Annual revenue exceeding 3 billion, is Cathay Biotech Inc. (688065.SH) truly a scarce target?

Since 2026, with the increasing popularity of special reports focusing on future industries, including biomanufacturing, as outlined in the 15th Five-Year Plan, the bio-manufacturing industry has gradually entered the sight of market investors from the perspective of professional investment institutions. However, the process from the laboratory to industrialization is facing many difficult points leading to a high failure rate, including but not limited to issues such as industry chain autonomy, construction period of production lines, industrialization debugging at the application layer, and the need for a large amount of capital and resources for capacity and promotion. With the end of the April 2026 annual report disclosure season, among the 134 listed companies in the biotechnology field, Cathay Biotech Inc. (688065.SH) became the first company to verify the industrialization platform model within three years based on criteria such as positive growth in revenue scale, net profit growth, and gross profit margin growth. This marks a significant breakthrough in the process of the rise of synthetic biology concepts to the positioning of bio-manufacturing as a future national pillar industry. Being in the field of biotechnology, Cathay Biotech Inc. has achieved a rare combination of high barriers to entry and high certainty. According to the Wind data, Cathay Biotech Inc. achieved operating revenues of 21.14 billion, 29.58 billion, and 32.95 billion in 2023, 2024, and 2025, respectively. Net profits attributable to shareholders were 3.67 billion, 4.89 billion, and 5.61 billion, respectively. The non-recurring net profits attributable to shareholders were 3.07 billion, 4.65 billion, and 5.21 billion, respectively. Sales gross margins were 28.79%, 31.25%, and 34.22%, respectively. Total assets were 188.33 billion, 190.21 billion, and 238.82 billion, respectively. As a typical heavy asset industry, Cathay Biotech Inc. has achieved improvement in net profit and gross profit margins while expanding total assets, which is uncommon among enterprises in the asset expansion stage. Specifically, behind the breakthrough in revenue exceeding 30 billion in 2025, Cathay Biotech Inc. achieved simultaneous growth in profitability, gross profit margin, and total assets for three consecutive years. This rare combination of high barriers to entry in the bio-manufacturing sector and high certainty reflects the company's technological barriers, economies of scale, cost control, and continuous iterative capabilities. As of the 2025 annual report data, among the 134 companies in the biotechnology sector, after filtering by industry classifications, there were 3 companies left, including Anhui Huaheng Biotechnology Co., Ltd., Cathay Biotech Inc., and Guilin Layn Natural Ingredients Corp. The total assets of all three companies were in a growth phase, with only Cathay Biotech Inc. exceeding a revenue scale of 30 billion, and only Cathay Biotech Inc. achieving a steady increase in gross profit margins for three consecutive years. In 2026, according to the Q1 data disclosed by the company, the first quarter achieved operating revenue of 875 million, a year-on-year increase of 12.73%, and a net profit attributable to shareholders of 166 million, a year-on-year increase of 21.01%. The three major competitive barriers behind the continuous improvement in multiple indicators over three years From 2023 to 2025, Cathay Biotech Inc. achieved three consecutive years of simultaneous growth in revenue, net profit, and gross profit margins during the capacity expansion stage. Unlike most companies that capitalize on cyclical dividends, Cathay Biotech relies on three major competitive barriers that have been verified layer by layer and are irreplicable. Firstly, there are barriers in the self-reliance and timing of the entire chain. As mentioned earlier, the common pain points in synthetic biology such as "feasibility in the lab, failure in mass production, low fermentation efficiency, cost overrun" have led to the fact that the vast majority of businesses only stay at the research and development of strains, lacking industrial amplification capabilities. Cathay Biotech Inc. has its own technology barriers for the entire chain of synthetic biology and was the first synthetic biology stock on the Sci-Tech Innovation Board in the same year. With over 700 global patents and the unique ability to achieve large-scale production of long-chain diacids and bio-based decamethylene diamine, the market has validated the availability and bargaining power of the products. In terms of timing barriers, Cathay Biotech has a clear advantage in technology and industrialization. While most domestic companies did not start focusing on synthetic biology until after 2020, Cathay Biotech has been deeply involved for over twenty years, pioneering the complete industry chain covering strains, fermentation, purification, polymerization, downstream applications, seizing the golden window period of the industry before the policy outbreak, and has secured its position with technology. Secondly, existing capacities and industrial applications serve as long-term barriers. The global and domestic market share of Cathay Biotech Inc.'s long-chain diacids determines its bargaining power. This top-tier position ensures the stability of the company's revenue base, protecting it from industry price wars, and at the same time, providing cash flow support for the upscale of the bio-based polyamide market. Additionally, after over a decade of iteration, Cathay Biotech Inc.'s fermentation process has achieved stable amplifications of thousands, tens of thousands, and hundreds of thousands of tons, with continuous optimization of yield and fermentation efficiency driving costs down and gross margins up. The most challenging