Rating: Neutral (Hold) | Target Price: RMB 45-49 (base-case fair value range) | Current Price: RMB 54.00 (close on 2026-10-30) | Margin of Safety: approx. -17% | Time Horizon: 12 months
Total shares outstanding: 954.8 million, corresponding to a market cap of approx. RMB 51.56 billion. The stock is up +38% year-to-date, but has retraced approx. 49% from its July 2026 high (approx. RMB 106), with the market having partially given back the optimistic pricing of the earlier semiconductor materials rally.
Dinglong is the absolute main force in domestic substitution of CMP polishing pads in China. The volume ramp and profitability improvement of its semiconductor materials platform (pads/slurry/cleaning solutions/display materials/photoresists) have both been validated: 2026 9M non-GAAP net profit of RMB 791 million (+60.01%), operating cash flow of RMB 940 million, and overall gross margin rising to 60.02%. Medium-term growth is backed by a genuine demand chain — domestic memory capacity expansion (CXMT and YMTC ramping capacity through 2026-2028) and AI advanced packaging increasing CMP consumables consumption per wafer. Under the base case, 2027E attributable net profit of RMB 1.33-1.50 billion (+23%-32%) is achievable. However, the current price of RMB 54.00 already implies 2028E attributable net profit of RMB 1.75-2.04 billion (2026-2028 CAGR of 26%-36%, discounted at an exit 30-35x PE), equivalent to "base + mildly bullish" scenario pricing. Zero-growth economic value (EPV) is only approx. RMB 10/share, with the growth option accounting for approx. 80% of the current price; this report's base-case fair value is RMB 45-49, with the current price approx. 14% above the midpoint — no margin of safety. Over the next 12 months, valuation re-rating is constrained by three factors: single-quarter polishing pad growth slowing from +56.8% in H1 to +22.3% in Q3; dilution and pricing-anchor uncertainty from the planned H-share listing (filed July 2026); and a sector-wide downward shift in exit multiples for A-share semiconductor materials names. Conclusion: a good company at an unattractive price — rating "Neutral," recommend holding off until the stock enters the base-case fair value range below RMB 45, or until memory expansion and photoresist data strengthen enough to raise the base-case fair value.
Key upcoming changes: On the demand side, the core change is domestic memory expansion moving from planning to production — CXMT's monthly capacity is expected to climb to approx. 300K wafers by end-2026 with HBM line startup; YMTC Phase 3 begins volume ramp in H2 2026. CMP consumables demand transmits with a 2-3 quarter lag behind equipment tenders, with the realization window concentrated in 2027-2028. On the supply side: the company's third soft-pad line in Qianjiang (+300K pads/year) starts production at end-2026; the 300-ton photoresist line is ramping; and the H-share financing platform (filed 2026-07; based on comparable timelines of approx. 8 months, a hearing/pricing milestone may come in H1 2027).
Ranking of primary stock price drivers: ① Memory capex → wafer output → pad/slurry revenue growth (current readings: pads +42.9% for 9M, but +22.3% YoY and +5.9% QoQ in Q3 alone — the deceleration signal requires consecutive quarterly verification); ② Delivery of second growth curves (photoresist order conversion, third soft-pad line and glass substrate orders) determining whether the valuation narrative can shift from single-CMP to platform story; ③ Valuation anchors and positioning (H-share pricing, sector exit multiples, buybacks and insider behavior).
Demonstrable expectation gaps: The market anchor is consensus from 46 sell-side analysts (31 Buy + 15 Overweight, no Neutral/Sell) of 2026E attributable net profit of RMB 1.108 billion (+50.6%) and 2027E RMB 1.442 billion (+30.2%), with target prices ranging RMB 58.3-86.0; this report's disagreement is not on earnings (our own 2027E of RMB 1.33-1.50 billion straddles the consensus midpoint) but on the exit multiple — sell-side targets are based on 50-55x 2027E earnings, whereas this report, using comparable growth materials companies' current non-GAAP PE (Anji approx. 40.7x, Yac approx. 37.8x) and the sector's downward multiple shift, applies a 30x exit on 2028E. The nearest reconciliation checkpoint is the January 2027 annual results pre-announcement: a guided range ≥ RMB 1.10 billion would confirm consensus, implying Q4 attributable profit of approx. RMB 256 million (+27% YoY).
Validation and falsification: Upside validation rests on memory fab tenders and record monthly shipments, photoresist revenue reaching RMB 30-50 million magnitude in the 2026 annual report, and smooth H-share pricing; downside falsification rests on DRAM/NAND contract price QoQ increases below 10% for two consecutive quarters along with slowing memory fab tenders, a heavily discounted H-share issuance, or Q4 2026 single-quarter attributable profit below RMB 230 million. Using scenario midpoints, the upside to the bullish midpoint is approx. +11% and the downside to the bearish midpoint approx. -36% — an approx. 1:3 asymmetry in odds. This is the core reason this report assigns "Neutral/Hold" rather than full participation.
Key evidence:
The volume evidence chain is solid: monthly pad shipments surpassed 20K in May 2024 → 40K in 2025 → 50K in June 2026; hard-pad capacity of 50K/month running at full utilization, with the two soft-pad lines at nearly 80% utilization. However, the share metrics must be presented side by side: back-calculating from approx. RMB 1.06-1.10 billion of 2025 pad revenue against an approx. RMB 2.7-2.8 billion China pad market, 38.5% is closer to "share of the China market (including imports)"; the Hubei Provincial Department of Economy and Information Technology (2025-04) cited "near 80% localization rate," a different denominator — the two cannot be mixed. Globally, DuPont still holds over 75% share; Dinglong is "No. 1 in the domestic camp, a global challenger," and the boundaries of any leadership premium must be recognized. This thesis fails if single-quarter pad revenue turns negative QoQ or YoY growth falls below 15% for two consecutive quarters.
