Orient: Optimistic about the development opportunities of high-speed resin materials for copper-clad laminates. Recommended to pay attention to Sichuan Em Technology (601208.SH) and Jinan Shengquan Group Share Holding (605589.SH).

Orient issued a research report stating that several domestic companies with leading resin synthesis technologies have entered the high-end electronic resin field. Some of their products have already achieved large-scale sales to leading copper clad laminate manufacturers domestically and internationally, and have entered the industrial chain of mainstream end users. In the future, they are expected to contribute substantial profits along with the increase in demand for end servers. The report recommends focusing on Sichuan Em Technology (601208.SH), which started with insulating materials and expanded into electronic resin business, and Jinan Shengquan Group Share Holding (605589.SH), a domestic leader in phenolic resin synthesis technology. Key points from Orient: The explosive demand for AI servers brings opportunities for localization of high-speed resin materials in China. The development of AI large models relies on high-performance hardware support, leading to the demand for high-performance new materials. As AI servers require higher signal transmission rates, the materials used for their copper clad laminates need to meet higher electrical performance requirements. Ordinary epoxy resins are no longer suitable as insulating substrates, and lower dielectric resin materials such as PPO and hydrocarbon resins are selected by downstream and mainstream end manufacturers for high-speed copper clad laminate substrates. Although China started late in this type of resin materials field, American and Japanese companies have monopolized the upstream resin materials end due to their early layout in the downstream PCB industry and industrial transfer, the report believes that with the explosive demand for AI, leading companies that have laid out relevant resin synthesis technologies have the opportunity to surpass their competitors. For the localization of new materials, both technological capabilities and market opportunities are essential, especially in the field of electronic materials where downstream manufacturers and upstream material suppliers are deeply integrated. The explosive demand for AI provides domestic resin manufacturers with the opportunity to enter and expand quickly. The development of AI servers not only leads to the upgrading or changing of the copper clad laminate technology routes, resulting in an increase in market share for Taiwanese and mainland high-speed copper clad laminate manufacturers, but also rapid demand growth may lead to technology and supply overflow in the entire industry chain, providing domestic resin material suppliers with the opportunity to enter and expand, and potentially achieve large-scale production with their own R&D accumulation and high-quality customer resources. High-speed resin demand space is significant. The incremental demand for high-speed resin mainly comes from GPU modules of AI servers and PCB boards used in switches and optical modules, as well as high-speed CPU motherboards upgraded from ordinary servers. With the continuous increase in transmission rates, not only the unit value of resin increases, but the structural requirements of multilayer boards also increase the resin usage per server. From the calculation of demand space, the future demand for high-speed copper clad laminate resin will be at least in the kiloton level. Assuming a selling price of 500,000 RMB per ton, the market size is estimated to be around 3 billion RMB in 2026. The actual unit value of high-grade resin may be higher, and the resin market is expected to continue to expand with the increase in demand and upgrade of AI servers. Domestic leading companies with resin synthesis technologies have gradually entered the market and are increasing production. Domestic leading resin companies represented by Sichuan Em Technology and Jinan Shengquan Group Share Holding have already laid out in the field of high-speed resin and have gradually entered the industrial chain of mainstream downstream manufacturers. Sichuan Em Technology, starting with insulating materials, has early mastery of some insulation resin synthesis technologies. In terms of high-speed resin, active esters and hydroxymethyl resins have formed kiloton-scale production capacity and have achieved large-scale sales of multiple high-speed resin products. They have also planned a project to produce 20,000 tons of electronic materials for high-speed communication boards to further improve their industrial layout in the electronic materials sector. Jinan Shengquan Group Share Holding is domestically leading in phenolic resin synthesis technology, extending into the business of electronic chemicals, laying out multiple high-speed resin materials. Commercially produced high-speed M8 grade materials include super hydrocarbon resins and modified polyphenylene ethers, with a maximum production capacity of 1,500-1,800 tons, and plans for projects involving kiloton-scale PPO/OPE resins, hydrocarbon resins, and BMI resins. Based on the triple conditions of technology, customers, and market, the report is optimistic about the growth opportunities of domestic leading resin companies in the field of high-speed copper clad laminate materials. Risk warnings: Unexpected lower growth in downstream demand and technological iteration; unexpected project commissioning; slower than expected progress in high-speed resin technology research and development; risks in downstream and end technology iteration; risks in core customer certification and supply; changes in assumptions affecting calculation results.