Anji Technology: CMP Materials Import Substitution and the Second Curve

The company early on targeted two types of materials that were both very hard to localize: CMP polishing slurry and photoresist remover. The reason is direct. The requirements a fab places on these materials are that they match a specific tool and process node across polishing rate, selectivity, defect density, corrosion control, and post-clean compatibility, far beyond simply meeting a purity spec. The prospectus disclosed that before listing Anji had already achieved volume sales of CMP polishing slurry at the 130-28nm technology nodes, with 14nm products entering customer qualification and 10-7nm products in the R&D stage; photoresist remover, meanwhile, had been supplied steadily from 2009 onward to customers such as Hua Hong Grace, SMIC, Silan Microelectronics, China Wafer Level CSP, and Yangtze Memory. This timing is important, because it means that before its STAR Market listing Anji had already passed the hardest 0-to-1 validation stage.

Anji's listing path also carries the distinct flavor of a first-generation STAR Market sample. The company listed on the Shanghai Stock Exchange STAR Market in 2019 at an offer price of 39.19 yuan and an offer PE of 48.26x, with a listing date of 2019-07-22 and IPO proceeds of about 520 million yuan, with the use of proceeds aimed squarely at expanding the CMP polishing slurry production line, an integrated-circuit materials base, and upgrading the R&D center and information systems. The story told to the capital markets at listing was clear: this is one of the few domestic high-end semiconductor materials companies that has truly entered volume production and mainstream customer lines, relying on validation barriers rather than low-price competition. That story was very easy to understand in the 2019 STAR Market environment, and very easy to earn a scarcity premium.

Stages from Validation to Platformization

Cutting the history by business logic rather than by year, Anji's history breaks roughly into five stages.

The first stage was product definition and the customer icebreaker. After it was established in 2004, the company first made itself a materials supplier with process understanding, not a simple formulation shop. Because materials like CMP inherently need to be co-developed with the wafer-manufacturing customer, the key to the company's early growth lay in winning the first batch of high-value process windows rather than building out channels. In this stage Anji took the "few categories, deep validation" route rather than the "many categories, fast distribution" route. The cost of choosing this path was slow revenue ramp, but the payoff was high downstream stickiness.

The second stage was penetration of mainstream domestic fabs. By the time it listed, Anji had advanced CMP polishing slurry applications into mainstream domestic 8-inch and 12-inch wafer lines, and had extended its customers to important wafer-manufacturing customers such as SMIC, TSMC, UMC, Yangtze Memory, Hua Hong Grace, CR Micro, and Wuhan Xinxin. The most valuable change here was that the product moved from single-point qualification to multilayer application and multi-node rollout, rather than the customer list simply growing longer. Customers began to purchase repeatedly, and company revenue shifted from a project type to a consumables type.

The third stage was the post-listing capitalized expansion and platform build-out. After the STAR Market IPO, Anji was no longer just "scaling up existing products" but used capital-market funds to step up R&D and capacity together. The post-listing use of proceeds had two meanings: one was to resolve genuine capacity and testing bottlenecks, and the other was to upgrade R&D from single-product development to platformization. From 2023 onward, the company explicitly described itself in its annual report as a "3+1" technology platform: chemical mechanical polishing slurry, functional wet electronic chemicals, core raw materials, plus integrated-circuit Damascene electroplating solutions and additives. The change in wording means the strategic mindset had shifted from a single CMP leader to a semiconductor materials platform.

The fourth stage was the renewed earnings acceleration. The annual-report data spell this change out clearly: revenue was 1.238 billion yuan in 2023, 1.835 billion yuan in 2024, and 2.504 billion yuan in 2025; net profit attributable to shareholders was 403 million yuan, 534 million yuan, and 784 million yuan respectively. The source of growth was no longer only the natural expansion of the old business, but two lines advancing at once: CMP polishing slurry revenue grew 32.06% year over year in 2025, and functional wet electronic chemicals revenue grew 63.73%. This means the company was truly turning a second category into a revenue contributor, rather than living off the cyclical upturn of a single old product.