Key evidence:
The real part: non-GAAP growth of +60%, OCF/net profit at 1.10x, FCF turning positive at RMB 508 million, and the semiconductor segment contributing approx. 80% of company-wide gross profit (RMB 1.953 bn × 71.93% ÷ RMB 2.913 bn × 60.02% ≈ 80.3%). The parts requiring discounts: the "three consecutive jumps" in overall gross margin from 36.95% to 60.02% span three structural changes — deconsolidation of the low-margin cartridge/toner business (April 2026), consolidation of Haofei New Materials (from March 2026), and rising semiconductor share; on a like-for-like basis, semiconductor segment gross margin improved only approx. +3.3 pp YoY. Non-GAAP profit still includes RMB 46.4 million of equity-method income (non-core recurring-type income from the deconsolidated printing consumables business recognized by shareholding ratio); Haofei's consolidation contributed RMB 463 million of 9M revenue and added RMB 201 million of goodwill (total goodwill RMB 738 million, 12.5% of attributable net assets); the cyclicality of lithium battery auxiliary materials and goodwill impairment exposure require close scrutiny in upcoming annual reports.
Key evidence:
The demand chain is quantifiable: CMP consumables are continuously consumed with wafer production, approximating a linear relationship with wafer output and lagging equipment tenders by 2-3 quarters; advanced packaging (HBM stacking, CoWoS, hybrid bonding) raises per-wafer polishing steps and precision requirements (hybrid bonding requires copper pad recess control within 2-5nm); industry estimates suggest advanced packaging will contribute an incremental 15-20% of CMP demand by 2028 (as cited by Guojin Securities). But capacity figures must use verifiable scopes: per currently available public information, combined monthly capacity of the two memory makers at end-2027 is approx. 550-600K wafers (CXMT 300K + YMTC's approx. 200K existing plus Phase 3 ramp); "600-800K wafers" includes 2028-and-beyond long-term plans, some not yet under construction, and cannot be pulled forward into the 2027 realization window. The company's pad share climbing further from 38.5% is also a scenario assumption, not a fait accompli (Tongcheng New Materials has already won formal CMP pad orders and raised HKD 2.9 billion via H-shares to intensify efforts). The base case of 2027E attributable net profit of RMB 1.33-1.50 billion holds only if memory capex doesn't brake abruptly in 2027 — the same variable as the "memory cycle peaking in 2027" downside risk; the company demonstrated its downside elasticity in 2023 (attributable profit -43%). This thesis is validated on a rolling basis via the January 2027 results pre-announcement and memory fab tender data.
Key evidence:
One sentence summarizing the market's implied expectation: the current price requires the company to achieve approx. RMB 1.75-2.04 billion of attributable net profit in 2028, while consensus extrapolation points to approx. RMB 1.75-1.85 billion — the market treats the base case as the floor and part of the bull case as highly probable. This report's base-case fair value is RMB 45-49 (midpoint approx. RMB 47.3; current price approx. 14% above midpoint), bear case RMB 31-38, bull case RMB 57-63. Honest disclosure: this conclusion is highly sensitive to the exit multiple — on a 2028E base of RMB 1.787 billion, a 25x exit implies approx. RMB 39, 30x approx. RMB 47, 35x approx. RMB 55, and 40x approx. RMB 63; if sector exit multiples stabilize above 40x, the current price would be reasonable. If the stock closes below RMB 38 (lower bound of the bear range), the market is pricing in cycle falsification, and this valuation framework requires a full re-examination rather than mechanical buying.
Key evidence:
The three constraints differ in substance: ① The pad slowdown is real but exaggerated by headline numbers — the reported revenue growth of +2.26% overstates the deceleration (on a like-for-like basis excluding deconsolidation, 9M attributable profit rose +73.63% YoY; slurry was still accelerating in Q3); the true deceleration reading is pads at +22.3% YoY and +5.9% QoQ in the single quarter, requiring consecutive quarterly verification; ② The H-share issuance is a two-way event — based on 8-15% new share issuance, implied dilution is approx. 7-13%; if priced significantly below A-shares it becomes a new valuation anchor (2026 A→H cases show divergent discounts, with leading names' discounts narrowing — a mechanical 20-30% discount assumption is inappropriate); ③ The fact that sector exit multiples are below sell-side target-price assumptions is real (Anji's TTM PE at a one-year low percentile; Dinglong's own 1-year median PE of 68.6x → now 49x), but low percentiles simultaneously mean limited room for further compression — directionally, a mix of pressure and support for the stock. If the H-share issuance completes at a high valuation, or Q4 attributable profit ≥ RMB 250 million with pad revenue growing again QoQ, this constraint thesis weakens significantly.
