new energy materials[62]. - The company aims to integrate global sales channels and optimize supply chain costs to improve product reach and efficiency[63]. - The company is focused on six key areas to enhance global sales scale and gross margin, including technology integration and brand influence[65]. - The company will deepen the integration of global surface solutions business, enhancing product competitiveness through collaboration and resource integration[62]. - The company plans to continuously expand and improve its full range of product offerings to enhance market competitiveness[66]. - The company aims to optimize supply chain costs through refined management to improve operational efficiency and reduce costs[67]. - The company will increase R&D investment to enhance technological integration and innovation capabilities, focusing on upgrading products in the cosmetics active ingredients and industrial functional products sectors[67]. Awards and Recognition - The company received the "Best Social Responsibility Case Award" at the Frankfurt Central European ESG Best Practices Conference, highlighting its commitment to sustainable development[12]. - The company received multiple industry awards, including the "Best Social Responsibility Case Award" at the first Frankfurt Central European Enterprises ESG Best Practices Conference[30]. Corporate Governance - The company emphasizes corporate governance as a key driver for sustainable development and value creation[144]. - The board of directors is committed to maintaining high standards of corporate governance to ensure shareholder returns and manage business risks effectively[149]. - The company has adopted the corporate governance code as the basis for its governance practices, ensuring compliance throughout the fiscal year 2024[149]. - The board consists of a balanced mix of executive and independent non-executive directors, ensuring strong independence and effective decision-making[153]. - The company has established a board independence assessment mechanism to enhance effectiveness and identify areas for improvement[160]. - The chairman and CEO roles are currently held by the same individual, which the board believes benefits the company's strategic development[157]. - The board has consistently met the requirement of having at least three independent non-executive directors, ensuring compliance with listing rules[158]. - The company actively engages in partnerships with research institutions to accelerate innovation and product development[148]. - The board holds regular meetings, with a minimum of four meetings per year, to ensure active participation and oversight[156]. - The board has reviewed the implementation and effectiveness of the board independence assessment mechanism for the fiscal year 2024, and the results are satisfactory[161]. - The non-executive directors, including independent non-executive directors, have a specific term of three years, with reappointment possible after the term expires[162]. - The audit committee consists of three independent non-executive directors, with the main responsibilities including reviewing financial data and internal control systems[173]. - The remuneration committee held one meeting in the fiscal year 2024 to review the remuneration policies for executive directors and senior management[178]. - The company's remuneration policy aims to ensure that employee compensation is determined based on skills, knowledge, responsibilities, and contributions to the company[178]. - The training courses organized for all directors in the fiscal year 2024 covered a wide range of relevant topics, including directors' duties and corporate governance updates[168]. - The audit committee held two meetings to review the interim and annual financial performance and reports for the fiscal year 2024[173]. - The company encourages all directors to participate in relevant training courses, with costs covered by the company[166]. - The board has established three committees: the audit committee, remuneration committee, and nomination committee, each with specific written terms of reference[171]. - The remuneration for non-executive and independent non-executive directors is determined based on their participation and responsibilities within the company[178]. - The Nomination Committee held one meeting in the fiscal year 2024 to review the board's structure, number, and composition, as well as the independence of non-executive directors[182]. - The company aims to achieve measurable goals under the board diversity policy, including at least one female board member and at least one-third of the board members being independent non-executive directors[186]. - The current board composition analysis shows 10 male members and 1 female member, with 4 independent non-executive directors[187]. - The gender ratio among employees indicates that 26.20% are female and 73.80% are male, with the board currently having 9% female representation[190]. - The company plans to appoint at least one female director to improve gender diversity on the board[190]. - The board diversity policy emphasizes the importance of a diverse board for maintaining competitive advantage and will be reviewed annually[184]. - The Nomination Committee is responsible for evaluating the qualifications of candidates for board positions based on established criteria[192]. - The company recognizes