Interpretation of IPOs | Tongcheng New Materials Sprint to Hong Kong Stock IPO: Opportunities and Concerns During the Domestic Replacement Window

The global new materials industry is at the intersection of technological iteration and supply chain restructuring. On the one hand, the explosion in demand for artificial intelligence computing power is driving semiconductor manufacturing to continue to expand, and demand for key electronic materials such as photoresists and CMP polishing pads is soaring; on the other hand, the increase in the penetration rate of new energy vehicles is forcing tire performance upgrades, and the formulation value of high-performance rubber additives is becoming more and more prominent.

On these two seemingly parallel tracks, Tongcheng New Materials Group Co., Ltd. (“Tongcheng New Materials”) came to the front of the stage with a rare “two-wheel drive” attitude — according to Frost & Sullivan's report, the company ranked first in sales in the global and Chinese tire phenolic resin rubber additives markets in fiscal year 2025, with market shares of 41.4% and 45.9%, respectively; at the same time, it ranked first among local suppliers in the sales value of the semiconductor photoresist and TFT array photoresist markets in China, with market shares of 5.8% and 26.2%, respectively.

The Zhitong Finance App noticed that Tongcheng New Materials recently passed a hearing on the Hong Kong Stock Exchange and plans to be listed on the main board of the Hong Kong Stock Exchange in an attempt to further strengthen its global position in the field of electronic materials and special rubber additives through the “A+H” dual capital platform.

So, as a leader in the semiconductor photoresist field in mainland China, what are the highlights of Tongcheng New Materials's impact on the Hong Kong Stock Exchange this time?

From traders to platform-based new material companies

The history of Tongcheng New Materials can be traced back to 1999. The company first entered the market as an international rubber additives trader. The company has successively established production bases and R&D centers in Zhangjiagang, Jiangsu, and completed penetration from trade to upstream manufacturing. In 2018, the company successfully listed on the Shanghai Stock Exchange. Since then, through strategic investment, it has gradually extended its business reach to the field of electronic materials such as semiconductor photoresists, display panel photoresists, CMP polishing pads and high-purity solvents, and entered the fully biodegradable materials circuit in 2020 with PBAT polymerization technology authorized by BASF.

Today, the company has formed three business divisions: rubber additives for tires and other chemical products, electronic materials, and fully biodegradable materials. It is positioned as a supplier of functional resins, photoresists and auxiliary chemical products in the middle of the industrial chain, covering the downstream manufacturers of tires, automobiles, semiconductors and display panels.

Looking at the revenue structure, rubber additives for tires are still the basic market, while electronic materials show strong growth potential.

From 2023 to 2025, the company's total revenue increased from 2,937 billion yuan (RMB, same below) to 3.421 billion yuan, of which revenue from rubber additives and other chemical products for tires increased slightly from 2,276 billion yuan to 2,321 billion yuan, accounting for 67.9%; revenue from electronic materials jumped from 561 million yuan to 986 million yuan, accounting for a CAGR of about 32.5%. In the first half of 2026, revenue from electronic materials further reached 693 million yuan, an increase of 56.9% over the previous year, accounting for 32.5% of total current revenue, while the share of tire additives revenue fell to 61.9%.

According to the Zhitong Finance App, this decline is no accident. In recent years, sales of semiconductor photoresists have risen, driven by demand in the storage industry. Display panel photoresists have benefited from the expansion of downstream panel production capacity and the acceleration of domestic substitution. Coupled with the significant increase in sales of auxiliary solvents after G5 grade EBR achieved commercial production, they have jointly promoted the electronic materials division as the core engine for the company's revenue growth. The company's product portfolio in the semiconductor photoresist field covers G-line, I-line, KrF, ArF, etc., and has established business relationships with many leading 8-inch and 12-inch wafer manufacturers in China; in the field of display panels, its TFT array photoresists, organic insulating films and OLED light-emitting materials have entered the supply chain of head panel factories.