| Metric (RMB 100 mn, %) | FY2023 | FY2024 | FY2025 | 2026Q1-3 (latest period) |
|---|---|---|---|---|
| Revenue | 26.67 | 33.38 | 36.60 | 29.13 (+7.97%) |
| Attributable net profit | 2.22 (-43.08%) | 5.21 (+134.54%) | 7.20 (+38.32%) | 8.52 (+64.00%) |
| Non-GAAP attributable net profit | 1.64 (-52.79%) | 4.69 (+185.26%) | 6.78 (+44.53%) | 7.91 (+60.01%) |
| Overall gross margin | 36.95% | 46.88% | 50.85% | 60.02% |
| Net margin | 8.32% | 15.60% | 19.68% | 29.24% |
| Operating cash flow | 5.34 | 8.28 | 11.57 | 9.40 |
| Free cash flow (OCF-CapEx) | -4.94 | 0.60 | 3.81 | 5.08 |
| Cash + trading financial assets | — | — | 17.03 (period-end) | 14.40 (period-end; plus other non-current financial assets of 5.56) |
| Interest-bearing debt | 11.78 (period-end) | 13.84 (period-end) | 23.73 (period-end) | 24.36 (period-end) |
| Debt-to-asset ratio | 27.31% | 34.08% | 39.17% | 37.07% |
| R&D expense (ratio) | 3.80 (14.26%) | 4.62 (13.86%) | 5.19 (14.19%) | 4.43 (15.22%) |
Note: Net interest-bearing debt at end-Q3 2026 was approx. RMB 440 million (cash + trading financial assets + other non-current financial assets of RMB 1.996 billion vs. interest-bearing debt of RMB 2.436 billion), net debt/EBITDA approx. 0.3x (TTM EBITDA estimated at approx. RMB 1.5 billion); negligible conversion of convertible bonds (Dinglong convertible bond of RMB 910 million, issued April 2025). Balance-sheet stock figures are as of 2026-09-30.
Explanations of metric changes (excerpted for YoY ≥ ±20%; all per company disclosures): High growth in attributable and non-GAAP profit — profit growing faster than revenue mainly due to product mix optimization, rising share of high-margin semiconductor materials revenue (57%→67%), and Haofei consolidation (contributing RMB 463 million in 9M); the company also proactively disclosed +73.63% YoY attributable growth excluding deconsolidation effects; investment income +1,218.97% (RMB 68.8 million) — equity-method investment income and equity disposal gains (cost method converted to equity method after deconsolidating Mingtu Chaojun and Jixun), of which RMB 46.4 million from equity method was included in non-GAAP; printing consumables revenue H1 -47.35% — divestiture of the cartridge/toner end-business in April 2026 (60% stake in Mingtu Chaojun for RMB 120 million, 15% stake in Jixun for RMB 72.75 million); new energy materials revenue H1 +2,631.52% — Haofei New Materials (70% stake acquired for RMB 630 million) consolidated from March; goodwill RMB 537 million → RMB 738 million (+37.4%) — RMB 201 million added from the Haofei acquisition; FY2025 financial expenses +321.38% — increased bank borrowing and convertible bond interest; FY2025 financing cash flow +539.11% — issuance of RMB 910 million convertible bonds.
9M revenue of RMB 2.913 billion (+7.97%), attributable profit of RMB 852 million (+64.00%), non-GAAP RMB 791 million (+60.01%) — near the midpoint of the pre-announced range (attributable RMB 840-860 million) and consistent with the sell-side consensus cadence (2026E RMB 1.108 billion implies Q4 attributable profit of approx. RMB 256 million, +27% YoY; management notes "Q4 trends are favorable and October operating data for certain semiconductor materials are expected to set new highs"). Q3 single quarter: revenue of RMB 988 million (+2.26% YoY, +9.28% QoQ), attributable profit of RMB 322 million (+54.73% YoY, +15.78% QoQ), non-GAAP RMB 307 million (+52.71%). By segment, momentum diverges: CMP pads Q3 single-quarter RMB 391 million (+22.32% YoY, +5.88% QoQ), a marked slowdown from H1's +56.8%, mainly digesting the high prior-year base; slurry/cleaning solutions Q3 approx. +65% YoY and +29% QoQ, still accelerating; Haofei lithium battery auxiliary materials Q3 +58.81% YoY; display materials remain under pressure (H1 -12.73%, insufficient panel utilization). Overall gross margin of 60.02% (+9.2 pp YoY) includes deconsolidation/consolidation mix effects; like-for-like semiconductor segment improvement was approx. +3.3 pp. Overall judgment: the "headline quality" of high profit growth is declining but the underlying core remains healthy — the deceleration is concentrated in pads' high base, with slurry, photoresist, soft pads, and newly consolidated businesses taking up the接力... the market's concern over "Q4 growth deceleration" (prior-year Q4 attributable profit of RMB 201 million included a high base from the since-deconsolidated business) is a definitional artifact; the January 2027 pre-announcement is the formal reconciliation point.
Model in brief: A platform-type semiconductor process consumables manufacturer whose core product lines (CMP pads/slurries/cleaning solutions) feature repeat-purchase attributes—consumables are continuously consumed as wafers are produced, so revenue scales linearly with wafer output and switching costs after qualification are extremely high; semiconductor consumables account for roughly 67% of core revenue. The company is in a heavy-asset expansion phase (CapEx/depreciation of 8.1x/4.3x/3.6x for 2023–2025), compounded by the shrinking printing-consumables cash cow and lithium-battery auxiliary materials M&A—a growth platform combining "high R&D intensity (14–15% expense ratio) + expansionary capital expenditure."