the benefits of a diverse board and aims to maintain a balanced perspective related to business growth[184]. - The board diversity policy includes considerations of gender, age, cultural and educational background, professional qualifications, skills, knowledge, and industry experience[184]. - The nomination committee recommended the appointment of a new executive director, Mr. Lin Guangshui, and an independent non-executive director, Professor Chen Fadong, for the fiscal year 2024[198]. - The nomination committee will review the board nomination policy in a timely manner to ensure its effectiveness[199]. - The board has reviewed the company's corporate governance policies and practices, including training and continuous professional development for directors and senior management[200]. Shareholder Information - As of December 31, 2024, the company's cash and bank balances were approximately RMB 3,411.4 million, an increase from RMB 3,203.5 million as of December 31, 2023[79]. - The company's total borrowings increased to approximately RMB 1,729.0 million as of December 31, 2024, compared to RMB 327.0 million as of December 31, 2023[79]. - The company's debt-to-asset ratio rose to approximately 34.3% as of December 31, 2024, up from 17.6% as of December 31, 2023[81]. - The company's net asset value was approximately RMB 4,353.1 million as of December 31, 2024, compared to RMB 4,085.1 million as of December 31, 2023[82]. - The company has decided not to declare any final dividends for the fiscal year 2024, consistent with the previous fiscal year[75]. - As of December 31, 2024, the company issued convertible bonds totaling RMB 300 million and USD 40 million, with an initial conversion price of HKD 7.6 per share[85]. - If the convertible bonds are fully converted, the company will issue 43,815,789 shares and 40,789,474 shares, representing approximately 3.54% and 3.29% of the total issued shares as of December 31, 2024, respectively[89]. - The company has capital commitments amounting to approximately RMB 5,873.1 million as of December 31, 2024, compared to RMB 275.1 million as of December 31, 2023[95]. - The capital commitments include the renovation and expansion of the first phase of the production plant, construction of the second phase of the production plant, and the establishment of a new research and development center[95]. - The company plans to finance the above commitments through internal resources and external financing[95]. - The company applied for the listing and trading of 73,026,316 shares related to the convertible bonds issued on December 30, 2022, and 81,578,947 shares related to the convertible bonds issued on November 8, 2023[90]. - As of December 31, 2024, the total issued shares will increase to 1,282,685,921 after the full conversion of the A batch convertible bonds[91]. - The company’s major shareholder, Guangxi Investment Group Co., Ltd., holds 123,638,000 shares, representing 9.97% of the total issued shares as of December 31, 2024[92]. - The company’s public shareholders hold 654,713,803 shares, which is 52.85% of the total issued shares as of December 31, 2024[91]. - The company’s chairman and CEO, Mr. Su, holds 427,057,948 shares, representing 34.47% of the total issued shares as of December 31, 2024[92]. - Mr. Su holds a total of 301,155,800 shares, representing 24.31% of the company's equity[129]. - Mr. Jin holds 24,241,200 shares, representing 1.96% of the company's equity[129]. - Mr. Hu holds 19,285,200 shares, representing 1.56% of the company's equity[129]. - The total equity interests of the directors and key executives in the company are disclosed in accordance with the Securities and Futures Ordinance[131]. - The company has no other equity interests or short positions held by directors and key executives as of December 31, 2024[131]. - The interests of Mr. Su are primarily through controlled corporations, including Guangxi Hongzun Investment Group[132]. - Mr. Su is the sole director of several investment companies, indicating concentrated control over equity interests[132]. - The company maintains compliance with the Securities and Futures Ordinance regarding the disclosure of interests[131]. - The ownership structure includes various partnerships and investment entities linked to the directors[132]. - The report emphasizes the importance of transparency in the ownership and control of the company's shares[131]. - As of December 31, 2024, major shareholders include Hongzun International with 301,155,800 shares (24.31%) and Guangxi Energy Holdings with 107,178,000 shares (8.65%) [133]. Operational Efficiency - Cost of goods sold increased by approximately 44.7% from RMB 528.0 million in FY2023 to RMB 764.1 million in FY2024, driven by a 35.9% increase in sales volume of pearlescent pigments to approximately 25,404 tons[42]. - Gross profit rose by approximately 65.4% from RMB 528.3 million in FY2023 to RMB 873.7 million in FY2024, with a gross margin of approximately 53.0%, up 3.3% from the previous fiscal year[43]. - Other income and losses decreased significantly from RMB 28.0 million in FY2023 to approximately RMB 2.4 million in FY2024, primarily due to increased foreign exchange losses of approximately RMB 28.4 million[44]. - Financing costs surged by approximately 130.3% from RMB 51.4 million in FY2023 to RMB 118.4 million in FY2024, mainly due to increased bank loans and interest expenses from