Guoci Materials: Core Business Sees Volume and Price Growth, AI and Automotive-Grade New Products to Ramp Up Soon

Overview

This research report summarizes the Non-Deal Roadshow (NDR) held by Goldman Sachs following Guoci Materials' Q2 2026 earnings release. Management confirmed that core businesses remain strong, with continued growth in MLCC powder shipments, increased market share in new energy materials, accelerated recovery in biomedical materials, and a forming trend of industry price recovery. The company is also optimistic about the ramp-up of high-value-added new products such as AI server and automotive-grade MLCC powders, and spherical silica micro-powders, but acknowledges that the commercialization timeline for solid-state electrolytes and AI data center ceramic substrates still depends on customer verification progress. Based on the judgment that long-term growth potential has been fairly reflected in current valuations, Goldman Sachs maintains a neutral rating on Guoci Materials with a 12-month target price of RMB 33.0.

Core views

In terms of core businesses, MLCC powder shipments reached 3,600 tons in the first half of the year, up 21% year-on-year, with capacity utilization approaching full production. The annual shipment target remains unchanged at 8,500-9,000 tons. Although ASP declined by more than 10% both year-on-year and quarter-on-quarter in H1 due to discounts on older products, management pointed out that major industry players have begun raising prices, and the company will follow market adjustments, leading to an improving pricing environment. Electronic pastes benefited from accelerated domestic substitution, with H1 revenue breaking through RMB 100 million for the first time, up 20% YoY. The new energy materials segment saw revenue grow by 50% YoY, with expanded market shares in high-purity alumina and Boehmite driving significant gross margin improvement. Biomedical material sales grew by 25% YoY, with dental zirconia powder sales increasing by 10%, and price increases of 10%-40% implemented in late July to hedge against rising raw material costs; subsidiary Upcera sales grew by 15%, with high-end zirconia blocks launched in overseas markets. Although this segment faced downward pressure on gross margins in H1, price increases and product upgrades are expected to drive margin recovery. Additionally, the company completed the privatization acquisition of Australian-listed dental material company SDI Limited in July, which is expected to enrich its clinical product pipeline and enhance international sales channels. In terms of new product expansion, AI server and automotive-grade MLCC powders are seen as key growth engines. Currently, Phase I capacity of over 2,000 tons has been built, and verification with key domestic and international customers is complete. Mass production is expected to begin in H2 2026, with an annual shipment target in the millions of tons (constrained by capacity limits to no more than 1,000 tons). Compared to traditional consumer-grade powders priced at approx. RMB 60,000/ton with gross margins above 35%, automotive-grade powders are priced at approx. RMB 100,000/ton, and AI server-grade powders at RMB 100,000-200,000+/ton, with both achieving gross margins of approx. 45%. The structural upgrade brings significant profit elasticity. Regarding spherical silica micro-powders, M8-M9 grade products are priced at RMB 200,000-300,000/ton with a gross margin of approx. 45%; management estimates the annual addressable market size to be approx. RMB 10 billion. Multiple customers are expected to complete verification in Q4 and achieve initial sales within the year, with a 2,000-ton expansion plan starting in early 2027, and capacity utilization有望 exceeding 50% next year. In contrast, sulfide solid-state electrolytes had only small-batch shipments this year, and large-scale mass production still requires time to reduce costs; customer verification for AI data center ceramic substrates is unlikely to be completed within this year, pushing visibility to next year. Although the potential market space is huge, the timeline is highly uncertain. Regarding external policy impacts, management believes that rare earth export controls create a window for Guoci Materials to compete for market share. Japanese competitors face supply uncertainties in dental materials and MLCC fields, with some peers experiencing supply disruptions. Since rare earth additives account for a very low proportion in Guoci Materials' MLCC formulation powders and cannot be extracted after sintering, exports are not restricted by current controls. Although Japanese enterprises hold strategic inventory and overseas customers are actively stocking up, the company is using this opportunity to accelerate the introduction of high-end customers. In other business segments, catalytic materials saw moderate growth in H1, mainly dragged down by weak domestic automotive market demand; precision ceramics was the only segment with declining revenue, due to intensified competition in ceramic balls and slower-than-expected ramp-up in demand for satellite ceramic packaging; architectural ceramics revenue grew by 17%, but rising raw material costs made it the segment under the greatest gross margin pressure, with overseas market expansion listed as the top priority for this business.

Analysis framework

Goldman Sachs conducted analysis around three main threads: "Core Business Fundamentals + New Product Commercialization Pace + External Policy Catalysts." First, it assessed the prosperity and profitability repair capability of existing businesses through shipment volumes, ASP changes, and gross margin trends across various business segments; second, it梳理ed capacity construction, customer verification nodes, pricing and profit levels, and addressable market sizes for each new product separately to distinguish which new products can contribute to performance in the short term and which still require longer cultivation periods; finally, combining the supply-side disturbance factor of rare earth export controls, it judged the company's ability to gain market share during the window of overseas competitor supply disruptions. For valuation, a forward P/E discount method was used, anchoring on expected profits in 2030 and referencing the mid-to-long-term valuation centers of global comparable companies to determine the target price, reflecting a pricing approach for the company's ten-year structural growth potential.