Cash content of earnings: OCF/net profit was 2.41x/1.59x/1.61x/1.10x for 2023–2025 and the first three quarters of 2026 (the elevated 2023 figure includes RMB 86.05 million in cash from asset-related government subsidies), consistently above 0.8 over the long term—healthy collections quality. FCF/net profit was -2.23x/0.11x/0.53x/0.60x—in 2023–2024 nearly all profit was swallowed by the Xiantao industrial park and photoresist capacity expansion (a historical risk that must be called out); it turned positive from 2025 as capacity came online and continued improving to RMB 508 million in the first three quarters of 2026, validating the shift from "investment phase → harvest phase." Operating receivables declined by RMB 338 million in FY2025 (the company attributes this to strengthened collection efforts); receivables plus inventory account for a very low share of incremental revenue.
Recurring earnings check: For the first three quarters of 2026, net profit attributable to shareholders was RMB 852 million versus RMB 791 million on an adjusted (ex-non-recurring) basis—a gap of only 7.2% (non-recurring items of RMB 60.54 million, mainly equity disposal gains). Dependence on government subsidies, which made up 31.3% of attributable profit in FY2023, has fallen to 5.9% in FY2025—one-off items provide limited window dressing of current profit. However, two caveats must be noted: ① Adjusted profit includes RMB 46.4 million in equity-method investment income (67.5% of total investment income), a recurring but non-core gain from the deconsolidated printing consumables business, now held as an associate; ② Haofei contributed RMB 463 million in revenue post-consolidation (15.9% of total), so the +60% adjusted growth includes consolidation effects—pure semiconductor organic growth is slightly below headline.
Return on capital: ROIC of roughly 10.1% (FY2025 estimate, NOPAT/invested capital), broadly in line with WACC (~9–10%)—capital sunk during the expansion phase (construction in progress of RMB 708 million) drags down current returns; true returns depend on utilization of new capacity in 2027–2028. ROE trajectory: 9.5% (2022) → 14.8% (2025) → ~18.9% (2026E), trending favorably. The moat is real (qualification stickiness + in-house produced abrasive particles/prepolymers + know-how), but not yet sufficient to support "lie-back-and-collect" level returns.
Quality red flags: FCF has historically been far weaker than profit (RMB -494 million in 2023); expansion relies on external financing (RMB 910 million convertible bonds + H-share application + ongoing option exercises); goodwill of RMB 738 million equals 12.5% of attributable net assets (historical printing consumables M&A has already impaired RMB 546 million, plus RMB 201 million added from Haofei yet to be tested); Dinghui Microelectronics minority stake acquisitions saw its valuation rise from RMB 2.5 billion to RMB 4.5 billion within two years, with large cash outflows while the dividend payout ratio is only 13–18%.
Consistency of words and deeds: pragmatic, high delivery rate. Verifiable commitment-vs-delivery record: ① H1 2026 guidance of RMB 510–540 million attributable profit → actual RMB 529 million, within range; ② first-three-quarters guidance of RMB 840–860 million → actual RMB 852 million, delivered at midpoint; ③ FY2024 annual report committed to raising hard pad capacity to 40,000 pieces/month by end-2025Q1 → achieved on schedule and further raised to 50,000 pieces; ④ the 300-tonne KrF/ArF photoresist project (launched 2023) → construction completed and ramping by end-2026Q1. No missed earnings preannouncements in the past two years; the only slightly optimistic claim was H1's "over 80% excluding adjustments," versus actual +74.57%.
Shareholder friendliness: neutral (growth-first). Payout ratio was 18.0%/13.2% for FY2024/FY2025 (RMB 1 per 10 shares)—low; buybacks for five consecutive rounds (round four: RMB 150 million cancelled; round five: RMB 100–200 million in progress, ~RMB 120 million repurchased as of end-September at transaction prices of RMB 57.00–75.44); on the financing side, RMB 910 million in convertible bonds plus an H-share filing reflect a "financed expansion > cash return" orientation. From 2024–2026, the company successively paid premium prices to raise stakes in subsidiaries' minority interests (Dinghui: 19%→8%→0.65%, at valuations of RMB 2.5→3.0→4.5 billion; Rouxian: 11.41%), with the company itself stating the purpose includes "increasing attributable net profit"—minority interest share of net profit fell from 18.5% to 6.5%, accretive to remaining shareholders, but the fairness of rapidly rising acquisition pricing depends on related-party transaction procedures.
Risk signals: Directors, supervisors and senior management sold ~470,000 shares via block/matched trades at RMB 101.30–105.00 during 2026-06-30 (company explanation: personal income tax needs; the group collectively terminated the selling plan in early September); controlling shareholders Zhu Shuangquan/Zhu Shunquan together hold ~29%, with pledges equal to 7.24% of their holdings (2.10% of total share capital, all pledged to brokerages for personal financing)—low pledge ratio, and August–October saw net releases; margin-call risk is minimal. No other key personnel changes.