convertible bonds[48]. - Net profit for FY2024 was approximately RMB 320.3 million, a 50.2% increase from RMB 213.3 million in FY2023, with net profit margins of approximately 19.4% and 20.0% respectively[50]. - Sales expenses increased by approximately 52.1% from RMB 62.8 million in FY2023 to RMB 95.5 million in FY2024, attributed to increased sales and transportation costs[46]. - Administrative and other operating expenses rose by approximately 39.1% from RMB 188.6 million in FY2023 to RMB 262.4 million in FY2024, driven by professional service fees for potential acquisitions and increased employee costs[47]. - The company actively manages inventory to stabilize product supply and cash flow, while also developing new products to meet market demand[120]. - The company maintains effective communication with customers to meet their demands and provide high-quality services[99]. - The company regularly reviews employee compensation and benefits to attract and retain talent, participating in relevant retirement plans in China, South Korea, and Hong Kong[102]. - The company has established good relationships with reputable suppliers and conducts regular fair assessments of them[100]. Compliance and Risk Management - The company confirmed compliance with applicable laws and regulations, including the Cayman Islands laws and listing rules, with no known violations[121]. - The group has established an energy-saving culture and implemented various measures to reduce carbon emissions in its operations[122]. - The company has not committed to using any financial instruments to hedge foreign currency risks in the fiscal year 2024, as the board believes these risks are manageable[96]. - There were no related party transactions constituting connected transactions or continuing connected transactions for the fiscal year 2024[113]. - The board has not been aware of any significant transactions or arrangements in which directors or their related entities had a substantial interest during the fiscal year 2024[125]. - There were no significant events affecting the group that required disclosure after December 31, 2024, up to the date of the report[117].

Investment Rating - The report assigns a "Buy" rating to the company, Universal New Materials International (6616.HK), with a target price of HKD 7.31, indicating a potential upside of 106.5% from the current closing price of HKD 3.54 [4][8]. Core Insights - The company is a leading domestic producer of pearlescent materials, demonstrating excellent growth and profitability. Its main products include pearlescent materials and synthetic mica, with applications in industrial coatings, plastics, automotive coatings, and cosmetics. The company has shown rapid revenue growth, with a CAGR of 30.54% from 2019 to 2024, and a projected revenue of HKD 1.649 billion in 2024, representing a year-on-year growth of 55.0% [8][12]. - The global pearlescent materials market is steadily expanding, with a market size of RMB 23.5 billion in 2023 and a CAGR of 14.1% from 2016 to 2023. The Chinese market accounts for 27.5% of the global market, with a projected growth to RMB 126.5 billion by 2030 [32][34]. - The company possesses strong competitive advantages, including production cost optimization through technology, proprietary core technology patents, and a mature sales channel that provides strong bargaining power. The ongoing overseas acquisitions are expected to further enhance the company's performance and mark a deeper level of globalization [8][64]. Financial Forecasts - Revenue projections for 2025-2027 are HKD 21.94 billion, HKD 27.71 billion, and HKD 33.08 billion, with growth rates of 33.1%, 26.3%, and 19.4% respectively. Net profit forecasts for the same period are HKD 3.40 billion, HKD 4.57 billion, and HKD 5.95 billion, with growth rates of 40.4%, 34.4%, and 30.2% respectively [8][71]. - The company is expected to maintain a gross margin of approximately 53.0% in 2024, with a slight increase projected in subsequent years due to product structure optimization and supply chain synergies [25][70]. Market Dynamics - The pearlescent materials market is characterized by a shift towards high-end products, particularly synthetic mica-based pearlescent materials, which are in high demand due to their superior optical properties compared to traditional organic/inorganic pigments. The automotive and cosmetics sectors are driving this demand, with a CAGR of 38.0% and 19.5% respectively from 2016 to 2023 [42][51]. - The company is actively expanding its production capacity, with a new facility expected to come online in 2024, which will increase its annual production capacity to 30,000 tons of pearlescent materials [15][16]. Strategic Initiatives - The company is pursuing an acquisition strategy, including a significant deal to acquire Merck's surface solutions business for EUR 665 million, which is expected to enhance its global footprint and product offerings [64][66]. - The integration of the acquired business is anticipated to yield synergies in production capacity, sales channels, and technology, further solidifying the company's market position [66][68]. Conclusion - The report highlights the company's robust growth trajectory, strong market position, and strategic initiatives aimed at enhancing its competitive edge in the pearlescent materials industry, making it a compelling investment opportunity [4][8][12].