At the same time, the company's profitability is quite impressive. From 2023 to 2025, the company's net profit increased from 404 million yuan to 577 million yuan, and the net interest rate ranged from 13.8% to 16.9%. In the first half of 2026, the company's net profit reached 389 million yuan, and the net interest rate further increased to 18.2%. On the one hand, this benefits from the high gross profit contribution of the electronic materials business, and on the other hand, it also stems from the company's effective cost control.

However, it is worth noting that the company's cash flow situation deteriorated significantly in the first half of 2026, and the net cash flow from operating activities plummeted to 36.55 million yuan from 136 million yuan in the same period last year. The prospectus explains that this is mainly related to the increase in trade receivables. As of June 30, 2026, the total amount of trade receivables had climbed to 924 million yuan, which suggests that investors should pay attention to the liquidity pressure brought about by the extended repayment cycle.

The three tracks continue to differentiate, with photoresists leading the way

From an industry perspective, the prosperity of the three tracks where Tongcheng New Materials is located is clearly divided.

Semiconductor photoresists are the fastest growing field with the highest technical barriers. According to Frost & Sullivan's report, the size of the semiconductor photoresist market in China is expected to increase from 8.6 billion yuan in 2025 to 13.1 billion yuan in 2030, with a compound annual growth rate of about 13.4%, of which ArF photoresist composite growth rate is as high as 15.2%. The driving force comes from the continuous expansion of wafer production capacity in China and the acceleration of the localization process under supply chain security requirements. Local photoresists are evolving from early small-batch verification to large-scale introduction of multiple production lines.

Phenolic resin rubber additives for tires are the company's cash cow business. The global market size is expected to increase from about 21.9 billion yuan in 2025 to about 24.1 billion yuan in 2030, with a compound growth rate of only 1.9%. Among them, phenolic resin rubber additives for tires will increase from 5.6 billion yuan to 6.7 billion yuan, with a compound growth rate of about 3.6%. Tongcheng New Materials ranks first with a global share of 41.4% and China's share of 45.9%, and its customers cover the top 20 tire manufacturers in the world. The demand driving the growth of this business comes more from the increased performance requirements of new energy vehicles for low rolling resistance and lightweight tires, and following downstream tire companies going overseas to build production bases in Thailand, but their strategic value is more reflected in providing stable cash flow and supporting investment in electronic materials research and development.

Fully biodegradable materials are the third curve in the company's strategic layout, but they are also a drag on current financial performance. Demand growth in the PBAT market continues to fall short of expectations due to factors such as the high cost of use of degradable materials, slow spread of downstream applications, and overcapacity in the industry. The company admits that although the long-term outlook is optimistic, there is uncertainty about the timing and intensity of implementation of relevant government policies and the development of downstream applications. According to the Zhitong Finance App, in 2025, the company made some progress in customer development through the development of agricultural film and food packaging materials. In the first half of 2026, PBAT revenue increased 121.2% year-on-year to 119 million yuan, and the gross loss ratio narrowed to 5.6%, showing signs of marginal improvement, but it is still quite far from becoming a profit contribution point.

Taken together, Tongcheng New Materials presents a picture of the steady growth of traditional businesses, high growth in emerging businesses but not yet fully realized profits, and a forward-looking strategic layout that still takes time to implement. Its global leading position in the field of phenolic resin rubber additives for tires provides a solid performance base and cash flow support. The rapid volume of the electronic materials division and domestic substitution logic give the company room to imagine growth through the cycle, while continued losses in the PBAT business and the weakening of short-term liquidity indicators constitute realistic constraints that need to be addressed.

Looking forward to the future, the capital raised from the Hong Kong listing will mainly be used for R&D, capacity upgrading, strategic investment and overseas expansion. The company plans to use capital advantages to further strengthen the moat in the field of high-end electronic materials such as photoresist. Against the backdrop of the upward semiconductor cycle and intensification of trade frictions, whether Tongcheng New Materials can rely on the H-share financing platform to achieve a true global breakthrough has yet to be tested by the market.