The fifth stage is the current "can the second curve turn from narrative into structure" phase. The 2026 first-quarter report shows single-quarter revenue of 724 million yuan, up 25.90% year over year, and net profit attributable to shareholders of 208 million yuan, up 23.40% year over year. The growth rate has slowed relative to full-year 2025 but remains high. More crucially, the integrated-circuit Damascene electroplating solutions and additives that just achieved a mass-production breakthrough in 2025 are beginning to move from "milestone event" into an actual revenue-validation period. The reason the capital markets were willing to award a valuation in advance was the belief that this curve would ramp like the CMP polishing slurry of earlier years; for the share price to keep rising from here, what is needed is no longer that the story holds but that revenue and gross margin truly land.

Key Milestones That Still Matter Today

The first key milestone is the 2019 listing itself. It brought Anji not only capital but a more important change: the company began to be able to make more forward-looking deployments in areas with very long customer-validation cycles, high R&D spending, and lagged returns. Otherwise, the electroplating solutions and additives, the core raw materials system, and the functional wet electronic chemicals platform would have been very hard to build on operating cash flow alone. The significance of the listing persists today, because high-end semiconductor materials is inherently an industry that needs long-term capital patience.

The second key milestone is the formation of the "3+1" platform. From the early CMP and cleaning to the systematic incorporation of functional wet electronic chemicals, core raw materials, and electroplating solutions, what Anji is trying to solve is now multi-material coordination across the customer's process chain, not a point substitution problem. In hindsight, this milestone did not change the income statement in an instant the way a merger would, but it changed how the capital markets understand the company: from a "single-product champion" to a "platform growth stock."

The third key milestone is the 2025 convertible-bond financing and the redemption and delisting completed in the first quarter of 2026. The annual report shows that in 2025 the company issued 830.5 million yuan of convertible bonds to non-specified parties; the 2026 first-quarter report discloses that in March 2026 the company completed the redemption and delisting of the "Anji convertible bond" and added 6,431,946 shares to total share capital through conversion. In the short term this means share dilution; in the long term it shows high market recognition, a smooth completion of debt-to-equity conversion, and a capital structure shifting from financing-driven expansion back to equity expansion. It reinforces the company's ability to keep expanding capacity and R&D, and it also reminds investors that Anji is not a mature machine that only spits out cash; it remains in a growth-stage capital-expenditure phase.

Financial History

From Small and Specialized to Large and Expensive

Anji's most striking financial feature is that revenue and profit climb along the same steeply sloped curve. The prospectus disclosed that in 2018 the company had revenue of 248 million yuan and net profit of 44.96 million yuan; by 2025, revenue had grown to 2.504 billion yuan and net profit attributable to shareholders to 784 million yuan. On a 2018-2025 basis, the revenue CAGR was about 39% and the net profit CAGR about 50%. This kind of growth looks more like three factors stacking up than something simply forced out through price increases: first, continued growth in customer adoption; second, an increasing number of application layers within the same customer; and third, the start of the second category's volume ramp. For a materials company, pulling revenue and profit out along this slope together shows it has not fallen into the typical manufacturing trap of "scale means price cuts, expansion means diluted profitability."

The 2018 data in the table come from the prospectus, and the 2023-2025 data come from the 2025 annual report. What is most notable is that after revenue grew tenfold, the company's R&D intensity remained close to 18% and ROE actually kept rising, rather than the revenue scale itself.

The Margins Are Pretty, but Cash Conversion Is Not as Easy as It Looks

In 2025 Anji posted revenue of 2.504 billion yuan and operating cost of 1.084 billion yuan, for a blended gross margin of roughly 56.7%. Broken down, the CMP polishing slurry gross margin was 57.92%, functional wet electronic chemicals was 50.05%, and other businesses was 83.46%. This shows the second curve is not trading losses for growth; wet electronic chemicals started in a high-gross-margin range from the outset, just slightly below the mature core CMP business. More importantly, total period expenses in 2025 grew 20.52%, below the 36.47% revenue growth, and operating leverage is already showing. In other words, Anji has more chance of lifting its margin the larger it gets, rather than "getting harder to earn as it grows."