Investment Rating - The report assigns a "Buy" rating to the company, with a target price of HKD 7.31, indicating a potential upside of 106.5% from the current closing price of HKD 3.54 [3][7]. Core Insights - The company is a leading domestic producer of pearlescent materials, demonstrating excellent growth and profitability. Its main products include pearlescent materials and synthetic mica, with applications in industrial coatings, plastics, automotive coatings, and cosmetics. The company has shown rapid revenue growth, with a CAGR of 30.54% from 2019 to 2024, and a projected revenue of HKD 1.649 billion in 2024, representing a year-on-year growth of 55.0% [7][11]. - The global pearlescent materials market is steadily expanding, with a market size of RMB 23.5 billion in 2023 and a CAGR of 14.1% from 2016 to 2023. The demand for high-end products, such as synthetic mica pearlescent materials, is particularly strong due to their optical characteristics compared to traditional organic/inorganic pigments [7][34]. - The company possesses significant competitive advantages, including cost reduction through production technology optimization and smart factories, ownership of core technology patents, and strong bargaining power with distributors. Ongoing overseas acquisitions are expected to further enhance performance and mark a deeper global expansion [7][66]. Financial Projections - Revenue is projected to reach HKD 2.194 billion in 2025, with growth rates of 33.1%, 26.3%, and 19.4% for the years 2025 to 2027. Net profit is expected to be HKD 340 million in 2025, with growth rates of 40.4%, 34.4%, and 30.2% for the same period [7][73]. - The company is expected to maintain a gross margin of approximately 53.0% in 2024, with a slight increase in subsequent years due to product structure optimization and supply chain synergies [7][72]. Market Dynamics - The pearlescent materials market is entering a new phase of diversified development, with increasing recognition and acceptance in various applications, particularly in cosmetics and automotive coatings. The market in China is projected to grow significantly, reaching RMB 126.5 billion by 2030, with a CAGR of 10.0% [34][42]. - The company is strategically positioned to benefit from favorable national policies that support the pearlescent materials and synthetic mica industries, enhancing the investment environment and attracting resources [42].