| Segment | Revenue (RMB 100M) | % of Core Revenue | YoY | One-line Business Logic |
|---|---|---|---|---|
| CMP polishing pads | 11.36 | ~39% | +42.93% | Core localization consumable, volume-driven with stable pricing and margins; in-house prepolymers cut costs |
| CMP slurries/cleaning solutions | 3.33 | ~11% | +64.08% | Second growth engine; in-house abrasive particle adoption >80%; breakthroughs in cerium oxide/TSV/large-wafer fine polishing |
| Semiconductor display materials (YPI/PSPI etc.) | 3.43 | ~12% | Under pressure (H1 -12.73%) | Key upstream OLED materials; utilization drag; first-mover on G8.6 line, share still rising |
| High-end wafer photoresists | 0.10 | <1% | Early ramp | KrF/ArF localization option; 300-tonne line ramping; 10 products with orders, not yet profitable |
| Lithium-battery functional auxiliaries (Haofei, consolidated from March) | 4.63 | ~16% | +60% | Leading lithium dispersant, tied to top battery makers; expanding at Xiantao |
| Printing consumables & others (incl. chips) | ~6.3 (back-calculated) | ~22% | Shrinking after terminal divestiture | Shrinking cash cow: retained toner and chips (price pressure), divested cartridge/ink terminal business |
Profit drivers: The semiconductor segment (pads + slurries + display + chip design; core revenue of RMB 1.953 billion, 67% of total) contributed ~80% of company gross profit at a 71.93% gross margin—the absolute profit and growth engine; Haofei (~41% gross margin) is an incremental second curve; printing consumables (H1 gross margin 29.46%) will continue shrinking in share. The gross-margin structure is highly divergent (~72% semiconductor vs. ~29% printing consumables, a gap of over 40 percentage points), rooted in the differing nature of the businesses: yield-sensitive qualified consumables for fabs command strong pricing power, while printing consumables are fully competitive generic consumer products. Segment disclosure calibers were changed multiple times in 2023–2025 (FY2024 once consolidated into a single line), so cross-period segment comparisons require caution.
Accounting red flags: ① Historical reliance on government subsidies—FY2023 subsidies recognized in profit were RMB 69.46 million, 31.3% of attributable profit (including RMB 86.05 million in cash directly boosting OCF from asset-related subsidies); by FY2025 this fell to 5.9%—improving trend (severity: medium, historical issue); ② Accumulated goodwill with exemption-based disclosure of subsidiaries' profits—gross goodwill of RMB 1.083 billion, RMB 546 million impaired, balance of RMB 738 million dependent on subsidiaries such as Haofei and Qijie; Dinghui/Rouxian/Haofei net profits disclosed under trade-secret exemptions, making external verification of impairment-testing assumptions difficult (medium); ③ Concentrated recognition of equity disposal gains—2026 deconsolidation of two consumables subsidiaries generated disposal gains (non-recurring RMB 60.54 million); the company proactively provided ex-item figures, transparency acceptable (low).
Cross-period consistency: ① Minority interest share of net profit fell systematically from 18.5% → 9.5% → 6.5% across 2024–2026 first three quarters, consistent with the company's stated goal of "acquiring minority stakes to boost attributable profit" (caliber consistent, but note that attributable growth includes this passive boost); ② Operating receivables rose RMB 201 million in FY2024 → fell RMB 338 million in FY2025, a large swing amplifying OCF growth; the company attributed both years to stronger collections (consistent); ③ The triple jump in overall gross margin includes a caliber switch (as noted above); company explanation aligns with disclosure; ④ FY2024 segment disclosure was consolidated, then re-split in FY2025 without explanation (weak cross-period comparability).
Overall judgment: No hard evidence of manipulative financial engineering; the main problem is reduced external verifiability due to "frequent caliber switches + exemption-based subsidiary disclosures." The quality of attributable-profit growth should be assessed under a triple caliber: "adjusted profit + excluding equity-method income + excluding consolidation effects" (first-three-quarters pure semiconductor organic growth is below the headline +64%).
Current market data (2026-10-30 close): Share price RMB 54.00, market cap RMB 51.56 billion; PE(TTM) 49.0x (9th percentile over 5 years—percentile is only a reference during a high-profit-growth period), adjusted TTM PE 52.9x, PB 8.78x (93rd percentile over 10 years), PS(TTM) ~13.3x; 2026E forward PE 46.5x, 2027E 35.8x, PEG ~1.18. Peer benchmarking (as of 2026-10-30/31):
| Company | Adjusted PE (TTM) | PB | Growth (2026 Q1–Q3 adjusted / revenue) | Notes |
|---|---|---|---|---|
| Dinglong | 52.9x | 8.78x | Adjusted ~+60% | Best semiconductor purity and gross margin (segment 71.9%) |
| Anji Technology | ~40.7x | 6.25x | Adjusted ~+35% | ~13% global slurry share; headline PE of 23.3x depressed by non-recurring gains |
| JX Nippon... Jiangfeng Electronics | ~86.2x (questionable; large non-recurring share) | 5.68x | Adjusted ~+48% | Targets + components; ~31% gross margin; earnings quality weaker than Dinglong's |
| Yoke Technology | ~37.8x | 4.33x | ~+5% (LNG drag) | Memory precursors; growth not directly comparable to Dinglong's |
Market-implied expectations: The current price of RMB 54.00 implies 2028E attributable profit of RMB 1.75–2.04 billion (simplified reverse DCF: 30–35x exit multiple, 9% discount over two years), corresponding to a 2026–2028 CAGR of 25.7%–35.8%. Two-way check: What supports it—consensus extrapolation to ~RMB 1.75–1.85 billion by 2028; the same-chain precedent of Anji achieving real revenue growth of +35–36% during its capacity ramp; the company's real pad/slurry run-rates (+43%/+64%); the certain portion of memory expansion (~550,000–600,000 pieces/month by end-2027). What doesn't—the photoresist narrative (only RMB 10.25 million of revenue in the first three quarters, <5% of profit contribution in 2027–2028) and the optimistic extrapolation that "memory boom won't slow through 2028." In one sentence: the current price requires the company to deliver 2028 earnings near the sell-side's most aggressive estimates, whereas consensus extrapolation lands right at the lower bound of the implied range.