But profit quality cannot be judged on net margin alone. From 2023 to 2025, net operating cash flow was 336 million yuan, 493 million yuan, and 440 million yuan respectively, while net profit attributable to shareholders over the same period was 403 million yuan, 534 million yuan, and 784 million yuan. The operating cash flow to net profit ratios were roughly 0.83, 0.92, and 0.56, with a three-year average of about 0.77. This ratio weakened clearly in 2025. The annual report explains that the main reason is that while sales collections grew normally, the company increased stocking of some raw materials to meet production and R&D needs and to secure the supply required for subsequent business growth. This explanation lines up with the balance sheet: inventory rose from 472 million yuan at the end of 2024 to 826 million yuan at the end of 2025, a very large increase. My read is that this is not "out-of-control bad-debt-type cash-flow deterioration," but it is by no means a small fluctuation that can be ignored. It means Anji is using more working capital to serve future growth.

The Balance Sheet Is Solid, but This Is a Growth Company Still Expanding

By the end of 2025, Anji had total assets of 5.038 billion yuan, net assets attributable to shareholders of 3.531 billion yuan, and a period-end cash and cash equivalents balance of 1.106 billion yuan. Fixed assets were 424 million yuan and construction in progress was 111 million yuan, each up considerably from the prior year; long-term equity investments rose from 671 million yuan to 1.084 billion yuan, showing that beyond organic capacity expansion the company is also making ecosystem-type investment deployments. At the same time, the company issued 830.5 million yuan of convertible bonds in 2025, with an unconverted balance remaining at year-end, and completed conversion plus redemption and delisting in the first quarter of 2026. Overall, this balance sheet has no liquidity anxiety, but it also shows that Anji is not a company that has entered a "cash-cow harvest period." It is still expanding, still investing, still preparing capacity and raw materials in advance.

Free Cash Flow Must Be Seen Through; Do Not Mistake Wealth-Management Outflows for Capex

The 2025 annual report states clearly that the increase in net cash outflow from investing activities was mainly due to purchases of short-term bank wealth-management products. This point is crucial. Treating all investing cash flow as capacity-expansion capex would seriously overstate operating cash consumption. A more reasonable approach is to back out the physical capital investment from the asset side: in 2025 fixed assets increased by about 145 million yuan and construction in progress by about 10 million yuan, suggesting that "physical capex" related to plant, equipment, and production lines was most likely in the 150 million to 200 million yuan range, rather than the entire outflow on the face of the investing cash-flow statement. Given that the company is still advancing new products and ramping production lines, I lean toward treating most of this as expansionary capex, with maintenance capex only a minority. Even so, using 2025 operating cash flow of 440 million yuan and a rough maintenance capex of 50 million to 70 million yuan, owner earnings are only about 370 million to 390 million yuan, an owner-earnings yield against the current market cap of less than 1%. Anji makes money; the market simply prices it far above its current distributable cash-flow capacity.

Share Price and Valuation History

Anji's offer price at listing was 39.19 yuan, with an offer PE of 48.26x. This starting point was already not cheap, because the market saw it from the start as a scarce high-end semiconductor materials asset rather than an ordinary electronic chemicals company. In hindsight, this pricing was not absurd, since the company did go on to scale up both size and profit with its earnings, but it also planted a long-term feature: Anji has almost always earned its premium from "scarcity plus growth certainty" rather than from being "cheap."

Since listing, the broad arc of the share price can be summarized in three rounds. The first round was the STAR Market's first batch of scarce names, where the market's core was scarcity. The second round was the heating up of semiconductor self-sufficiency in 2020-2021, when the market began to see it as a core domestic-substitution asset. The third round was the re-rating driven by earnings delivery in 2024-2026: no longer just a materials-localization theme, but revenue, profit, and new-product ramp validated in sync. Viewing this pricing change through the financial cadence is the most direct: from 2023 to 2025, the company's revenue doubled in two years and net profit attributable to shareholders rose from 403 million yuan to 784 million yuan, and the capital markets re-understood it from a "small company with a high valuation" to a "high-growth platform materials company."

As of the 2026-06-12 close, Anji's share price was 230.45 yuan, with a total market cap of about 52.426 billion yuan based on the post-conversion share count; this corresponds to a trailing 2025 PE of about 66.9x and a price-to-sales ratio of about 20.9x. This valuation level is higher than the IPO pricing, showing the market is willing to pay a higher multiple for its larger scale, higher global share, and second growth curve. The one thing most worth guarding against here is that an upward shift in the valuation center means not only that business quality has improved but also that market preference is now demanding it keep delivering higher growth. Once growth drops below 15%, the valuation center could shift down first, before the fundamentals are discussed.

