Summary of Shandong Sinocera Functional Material Conference Call Company Overview - **Company**: Shandong Sinocera Functional Material - **Industry**: Specialty Chemicals, specifically ceramic materials - **Key Products**: Barium titanate (BaTiO3) powder for multi-layer ceramic capacitors (MLCCs), zirconium powder for dental implants, honeycomb ceramics, and ceramic ink [11][12] Financial Performance - **Q3 2025 Results**: - **Net Profit**: Rmb490 million, up 1.5% YoY - **Revenue**: Rmb3.3 billion for 9M25, up 11% YoY - **Q3 Revenue Highlights**: - Catalytic material segment revenue increased by 30% YoY - Ceratron (subsidiary) revenue rose by 40% YoY due to satellite tube shell sales - Electronic paste segment maintained high growth - MLCC powder sales volume and ASP affected by production line switching - Dental material segment GPM under pressure [2][3] Growth Drivers and Future Outlook - **2026 Expectations**: - Anticipated growth in automotive-grade powder driving MLCC sales volume - Continued rapid growth in catalytic materials, satellite tube shells, and ceramic balls - Expected mass production of solid-state electrolyte (SSE) [2][4] Capacity Expansion and New Products - **New Capacity**: - 1.5-2.0kt automotive-/AI-grade MLCC powder capacity expected to be completed by end-2025 - **New Product Developments**: - Sulfide SSE samples sent to customers, with plans for 30t capacity by year-end and ramping up to 100t in 2026 - Spherical silica samples for M7-M9 PCB with a planned 700t capacity by year-end - Zirconia dispersion revenue reached Rmb10 million; titanium oxide dispersion expected to grow rapidly next year - SOFC market remains in early stages with sales of zirconia materials to domestic customers [4][12] Valuation and Price Target - **Price Target**: Raised from Rmb26.00 to Rmb29.00 - **Earnings Forecast**: 2025-27E earnings lowered by 4-10% due to one-off items affecting Q3 revenue - **DCF-based Valuation**: New price target implies 33x/27x PE for 2026E/27E [5][6] Key Financial Metrics - **Revenue Growth**: Expected to reach Rmb4.55 billion by 2025E, Rmb5.68 billion by 2026E - **Net Earnings**: Projected to grow to Rmb680 million by 2025E, Rmb879 million by 2026E - **EBIT Margin**: Expected to improve to 19.0% by 2025E, 20.5% by 2026E - **P/E Ratio**: Expected to decrease from 33.2x in 2025E to 25.6x in 2026E [6][7] Risks and Challenges - **Downside Risks**: - Proliferation of MLCC material technology - Marketing challenges for Upcera's dental B2C business - Potential decline in honeycomb ceramics sales due to clean energy vehicle adoption - Intense competition leading to price wars in the honeycomb ceramics market [12] Analyst Ratings - **12-Month Rating**: Buy - **Market Cap**: Rmb22.3 billion (approximately US$3.14 billion) - **Current Price**: Rmb22.38 as of 27 October 2025 [7][26] Conclusion - Shandong Sinocera is positioned for growth with strong revenue drivers in the automotive and electronic materials sectors, despite facing some risks related to competition and market dynamics. The company is expected to leverage its advancements in solid-state electrolytes and automotive-grade materials to enhance its market position.