Three-tier value (EPV): Asset value (floor) ~RMB 6.15/share (book BPS; net interest-bearing debt of -RMB 0.46/share; the replacement cost of the 2–3-year CMP pad qualification barrier and 40+ photoresist pipeline is significantly higher but unquantifiable); EPV at zero growth ~RMB 10/share (normalized FCFF ~RMB 1 billion: NOPAT ~1.1 billion + D&A ~250 million − maintenance CapEx ~240 million − working capital ~50 million, at a 10% discount rate—more conservative than the 9% used in the ramp DCF); the growth option accounts for ~81.5% of the current price—more than 80% of today's price is a bet on future growth delivery. EPV is a floor, not a conclusion; whether growth deserves payment is answered by the ramp scenarios (below).
Three scenarios & odds (12-month horizon):
| Scenario | Probability | Fair Range | Core Assumptions |
|---|---|---|---|
| Bear | 28% | RMB 31–38 | Memory capex peaks in 2027, expansion slammed to a halt, pad growth downshifts to +15%, 2027E attributable profit ~RMB 1.2 billion × 25–30x; anchored to 2023 downside elasticity (attributable -43%) |
| Base | 50% | RMB 45–49 | 2027E revenue ~RMB 4.97 billion (+26%) / attributable profit 1.416 billion → 2028E revenue 6.16 billion / attributable profit 1.787 billion × 30x exit ÷ 1.09²; exit multiple anchored at the lower end of comps' current adjusted PE of 37.8–40.7x, adjusted for growth decay and sector multiple compression |
| Bull | 22% | RMB 57–63 | Memory cycle extends to 2029 + foreign fab order conversion + photoresist reaching ~RMB 300 million and profitable by 2028; 2028E attributable profit 1.95–2.05 billion × 35x ÷ 1.09² |
At midpoints, the current price of RMB 54.00 sits ~-12% from the base-case midpoint (even the range's upper bound of RMB 49 is 9.3% below the current price), ~+11.1% from the bull midpoint, and ~-36.1% from the bear midpoint—odds are roughly 1:3 asymmetric. Probability-weighted fair value is ~RMB 46.4 (~-14.1% vs. current). The price sits precisely in the gap between the base-case upper bound (RMB 49) and the bull-case lower bound (RMB 57)—the market has priced past the base case but not fully into the bull scenario, consistent with the "base-case + bull-leaning" implied expectation reading. Exit-multiple sensitivity must be laid bare: on a 2028E base of RMB 1.787 billion, exit multiples of 25/30/35/40x imply ~RMB 39/47/55/63—the entire disagreement between this report and the sell side (targets RMB 58.3–86) is concentrated in this single parameter. The sell side's anchor of 50–55x on 2027E implies the sector maintaining historically high valuations, while A-share semiconductor materials exit multiples are in fact declining (Anji's TTM PE at a 1-year low percentile; Dinglong's own 1-year median PE of 68.6x → 49x now), and the H-share offering will introduce an even lower external anchor. Additional caveat: the per-share figures above exclude H-share dilution (8–15% new-share dilution, i.e., 7–13%; if dilution lands, the 2028E earnings implied by the current price rise to ~RMB 1.9–2.2 billion, only strengthening the "fully priced" conclusion).
Conclusion: Overvalued (mildly, not a bubble). Assess quality (share, gross margin, cash, delivery record) separately from price (~14% above base-case fair value, no margin of safety, growth option at 80% of price)—a good company at an unattractive price. Target range RMB 45–49 (= base-case fair value); await two reassessment triggers: the share price falling below RMB 45, or memory expansion/photoresist data strengthening that lifts base-case fair value above the current price.
Industry space: The company actually competes in the innovation materials platform of "semiconductor CMP process materials + front-end wet chemicals/photoresists + semiconductor display materials + advanced packaging materials." China market figures (per the company's Hong Kong prospectus citing Frost & Sullivan): China's CMP polishing pad market was approximately RMB 2.3 billion in 2024; China's CMP slurry market was approximately RMB 2.96 billion in 2023 (Huaon Industry Research Institute); domestic self-sufficiency rate in core OLED materials was approximately 32% (2025, CCID basis, cited in the company's annual report). Global basis: CMP slurries + pads combined were approximately USD 3.38 billion in 2025, with a 5-9 year CAGR of 4.5%-7.3% (Market Growth Reports, as relayed by Sinolink Securities' 2026-03 industry deep-dive; aggregated data pending verification); per Xinhua Finance, global CMP materials were approximately RMB 35.6 billion in 2025, projected to reach RMB 64 billion by 2030 (CAGR of approximately 12.5%). The most notable structural increment: industry estimates suggest advanced packaging will contribute an additional 15-20% of CMP demand by 2028 (as relayed by Sinolink); China's high-end wafer photoresist market is expected to exceed RMB 10 billion by 2029 (Frost & Sullivan, cited in company announcements), with extremely low domestic substitution rates. Growth is clearly tiered: global volumes grow at low single digits, while the China domestic-substitution segment compounds at 25-40% (Dinglong's pad revenue rose from RMB 357 million in the first three quarters of 2022 to RMB 1.136 billion in the first three quarters of 2026); the company's growth comes from "structure," not "total volume."