Business Model and Moat

Revenue Structure and Sources of Profit

Anji's revenue structure is now richer than the outside impression, but the profit core remains highly concentrated. In 2025, CMP polishing slurry revenue was 2.040 billion yuan, or 81.45% of total revenue; functional wet electronic chemicals revenue was 453 million yuan, or 18.08%; other businesses were only 0.46%. By region, mainland China revenue was 2.416 billion yuan, about 96.5%, and overseas revenue was 87.8477 million yuan, about 3.5%. This means the company is still a typical case of "one core category carrying profit, one new platform driving growth, and revenue still heavily dependent on mainland wafer-manufacturing investment."

This table says two things. First, CMP is still the profit machine. Second, wet electronic chemicals is already a genuinely high-gross-margin growth business rather than a "story-telling new product," only with a scale still clearly smaller than the core business.

Operating Leverage and Cost Structure

Anji's cost structure differs greatly from an ordinary chemicals company. Raw materials, manufacturing, and logistics are of course variable costs, but what really determines success or failure is front-end R&D, process support, validation service, analytical testing, and on-site customer response. These are high fixed costs. The company's 2025 R&D spending was 17.76% of revenue, still at a very high position; but at the same time, period expenses grew slower than revenue, indicating that once a product enters volume production, fixed costs are spread by revenue and profit is released at an accelerating pace. That 2025 profit grew faster than revenue is the result of this leverage starting to deliver. Conversely, once revenue slows, the hardest expense to compress in the short term is precisely R&D and the quality system. The company cannot, like ordinary manufacturing, cut R&D immediately in a downturn, or the next round of node adoption will run into trouble.

Moats That Genuinely Hold

Anji's strongest moat is the customer validation barrier. In the wafer-manufacturing flow, CMP materials are not standard products that are "ready to use once bought." They are tied to the tool, the pad, the upstream and downstream chemicals, the cleaning steps, and the material structure. Once a customer completes validation and writes the material into the process recipe, switching suppliers brings yield, defect, and re-validation costs. This stickiness is built by entering the customer's process window, not by a sales relationship. Both the prospectus and the annual report repeatedly stress that the company is guided by meeting customer process needs, and that passing validation is the most important expression of its performance specs. This barrier genuinely holds on a 3-to-5-year horizon.

The second moat is the compound technical accumulation of formulation and particle-dispersion know-how. The company disclosed in its 2025 annual report that it has formed a "3+1" technology platform and holds 308 granted domestic and overseas invention patents, with 106 new applications filed in 2025. Patents themselves do not equal the entire barrier, but they at least prove the company keeps doing original development around abrasive particles, additives, and cleaning and electroplating systems, rather than assembling bought formulations. What is truly hard about materials like CMP has always been the systems capability of particles, chemical reactions, interface protection, and defect control working together, not a single formulation.

The third moat is localized process-service capability. From the prospectus period, the company has clearly described a "localized, customized, integrated" service model. For domestic Chinese fabs, a local team can reach the site faster for problem localization, formulation fine-tuning, failure analysis, and quality tracking, and such service matters a great deal when actually selecting a supplier. Global leaders may not lag Anji in technical maturity, but Anji's response speed, willingness to customize, and depth of co-development within China constitute its most realistic substitution advantage over the overseas giants.

The fourth moat is still forming rather than fully cemented: platformized category expansion. Moving from polishing slurry to wet electronic chemicals and then to electroplating solutions and additives looks like a natural extension, but the customer validation and technical difficulty of each category are not equivalent. What Anji really wants is to upgrade itself from a "single-product supplier" to a "process partner for multi-material coordination." If the electroplating-solution and core-raw-material systems can also enter volume production and keep scaling like CMP, this moat will deepen markedly; if they can only stay at limited validation or single-point supply, it looks more like a layer of expectation premium in marketing. Today I think this moat is still under construction and cannot be valued as if mature.

Management and Governance

On governance, Anji has two features. First, the controlling shareholder Anji Microelectronics Co. Ltd. held 30.70% at the end of 2025, the company has no actual controller, and there is no special voting arrangement. Second, there were no instances of penalties from securities regulators over the past three years. Such a structure is not bad for ordinary shareholders: there is no governance discount from a strong controlling owner who "calls all the shots," but it also means the market relies mainly on operating delivery to assess management, rather than on a founder myth. In 2025, non-independent director Chris Chang Yu resigned from the board for personal reasons, a change worth tracking but with limited impact for now.