Methodology notes

• Valuation MethodPE/PEG valuation

  Forward P/E Discount Valuation Method

  The research report uses expected net profit in 2030 as the benchmark, applying a 25x P/E multiple, and then discounts it back to mid-2027 at a 10% cost of equity as the 12-month target price. This method is suitable for companies where current profits are still in the investment phase but the long-term growth path is clear. It anchors intrinsic value through distant steady-state profits, avoiding interference from short-term profit fluctuations on valuation.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Separate Analysis of Shipments and ASP

  The research report tracks shipment volume growth rates and ASP change directions separately for businesses such as MLCC powders, thereby distinguishing whether growth comes from demand expansion or price cycles. When volume increases but prices fall, it indicates expanding market share but weak pricing power; when industry leaders start raising prices and the company follows suit, it means a price inflection point is approaching, helping to predict the rhythm of margin recovery.

• Competition and Strategy FrameworkMoat / competitive advantage

  Share Acquisition During Supply Disruption Windows

  When competitors face supply disruptions due to geopolitical policies or supply chain issues, enterprises with independent supply capabilities can obtain scarce opportunities to introduce high-end customers. The research report focuses on the window where Japanese competitor supplies are limited under rare earth controls, assessing whether Guoci Materials can leverage this to accelerate customer verification and share enhancement. This is a typical analytical perspective for event-driven competitive advantages.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Guoci Materials (300285.SS)

  Research coverage target, core MLCC powder business growing steadily, AI and automotive-grade new products opening a second growth curve, rare earth controls creating a window for share enhancement

  Strengths

  MLCC powder capacity full load and high shipment growth; AI/automotive-grade new products have gross margins significantly higher than traditional products; completed SDI acquisition to strengthen global dental layout; exports unrestricted under rare earth controls,具备 conditions to grab share

  Weaknesses

  Long verification cycles and uncertain commercialization timelines for solid-state electrolytes and AI data center substrates; revenue decline in precision ceramics segment; architectural ceramics facing the greatest gross margin pressure

  Risks

  Ceramic powder market share expansion speed lower or higher than expected; new business expansion progress deviating from expectations; terminal market demand growth lower or higher than expected

Key data

• MLCC Powder H1 Shipments3,600 tonsUp 21% YoY, capacity near full load; annual target remains 8,500-9,000 tons
• MLCC Powder ASP ChangeDown >10% YoYAffected by discounts on older products; industry leaders have initiated price hikes, company will follow adjustments subsequently
• Electronic Paste H1 RevenueOver RMB 100 millionUp 20% YoY, first half-year break of 100 million, driven by accelerated domestic substitution
• New Energy Materials Segment Revenue Growth+50% YoYExpanded shares in high-purity alumina and Boehmite, gross margin significantly improved due to increased capacity utilization
• AI/Automotive-Grade MLCC Powder Gross MarginApprox. 45%Significantly higher than the 35%+ of traditional consumer-grade products; automotive-grade priced ~RMB 100,000/ton, AI-grade RMB 100,000-200,000+/ton
• Spherical Silica Micro-Powder M8-M9 Grade PricingRMB 200,000-300,000/tonGross margin approx. 45%, corresponding to an annual addressable market of approx. RMB 10 billion
• Dental Zirconia Powder Price Increase Magnitude10%-40%Implemented in late July, used to hedge against rising raw material costs
• 12-Month Target PriceRMB 33.0Based on 25x 2030E P/E, discounted to mid-2027 at 10% COE

Impact & implications

The research report believes that Guoci Materials' core businesses have entered a repair channel of volume-price resonance, with price increase signals from MLCC powders and biomedical materials indicating a high certainty of margin improvement in H2. The ramp-up of high-value-added new products such as AI server and automotive-grade MLCC powders, and spherical silica micro-powders will gradually optimize the product structure starting from H2 2026, driving overall profitability to migrate to higher levels. The supply gap brought by rare earth export controls provides the company with a strategic opportunity to accelerate penetration into overseas high-end customers. If successfully seized, it is expected to further consolidate global market share in the mid-to-long term. However, the commercialization pace of frontier projects such as solid-state electrolytes and AI data center ceramic substrates still carries significant uncertainty, meaning that the realization stage of some long-term growth narratives may be later than market expectations. Current valuations have basically reflected the company's long-term structural growth potential, so short-term stock price upside will depend more on the actual speed of new product ramp-up and the degree of margin realization.

Risks

• Ceramic powder market share expansion speed slower or faster than expected
• New business expansion progress below or exceeding expectations
• Terminal market demand growth lower or higher than expected

What to watch

• Actual shipments and customer verification progress of AI server and automotive-grade MLCC powders in H2 2026
• Q4 customer verification results for spherical silica micro-powders and implementation of expansion plans in early 2027
• Effectiveness of MLCC powder industry price transmission and company's ASP quarter-on-quarter changes
• Sales feedback and gross margin recovery magnitude after dental zirconia price increases
• Scale of small-batch shipments and cost reduction rhythm for sulfide solid-state electrolytes
• Whether AI data center ceramic substrate customer verification can make substantial progress in 2027
• Actual conversion of overseas high-end customer introductions under rare earth controls