Supply chain and value distribution: Upstream comprises specialty polymers and functional fillers—polyurethane prepolymers (self-produced by Dinglong, with 4,000 tons/year under construction), nano-abrasives SiO2/CeO2/Al2O3 (abrasive procurement accounts for approximately 54.6% of total slurry cost, per Anji's disclosures; Dinglong self-produces 10,000 tons/year of abrasive particles with an in-house adoption rate exceeding 80%; Anji's self-developed cerium oxide is already in mass production), and spherical silica powder (Yake Huafei, etc.). Midstream is consumables manufacturing and formulation. Downstream consists of wafer fabs (SMIC, Hua Hong, YMTC, CXMT, and foreign-owned fabs in China), advanced packaging plants, and panel makers (G8.6 AMOLED). Value accrues mainly to consumables and upstream self-produced raw materials: Dinglong's semiconductor segment gross margin is 71.93% and Anji's slurry gross margin is 58.28%, significantly higher than downstream foundry gross margins; consumables represent a low share of wafer manufacturing costs (about 7% is the overall semiconductor materials basis) but are yield-sensitive, and switching costs after qualification are extremely high, creating a pricing dynamic of "small cost, big responsibility"—Dinglong has strong bargaining power over upstream suppliers (key raw materials are self-produced) and moderate-to-strong leverage over downstream (growth driven by share gains and product category expansion rather than pure price increases; per the company, pad "unit prices and margins are stable").
Supply-demand and competitive landscape: Highly concentrated globally—in CMP pads, DuPont holds 75%+ and the top four (DuPont/CMC-Entegris/Thomas West/Fujibo) hold about 90% (AB Polishing/ebong semiconductor basis, relayed from Sinolink 2026-03); the top six slurry players hold about 85% (2024, Entegris/CMC, Fujimi, Resonac, etc.). Effective domestic supply is concentrated and differentiated: Dinglong (strong in pads, catching up in slurries; pad share in China 38.5%/2025 revenue, Frost & Sullivan) vs. Anji (strong in slurries with about 13% global share, no pads)—limited direct conflict. New entrants include Hongdao New Materials (Torch New Materials) (CMP pads with formal orders from 8/12-inch customers, H1 sales exceeding RMB 20 million, September H-share net proceeds of HKD 2.9 billion to scale up, plus a joint venture with BOE to enter display materials—directly overlapping with Dinglong's display main business) and Shanghai Sinyang (slurries). Entry barriers are extremely high: ① customer qualification takes years (longer for advanced nodes), and yield risk makes fabs reluctant to switch suppliers; ② formulation know-how (over 300 active slurry formulations globally); ③ self-production of key raw materials creates a dual barrier of cost + purity; ④ cleanroom manufacturing and capital intensity (Dinglong's R&D ratio 15%+); ⑤ process-equipment-material binding. Substitution threat: CMP is currently the only mass-produced global nanoscale planarization process; hybrid bonding and other new processes actually increase CMP dependence—increment, not substitution. The real structural risk is "volume growth with price declines" triggered by overseas incumbents (DuPont/Fujibo with fully depreciated capacity) cutting prices defensively in China, combined with multi-front pressure from Hongdao and Anji.
Cycles and regulation: The semiconductor industry is in an AI-driven upcycle—SEMI forecasts global 300mm equipment spending to grow +18% to USD 133.0 billion in 2026 and +14% to USD 151.0 billion in 2027, with mainland China the largest 300mm equipment spending region for consecutive years; TrendForce expects DRAM capex of USD 61.3 billion in 2026 (+14%), with NAND supply tight throughout the year. The CMP consumables subsegment is in the growth stage of its lifecycle (dual engines: domestic substitution + category expansion). On regulation, structural tailwinds favor domestic consumables leaders: the Big Fund Phase III (established May 2024, registered capital RMB 344 billion) explicitly tilts toward upstream equipment and materials; the U.S. BIS's December 2024 new rules restrict exports to China of 24 categories of semiconductor equipment and HBM but do not directly cover CMP consumables; the supply-chain security logic is prompting domestic fabs to systematically accelerate the adoption of local materials (safety stock + dual sourcing → domestic first). The risk: if controls spill over to materials lists, or domestic fabs slow expansion due to equipment restrictions, total consumables demand will be suppressed; the reverse scenario is that after U.S.-China détente, major overseas suppliers resume shipments and cut prices, diluting the "security premium" of domestic substitution.
Quantified demand inflection chain (this report determines the company has hit a structural demand inflection): Drivers—AI compute hardware has entered the era of advanced packaging heterogeneous integration: TSMC's CoWoS capacity doubled in 2024 and 2025 respectively, with a 2022-2027 CAGR exceeding 80% (company earnings call basis); market estimates put it at 120,000-140,000 wafers/month by end-2026; HBM4 12-layer enters mass production in 2H2025 → 16-layer ramp in 2026; global DRAM capex rises from USD 53.7 billion in 2025 to USD 61.3 billion in 2026, focused on HBM4/hybrid bonding/TSV. Unit consumption—CMP steps per wafer in logic processes rise from about 12 at 28nm to over 28 at 2nm GAA (industry estimates; low reliability but direction certain); hybrid bonding requires copper pad recess of 2-5nm and surface roughness <0.3nm, creating new demand for high-precision soft pads + ultra-high-purity fine polishing slurries. Penetration ramp—advanced packaging CMP demand release is concentrated in 2026-2028. The company's share capture—Dinglong's pads rank first in domestic China market share (38.5%), already positioned in advanced packaging: entry into 2.5D/3D packaging lines, volume orders from core panel-level packaging customers, dedicated soft pad layout for glass substrates (TGV), TSV slurries validated by a leading customer, cerium oxide slurries introduced into a memory leader's mass-production lines; but the company's specific share of advanced packaging increments is not separately disclosed, and the last link in the chain is a qualitative inference—this is why the "advanced packaging contribution" in the base/bull scenarios must be discounted.