Industry and Cycle Analysis

Anji sits in the small industry of high-barrier process materials within front-end semiconductors and advanced packaging, not the "big electronic chemicals industry" in the traditional sense. The profit pool of this industry is held by the few suppliers that can enter mainstream nodes, mainstream customers, and mainstream process windows, not by low-end chemicals capacity builders. The prospectus made clear long ago that semiconductor materials are highly segmented, have high technical thresholds, and require strict validation, and have long been dominated by US and Japanese firms leveraging first-mover advantage. For companies like Anji, it faces a track where "a new entrant, even with a formulation, must first survive customer validation," not a track where "anyone can come in and compete on price."

On the demand side, what semiconductor materials are going through is structural upgrading, not a simple recovery. Anji's 2025 annual report cites WSTS and SIA data, projecting 2025 global semiconductor sales of about 704.9 billion US dollars, up 11.2% year over year, with logic and memory growing especially fast at about 38.8% and 39.0% respectively. Looking only at the total, this is just a cyclical recovery; what is more valuable is the structure: advanced logic, DRAM, HBM, 3D NAND, advanced packaging, and hybrid bonding are all adding finer planarization and subsequent chemical steps. Fujifilm stated clearly in its 2025 semiconductor-materials business briefing that back-end new technologies such as increasing advanced-logic line layers, increasing DRAM layers, BSPDN, and hybrid bonding will all raise CMP slurry usage, and projected a 2024-2030 CAGR of up to 10% for copper-interconnect CMP slurry. This is where Anji's AI relevance truly lies: selling into the materials process required to support denser compute and packaging architectures, not selling to AI companies.

On this I lean toward classifying Anji as a superposition of four cycles. The first is the semiconductor cycle, where fab utilization, inventory, and capex directly affect materials consumption. The second is the technology-iteration cycle, where the more advanced the node and the higher the material requirements, the easier it is for top suppliers to gain share. The third is the capex cycle, where new fabs and new lines bring validation and ramp windows. The fourth is the policy cycle, where domestic substitution and supply-chain security affect whether customers are willing to bring in local materials. It is not a macro-consumption cyclical, nor a pure defensive. The biggest beneficiary variable in an upcycle is advanced-node wafer starts and breadth of adoption; the most fragile variable in a downcycle is the pace of customer expansion and validation progress.

Policy and geopolitics also affect Anji in a complex way, not a one-sided positive. The positive side is direct: supply-chain security considerations strengthen domestic fabs' willingness to adopt local materials. The risk side is also written out in the annual report by the company itself: changes in global tariff policy, bilateral trade friction, and geopolitical risk could bring higher supply-chain costs, unstable supply, and insufficient downstream demand. In particular, Anji still has some raw materials tied to overseas supply chains, which means it both benefits from domestic substitution and is exposed to upstream international trade friction. The market easily sees only the former side and overlooks the latter.

Competitive Analysis

Anji's competitive landscape is the classic "a few direct rivals plus several adjacent substitutes" scenario. Viewed in the narrowest sense of high-end CMP polishing slurry, it faces established global leaders and a few domestic latecomers; viewed at the level of the customer's procurement decision, it also competes cross-category with wet electronic chemicals, electroplating solutions, and cleaning solution platform companies. So what really needs comparing is who solves what problem at the customer, not whose spec sheet looks prettier.

If the customer's priority is "replicable across global tier-one fabs, extremely deep node coverage, lowest process risk," it more easily chooses a global materials leader like Entegris, or a Fujifilm-type supplier with very high copper-interconnect CMP share that is pushing further into advanced packaging and HBM. Entegris's advantage is not a single slurry but packaging materials, filtration, contamination control, and process solutions together; Fujifilm explicitly makes copper interconnect, hybrid bonding, and HBM the focus directions for future CMP slurry. For the most advanced logic or cross-regional volume-production customers, this "global consistency plus ecosystem completeness" is attractive. Anji's shortcoming at this level is that overseas revenue is still a low share and its global service network is still weak, with revenue outside mainland China only about 3.5% in 2025, not that its technology necessarily lags.