Group 1 - The company achieved a revenue of 1.649 billion yuan in 2024, representing a year-on-year growth of 55.0%, and a net profit of 242 million yuan, up 33.4%, with a gross margin reaching a historical high of 53.0% [1] - The core business of the company, pearlescent pigments, accounts for over 90% of total revenue, with natural mica-based pearlescent pigments being the largest source at 43.2% [2] - The company has expanded its product offerings to over 2,000 types, focusing on high-end products such as aluminum oxide and silica-based pigments, which have seen a year-on-year growth rate exceeding 200% [2] Group 2 - The company launched a new 30,000-ton high-end pearlescent materials smart factory in 2024, focusing on high-value products for automotive and cosmetics [3] - The company is pursuing a global strategy by integrating with Korean CQV and planning to acquire German Merck's surface solutions business, which is expected to enhance its market presence in Europe [3] - The company’s net profit from CQV increased significantly by 170.5% in 2024, highlighting the effectiveness of the synergy [3] Group 3 - The company’s growth in 2024 is attributed to technological breakthroughs and a relentless pursuit of color aesthetics, alongside a global perspective [4] - The completion of the acquisition of Merck's surface materials business and the introduction of new production capacity are expected to deepen the company's exploration at the intersection of art and technology [4]

Financial Performance - Revenue for the fiscal year 2024 was approximately RMB 1,648.8 million, an increase of about 55.0% compared to RMB 1,064.1 million in fiscal year 2023[4] - Gross profit for fiscal year 2024 was approximately RMB 873.7 million, up about 65.4% from RMB 528.3 million in fiscal year 2023, with gross margins of approximately 53.0% and 49.7% respectively[4] - Profit attributable to owners of the company for fiscal year 2024 was approximately RMB 242.2 million, a 33.4% increase from RMB 181.6 million in fiscal year 2023, with net profit margins of approximately 19.4% and 20.0% respectively[4] - EBITDA for fiscal year 2024 was approximately RMB 612.9 million, an increase of about 65.9% from RMB 369.6 million in fiscal year 2023[4] - The company reported a total comprehensive income of RMB 268.1 million for fiscal year 2024, compared to RMB 209.9 million in fiscal year 2023[6] - The net profit for the fiscal year 2024 was approximately RMB 320.3 million, reflecting a year-on-year growth of about 50.2%[39] - Segment profit for the year 2024 was RMB 443,441 thousand, up 61% from RMB 275,506 thousand in 2023[24] - The company reported a net profit after tax of RMB 320,272 thousand for 2024, an increase of 50% from RMB 213,285 thousand in 2023[24] Assets and Liabilities - Total assets as of December 31, 2024, amounted to RMB 7,054.5 million, compared to RMB 5,155.3 million as of December 31, 2023[7] - Total liabilities rose to RMB 2,701,383 thousand in 2024, up from RMB 1,070,137 thousand in 2023, indicating an increase of 152%[25] - The company's total liabilities to assets ratio increased to approximately 34.3% as of December 31, 2024, compared to 17.7% on December 31, 2023, due to an increase in bank loans and other borrowings[83] - Non-current assets increased to RMB 2,731.9 million in fiscal year 2024 from RMB 1,319.9 million in fiscal year 2023[7] - Current assets totaled RMB 4,322.6 million as of December 31, 2024, compared to RMB 3,835.3 million in the previous year[7] Revenue Breakdown - The revenue from pearlescent pigment products reached RMB 1,528,263,000 in 2024, up from RMB 964,003,000 in 2023, indicating a growth of about 58%[18] - Revenue from external customers in China for 2024 was RMB 1,358,357 thousand, representing a 41% increase from RMB 961,325 thousand in 2023[26] - Revenue from the Korean operations increased significantly to approximately RMB 316.6 million in fiscal year 2024, representing 19.2% of total revenue, compared to 9.7% in the previous year[49] - The revenue breakdown by product for fiscal year 2024 shows that natural mica-based pearlescent pigments generated RMB 712.4 million (43.2%), synthetic mica-based pigments RMB 518.2 million (31.4%), and glass flake-based pigments RMB 142.2 million (8.6%) [50]. Costs and Expenses - The company’s financing costs increased to RMB 118.4 million in fiscal year 2024 from RMB 51.4 million in fiscal year 2023[5] - Research and development expenses for 2024 amounted to RMB 89,540 thousand, compared to RMB 75,018 thousand in 2023, reflecting a growth of 19%[31] - Administrative and other operating expenses rose from approximately RMB 188.6 million in FY2023 to approximately RMB 262.4 million in FY2024, an increase of about 39.1%[63] - Other income and losses decreased from approximately RMB 28.0 million in FY2023 to approximately RMB 2.4 million in FY2024, primarily due to increased foreign exchange losses[60] Strategic Initiatives - The company is pursuing