Company's industry positioning: Global challenger (still a small share relative to DuPont's 75%+), domestic leader (first in domestic pads, third-largest CMP materials player in China). Share figures must be presented side by side: Frost & Sullivan's "38.5% (2025 revenue, China market basis with back-calculation support)" versus the Hubei Provincial Department of Economy and Information Technology's "nearly 80% localization rate (domestic supply basis)" have different denominators—the latter includes all domestic players such as Hongdao and Dalian Luming; third-party m8 estimates even diverge to a 10-15% localization rate—the coexistence of three figures shows this data lacks authoritative arbitration; tracking should rely on first-hand operating data such as company revenue growth and monthly shipments. Share trend: rising (monthly sales exceeding 50,000 pads, third round of qualification at foreign fabs progressing, G8.6 display materials first-source supply).
A generic financial framework easily misses the three decisive factors of this business: ① The qualification cycle is a time barrier—wafer fab material validation takes years (leading foreign customers have advanced to a third round of qualification; Korean panel customers through multiple rounds); qualification progress, not capacity, determines the revenue inflection; once in, yield sensitivity + switching costs make share "easy to defend, hard to attack"—this is the structural reason the 71.9% segment gross margin can be sustained. ② Consumables volume lags equipment tenders by 2-3 quarters—company revenue is a function of memory/logic fabs "starting production," not "tendering"; the 2026 +18% equipment spending boost to company revenue is concentrated in 2027-2028 (the company itself suggests observing over a 3-5 year horizon), so quarter-to-quarter growth is volatile and single-quarter readings cannot be linearly extrapolated. ③ The three-tier domestic substitution gradient determines valuation elasticity ranking—pads (domestically dominant; substitution dividend in the late stage of share consolidation) < slurries (catch-up phase, +64%) < high-end photoresists (extremely low localization rate, strongest optionality)—this is precisely why the market assigns the highest valuation elasticity to the photoresist narrative, and why this report cautions that "photoresist revenue is currently only in the tens of millions RMB, contributing <5% of profit in 2027-2028": the option is real, but the current price has already priced in a considerable portion. High-frequency tracking indicators: monthly pad shipments (milestone ramp: 2→3→4→5 → 10,000 units), soft pad line utilization (near 80%), photoresist order announcement cadence (voluntary disclosure every 2-4 weeks from June), ramp of the Qianjiang third line and Xiantao lines, qualification rounds at foreign fabs.
Overall verdict: Neutral (Wait and See), confidence 0.50, time horizon 12 months. Dinglong Co., Ltd. is a scarce A-share semiconductor materials platform with "verified volume ramp-up": share, gross margin, cash flow, and management track record—the four quality evidences are all present—and the medium-term demand chain (memory capacity expansion + advanced packaging unit consumption) is quantifiable and trackable. But the current price of RMB 54.00 (2026-10-30 close) already treats the base case as a floor—implied 2028E net profit of RMB 1.75-2.04 billion approaches the most aggressive sell-side forecasts; growth options account for about 81.5% of the current price; base fair value of RMB 45-49 and probability-weighted value of approximately RMB 46.4 are both below the current price, with 1:3 asymmetric odds; combined with the triple constraints of slowing pad growth, H-share dilution and its pricing anchor, and declining sector exit multiples within 12 months, the risk-reward at the current level is unfavorable.
Strategy: Existing holders may continue to hold (quality and growth trend unimpaired; logic reassessment triggered only below the RMB 38 bear-case floor); incremental capital is advised to wait, with two re-evaluation triggers—① a share price pullback below RMB 45 (lower edge of base fair value range) for staged evaluation; ② strengthening of memory fab tenders/company monthly shipment data and photoresist revenue, moving 2027E-2028E base earnings and fair value range above the current price. Upside alert line at RMB 62 (near the upper edge of the bull range): if the share price recovers to this level without earnings upgrades, valuation re-enters the fully valued zone.
Risks and tracking (key checkpoints for the next 6-12 months): Announcement of the Qianjiang soft pad third line commissioning around December 2026; annual results forecast in January 2027 (versus consensus RMB 1.108 billion, implying Q4 of approximately RMB 256 million); 2026 annual report in late March 2027 (revenue by product, whether photoresist reaches the RMB 30-50 million scale, goodwill impairment testing, Haofei performance commitments); H-share filing/hearing/pricing checkpoints (application documents expiring around January 2027 and requiring updates); memory fab expansion and tender cadence, DRAM/NAND contract price MoM changes (if increases are <10% for two consecutive quarters and tenders slow, base case to be revised down); buyback execution and insider behavior (the fifth buyback expires around early November 2026). Main downside risks: memory cycle peaking in 2027, H-share issuance at a deep discount, intensifying competition from Hongdao/Anji/overseas incumbents, Haofei goodwill impairment.
This report's price and valuation basis: 2026-10-30 close of RMB 54.00 (frozen anchor); market cap RMB 51.56 billion (total shares 954.8 million); earnings forecasts and scenarios are built by this report, with points of divergence disclosed in the text. Report date: 2026-11-01.