If the customer's priority is "find a proven, faster-responding, more deeply co-developed alternative on a Chinese domestic production line," then Anji is the strongest local option. Its advantage is that it has already brought high-gross-margin, high-validation-barrier CMP polishing slurry to the leading domestic position and is turning wet electronic chemicals into a high-growth new business, not that its price is especially low. The global polishing slurry share of about 13% it disclosed in 2025 shows it is not living on local policy dividends alone. A customer choosing Anji is essentially buying a materials partner that "can enter the main process, support quickly, and co-develop at the pace of a Chinese production line."

Dinglong is the domestic frontal competitor most worth watching, but it has grown into a different shape. Dinglong first made CMP polishing pads the domestic leader, then extended into CMP polishing slurry, CMP cleaning solutions, and other semiconductor materials, rather than starting from slurry. In 2025, the company's semiconductor segment revenue was 2.086 billion yuan, or 57% of total revenue; of this, CMP polishing pad revenue was 1.091 billion yuan, up 52.34% year over year. Why would a customer choose Dinglong? The answer is realistic: if a customer wants a more complete domestic one-stop solution for the CMP step, Dinglong's pad-plus-slurry-plus-cleaner route is attractive. For Anji, this is a long-term shift in the form of competition, from single-point materials competition to systems-solution competition, not a "replaced tomorrow" risk.

CMC and Jianghua Micro sit in different positions. CMC is more of a platform player in high-purity wet electronic chemicals, electronic specialty gases, and precursors, still at the edge of losses in 2025, showing that its core tension is scale and profit quality rather than, like Anji, delivering high ROE in a single high-barrier category. Jianghua Micro leans more toward being a mature-line player in wet electronic chemicals, with a current market cap of about 16 billion yuan, and the market clearly prices it below Anji, precisely because the process barriers and profit structure are not the same. Customers choosing these two types of companies do so more for broad-spectrum wet-chemical supply capability, local delivery, and cost efficiency; choosing Anji is more focused on validation capability in high-end CMP and adjacent high-barrier materials.

By ecological niche, Anji is one of the most typical high-end process-materials leaders in the entire electronic chemicals industry, but not the largest company. It fills the gap of "the leading domestic supplier of high-end CMP polishing slurry" and is trying to keep encroaching on the profit pools corresponding to functional wet electronic chemicals and electroplating solutions. What it most directly seizes is the profit of overseas high-end materials makers inside Chinese fabs; what is most likely to come for its profit pool is domestic platform-type materials companies that have already advanced toward one-stop CMP solutions. If a price war breaks out in the industry in the future, Anji's position may not be the worst, because the suppliers that can truly enter high-end nodes are few to begin with; but if technical substitution shifts from "single-formulation optimization" to "an entire material-equipment coordination," it must also prove that its platform capability does not stay on a PowerPoint slide.

Current Fundamentals and Bull-Bear Divergence

The latest financial signals are not bad. The 2026 first-quarter report shows the company achieved revenue of 724 million yuan, up 25.90% year over year, and net profit attributable to shareholders of 208 million yuan, up 23.40% year over year; the company also completed the redemption and delisting of the "Anji convertible bond" in March 2026. This growth is slightly lower than the full-year 2025 revenue growth of 36.47% and profit growth of 46.85%, but it is by no means a stall. It looks more like a company continuing to grow off a high base than a cliff after a cyclical peak. If the market treats Q1's single-digit sequential fluctuation as a reversal of the logic, it easily overreacts; but simply extrapolating 2025's high growth linearly into the next three years is equally dangerous.

Over the last four quarters, what truly decides market sentiment is the source structure of growth, not the single data point of any one quarter. In 2025 the company's revenue jumped, with CMP polishing slurry still growing 32.06% year over year, functional wet electronic chemicals growing 63.73%, electroplating solutions and additives achieving a mass-production breakthrough, and operating efficiency continuing to improve. In other words, what the market sees is "the old business steady, the new business fast, margins not collapsing," not "the old business living off the cycle." This is why Anji's valuation has not been pressed back into the ordinary-chemicals range as scale grew, but has instead remained in the high-growth materials range.

The market is currently trading three things. The first is that domestic substitution keeps advancing into higher-end processes and more material steps, rather than stalling at 28nm and below. The second is that the second curve no longer stays at validation news but is beginning to enter volume production. The third is AI: the market projects the increase in material process steps brought by advanced logic, HBM, and advanced packaging onto the long-term demand for high-end CMP and electroplating solutions. Of these, the first two are more solid, and the third more prone to overheating. My judgment is that Anji's true fundamentals support "domestic substitution plus category expansion," but do not support pricing it as a "direct beneficiary of an AI explosion."