a strategic acquisition of the global surface solutions business, which is expected to enhance its market resources and international presence[41] - The company has entered into an agreement to acquire part of Merck KGaA's global surface solutions business, indicating a strategic move for market expansion[89] - The company agreed to acquire the global surface solutions business for a total consideration of €665,000,000 (approximately RMB 5,187,000,000 or HKD 5,586,000,000), to be paid in cash[90] - The company plans to enhance its global sales pipeline integration to ensure efficient market reach and customer engagement[76] - The company aims to implement a "Materials + Innovation + Full Scenario" strategy, focusing on green manufacturing, advanced materials, and intelligent applications to drive growth towards 2025[75] Corporate Governance - The company has established an audit committee consisting of three independent non-executive directors to oversee financial reporting and risk management[101] - The company is committed to high standards of corporate governance to protect shareholder interests and enhance corporate value[98] - The board of directors includes executive directors such as Mr. Su Ertian (Chairman and CEO) and Mr. Jin Zengqin[106] Market and Product Development - The company launched five innovative product series and ten annual trending colors at the 2024 "Brilliant New Colors" product launch event, enhancing its product line significantly[42] - The group has developed new energy materials with high-temperature resistance up to 1,150℃ and high-voltage breakdown resistance of 20KV/mm, indicating advancements in product technology[51] - The total number of pearlescent pigment products offered by the group reached 993 as of December 31, 2024, including 472 synthetic mica-based products, 94 glass flake-based products, and 21 silica-based products[43][44]. Employee and Operational Metrics - The company employed 693 employees in mainland China, 15 in Hong Kong, and 193 in South Korea as of December 31, 2024, compared to 589, 9, and 171 respectively on December 31, 2023[93] - The average number of ordinary shares outstanding increased to 1,238,870,132 in 2024 from 1,208,799,000 in 2023, reflecting an increase of approximately 2.5%[33] Future Outlook - Future outlook includes potential new product launches and technological advancements[106] - The company is focused on strategic expansion and enhancing its market presence[106] - The company aims to improve user data analytics to drive better decision-making[106] - There is an emphasis on mergers and acquisitions to strengthen market position[106]

Investment Rating - The report assigns a "Buy" rating to the company with a target price of 7.81 HKD, indicating a potential upside of 119% from the current price [4][6]. Core Insights - The company has established itself as a leading player in the pearl material industry, with a strong focus on R&D and innovation, and a robust global sales network [2][3]. - The pearl materials market is experiencing rapid growth, driven by increasing demand in various applications, particularly in cosmetics and automotive sectors [2][20]. - The company has demonstrated strong financial performance, with a revenue CAGR of 24.7% from 2019 to 2023, and a gross margin consistently around 50% [2][15]. Summary by Sections Company Overview - Established in 2011, the company specializes in R&D, production, and sales of pearl materials and synthetic mica, with over 2,000 products and a global sales network [2][8]. - The company has received multiple accolades, including "National Green Factory" and "Top 500 Most Valuable Brands in China" [8]. Market Dynamics - The pearl materials industry is rapidly expanding, with China's market size reaching 6.47 billion RMB, accounting for 28% of the global market [2][22]. - Synthetic mica-based pearl materials have seen a CAGR of 31.7% from 2016 to 2023, indicating strong demand growth [2][20]. R&D and Competitive Advantage - The company invests heavily in R&D, with a 40% increase in R&D spending in the first half of 2024, leading to the launch of over 100 new products annually [3][48]. - The company has built a strong technological moat in synthetic mica production, supported by patents and innovative processes [3][57]. Financial Performance - The company achieved a revenue of 1.056 billion RMB in 2023, with a projected revenue of 1.571 billion RMB in 2024, reflecting a growth rate of 48.74% [4][15]. - The net profit for 2023 was approximately 213 million RMB, with a projected net profit of 340 million RMB in 2024, indicating a growth rate of 59.21% [4][15]. Future Outlook - The company is expected to benefit from the ongoing expansion of the pearl materials market, particularly in high-end applications [2][20]. - The acquisition of CQV and the planned acquisition of Merck's surface solutions business are anticipated to enhance the company's market position and operational synergies [3][4].