Summary of Sinocera Functional Material (300285.SZ) Conference Call Company Overview - **Company**: Sinocera Functional Material (300285.SZ) - **Market Cap**: Rmb18.5 billion / $2.6 billion - **Enterprise Value**: Rmb19.0 billion / $2.6 billion - **Industry**: Advanced Materials & Construction in China Key Financial Insights - **2Q25 Earnings Preview**: Expected flattish year-over-year (yoy) net profit with low-teen percentage top-line growth driven by new businesses such as precision ceramics and catalytic materials [1][3] - **Revenue Estimates**: - 2025E: Rmb4,671.7 million (previously Rmb4,737.0 million) - 2026E: Rmb5,432.0 million (previously Rmb5,513.7 million) - 2027E: Rmb6,356.1 million (previously Rmb6,458.2 million) [5] - **EPS Estimates**: - 2025E: Rmb0.63 (previously Rmb0.64) - 2026E: Rmb0.76 (previously Rmb0.77) - 2027E: Rmb0.92 (previously Rmb0.94) [5] Market Dynamics - **Demand Environment**: - Improved demand for MLCC (Multi-layer Ceramic Capacitors) indicated by solid exports from China and Korea - Commercial vehicle sales increased by 10% yoy compared to 9% in 1Q25 - Property market remains challenging with completions down 16% yoy [2][28] - Strong battery shipments with a growth of 57% yoy in 2Q25 [23] Growth Drivers - **New Business Segments**: - Precision ceramics expected to grow by 75% yoy - Catalytic materials projected to grow by 15% yoy - New energy materials anticipated to grow by 20% yoy [10] - **Margin Outlook**: - Forecasted gross profit margin contraction of 2.5 percentage points yoy due to unfavorable product mix [10] Investment Thesis - **Long-term Growth Potential**: Sinocera is positioned as a leading supplier of fine ceramic materials with significant growth opportunities in electronic, catalytic, and biomedical materials [34] - **Valuation**: Target price set at Rmb20.0 based on a 25x 2027E P/E ratio discounted back to mid-2026E [35] - **Risks**: - Slower-than-expected market share expansion in ceramic powders - Challenges in customer penetration for catalytic materials - Potential delays in the expansion of new business segments [34][36] Conclusion - **Recommendation**: Maintain Buy rating with an upside potential of 8.7% from the current price of Rmb18.40 to the target price of Rmb20.00 [1]