The bulls' strongest evidence has four parts. First, global polishing slurry share rose from about 8% to about 13% over the past three years, which cannot be achieved by local policy alone. Second, functional wet electronic chemicals grew 63.73% with a gross margin still at 50.05%, showing the second curve already has a profit base. Third, the company's 2025 ROE reached 25.18%, with expense growth below revenue growth and operating leverage being released. Fourth, trends such as advanced logic, DRAM, HBM, and hybrid bonding will indeed raise CMP slurry usage. As long as the company can keep entering new process layers and new customer lines, revenue growth is not a one-off.

The bears' strongest evidence is equally specific. First, customer concentration is still high, with the top five customers at 75.65% and the largest customer at 26.40%, so any change in a top customer's expansion pace directly affects growth. Second, cash conversion weakened clearly in 2025, with the operating cash flow to net profit ratio falling to 0.56 and inventory climbing sharply. Third, more than 96% of revenue is still in mainland China, and overseas markets have opened far too slowly. Fourth, the valuation is very expensive, with a trailing PE of about 66.9x on the 2026-06-12 close and an owner-earnings yield of less than 1%. This means that as long as growth slows to "still decent but not as dazzling," the share price could re-rate first and then wait for earnings.

Valuation Analysis

Historical Valuation

Anji's offer PE at listing was 48.26x, showing that it belonged to the high-premium growth category from primary-market pricing onward. Today, calculated on 2025 earnings, the trailing PE is about 66.9x, clearly higher than the IPO basis. Behind this lift are both improving business quality and a change in market preference. Improving business quality shows in revenue and profit scale now far above the early listing period, and global share rising; the change in market preference shows in investors no longer treating it as merely a single-product domestic-substitution maker but viewing it through a platform-growth-stock framework. The problem is that an upward shift in the valuation center is a double-edged sword. It rewards past success and forces continued delivery in the future.

Peer Valuation

Within A-shares, what comes closest to Anji's current valuation atmosphere is the "key-materials platformization" story like Dinglong, not a wet-electronic-chemicals company like Jianghua Micro. On the visible quotes as of 2026-06-14, Dinglong's market cap is about 74.89 billion yuan, corresponding to 2025 net profit attributable to shareholders of 720 million yuan, with a trailing PE already above 100x; Anji's market cap is about 52.43 billion yuan, corresponding to 2025 net profit attributable to shareholders of 784 million yuan, with a trailing PE of about 66.9x. That is, within this basket of high-end semiconductor materials domestic substitution, Anji is not the most expensive, but it is still clearly more expensive than traditional wet-electronic-chemicals players. This relative premium has its rationale: Anji has higher ROE, higher gross margin, a stronger validation barrier, and more certain global share gains. But if the entire semiconductor-materials sector sits in a high-valuation zone, then "a bit cheaper than the others" does not automatically equal cheap.

Cash-Flow Pass-Through

First look at the match between cash and profit. From 2023 to 2025, operating cash flow to net profit attributable to shareholders was roughly 0.83, 0.92, and 0.56, with a three-year average of about 0.77. Over the long run this is not a catastrophic distortion, but 2025 was clearly weak, showing that the speed at which accounting profit converts to cash declined. The main explanation the annual report gives is increased raw-material stocking, which is corroborated by inventory rising from 472 million yuan to 826 million yuan. My judgment is that Anji is currently still in a stage where "growth takes priority over cash-recovery efficiency."

Now look at capex. Because 2025 investing cash flow was affected by short-term wealth-management, the net investing outflow cannot be mechanically treated entirely as manufacturing capex. A safer method is to treat the increments in fixed assets and construction in progress as an approximate anchor for physical capex. In 2025 fixed assets increased by about 145 million yuan and construction in progress by about 10 million yuan, suggesting that capex related to capacity expansion, equipment, and production lines was most likely in the 150 million to 200 million yuan range, of which maintenance capex is only a minority and expansionary capex the majority. If maintenance capex is roughly estimated at 50 million to 70 million yuan, then 2025 owner earnings are about 370 million to 390 million yuan, an owner-earnings PE against the current price of about 135-142x; if all physical capex is deducted, the free cash flow yield is even only about 0.5%. In other words, the apparent 66.9x PE is already not low, and seen through to cash flow it only gets more expensive, not cheaper.