point of industrial debugging, as the industrialization process from the laboratory to pilot testing and then to industrialization is not simply about scaling up and replicating, throwing money at the problem alone cannot break through. This is why Cathay Biotech's accumulation of industrial applications and ecological lockdowns in fields such as new energy, transportation logistics, and textile consumption sectors serve as long-term barriers that cannot be easily overcome by capital and resources. Thirdly, binding with top customers and ecological positioning is the major opportunity for future growth. As is well known, the customer certification cycle for chemical new materials can last 3-5 years, and once certified, the stickiness is very strong. The continued growth in revenue by Cathay Biotech to some extent demonstrates continuous breakthroughs with downstream customers. Looking at the systematic planning paths in various fields, in the field of new energy, a subsidiary was established in collaboration with Contemporary Amperex Technology focusing on research and sales of battery casings and energy storage boxes. In the field of transportation and logistics, the world's first bio-based composite material refrigerated container was delivered in cooperation with China Ocean Shipping Company, and the Robovan unmanned logistics vehicle in cooperation with Changan Auto debuted at the Beijing Auto Show in April 2026, reducing the weight of the cargo container with bio-based nylon composite sheets by 50% and increasing tensile strength 2-3 times that of metal; in the consumer textile field, partnerships with Sumec Corporation, Hla Group Corp., and Yingshi, among other well-known enterprises, are blossoming. Additionally, innovative applications in various fields such as construction materials and automotive lightweighting are continuously expanding the boundaries of applications. By precise positioning with top customers in each field, once the market volume picks up, the company's sales growth is expected to become "exponential." The investment direction of state-owned funds provides guidance for the future In July 2025, the Secretary of the Party Committee and Director of the State-owned Assets Supervision and Administration Commission of the State Council, Zhang Yuzhuo, visited Cathay Biotech Inc. and other companies during his visit to Shanghai to study the layout and development of central enterprises in strategic emerging industries. He emphasized the need to steadfastly focus on "new" initiatives, continuously improve technological innovation capabilities, apply technological innovation achievements to specific industries and industrial chains, transform and enhance traditional industries, nurture and strengthen emerging industries, strengthen collaborative research with enterprises of various ownership on the industrial chain, and create a batch of market-oriented and competitive products and services. Less than a year after this in-depth enterprise research, in April 2026, the State-owned Assets Supervision and Administration Commission announced 30 key topics for 2026, covering six major areas including state-owned assets supervision, technological innovation, and energy security, clarifying policy and financial directions for the next 1-2 years. All technological topics explicitly require integration with specific application scenarios, such as the topic of bio-manufacturing, which directly focuses on the "key bottlenecks and implementation paths for industrialized development." At the Beijing Centergate Technologies forum in March 2026, Li Zhen, Deputy Director of the State-owned Assets Supervision and Administration Commission of the State Council, representing central enterprises, directly pointed to the application amplification stage. The original statement regarding joint promotion of technology application is as follows: "Smooth the implementation path for deep integration of technological innovation and industrial innovation. State-owned enterprises are willing to actively connect with global innovative forces, proactively match conversion demands, jointly build conversion platforms, accelerate the improvement of conversion mechanisms, better leverage market scale and application scenario advantages, speed up technological applications and iterative upgrades, allow more bio-technological achievements to move from the laboratory to the production line, convert into real productivity in the bio-industry, create incremental markets for the global economy, and provide opportunities for development." From the above guidance, it can be seen that Cathay Biotech Inc. holds a key position in the sectors where the country is actively supporting. On the Wind platform, public fund holdings can be observed, and by the end of 2025, Cathay Biotech Inc.'s funds, excluding passive funds, included investments from China Investment Corporation, Penghua Fund, Southern Fund, Guojin Fund, among others. Industry insiders point out that at the juncture of 2026, the vulnerabilities in the energy and materials supply chains exposed by the Middle East crisis have prompted China to accelerate the process of achieving independent and controllable supply chains. Companies in the bio-manufacturing sector, represented by Cathay Biotech Inc., with their bio-manufacturing technology and industrialization capabilities, have become the core carriers of the country's material security strategy. Especially the "substituting plastic for steel, substituting plastic for aluminum" promoted by bio-based materials not only reduces the dependency on oil, gas, and ore imports and resolves resource bottlenecks but also converts China's biomass resource advantage into industrial advantages, laying a solid foundation for the security of the industry chain and green development, possibly becoming a key branch in establishing the country's advantageous resources.