Absolute Valuation Scenarios

I do not use DCF as the main method for Anji, for a simple reason: what matters more in the current ordering is whether growth can persist over the next 1 to 3 years, whether the second curve can be delivered, and how the high valuation is digested, rather than a far-future terminal value. A more suitable method is scenario valuation using "2026 net profit assumption times a reasonable PE range," then checking with cash-flow pass-through whether the multiple is too high. This is only a price-range projection under a research framework, not investment advice.

The prices above are central valuations, not precise targets. My core conclusion is that the current price of 230.45 yuan lands roughly in the region the neutral scenario can explain, not in territory that corresponds to "cheap."

Expectations-Gap Analysis

The market's currently implied expectations are roughly three: one, the core CMP business can at least maintain growth of about 20%; two, wet electronic chemicals will keep growing above 40% and lift its revenue share; three, electroplating solutions and additives will quickly move from a mass-production breakthrough to scale revenue. The first two have a realistic basis, while the third looks more like an option. The metrics most likely to truly create an expectations gap are revenue structure by product, customer concentration, inventory changes, and operating cash flow, not total revenue. As long as two of these four metrics deteriorate at the same time, the market will start to question whether "platformization" has been priced in advance.

Margin-of-Safety Recheck

Against the conservative scenario of 175 yuan, the current price carries a premium of about 31.7%, and the margin of safety is zero. The most fragile of the three assumptions is the ramp speed of the second curve, not the CMP business itself. If I cut the assumption that "wet electronic chemicals and electroplating solutions ramp as planned" by 30%, I think the neutral-scenario value falls from around 240 yuan to around 200 yuan. The reason is simple: in the current valuation, the market is already valuing it as a platform growth company, not merely as a mature CMP leader.

Now do a crueler check. If earnings are flat over the next 3 years while the market still grants the current trailing PE of about 66.9x, the implied "earnings yield" is only about 1.5%; and China's government bond yield curve shows the 10-year yield at about 1.74% on 2026-06-12. That is, even assuming no valuation contraction, the trailing yield corresponding to Anji's current buy price does not offer a decent enough risk-free premium. This is exactly the classic feature of "a good company but a bad price." My conclusion on margin-of-safety adequacy is: none.

Risk Analysis

The first type of risk is customer concentration and a slowdown in mainland fab capex. I assign this risk a medium probability of occurrence and a high impact. In 2025 the top five customers accounted for 75.65% of sales and the largest for 26.40%, and about 96.5% of revenue came from mainland China. Once a top customer trims expansion, slows new-formulation validation, or the pace of advanced-process material use falls short of expectations, the company's revenue growth will fall first and then be amplified to the share price through valuation compression. The most direct observation metrics are the top-five share, the single largest customer's revenue share, and whether the mainland share keeps rising.

The second type of risk is cash-flow and inventory risk. I assign this risk a medium probability of occurrence and also a high impact. In 2025 net operating cash flow was 440 million yuan, clearly below the 784 million yuan of net profit; inventory rose from 472 million yuan to 826 million yuan. The company explains it as stocking for growth, and I accept half of this explanation: it may indeed be expansion brought forward, but it also means the company must use more working capital to support growth. If inventory does not fall over the next two quarters and the operating cash flow to net profit ratio stays below 0.7, the market will begin to suspect that part of the profit is merely "pressed into inventory." This kind of risk never blows up immediately, but it slowly erodes the credibility of a high-valuation company.

The third type of risk is that the second curve does not come as fast as the market imagines. Medium probability of occurrence, high impact. One of Anji's 2025 highlights is the high growth of functional wet electronic chemicals and the mass-production breakthrough of electroplating solutions. But the capital markets now treat this as a high-probability delivery rather than dispensable optionality. If over the next year wet electronic chemicals revenue share stays below 20% and electroplating solutions form no visible scale, the market will re-value Anji as a "high-end CMP single-product leader" rather than a "materials platform." For a stock with a PE above 60x, this kind of downgrade in valuation identity is already enough to bring a sizable pullback.

The fourth type of risk is valuation compression itself. I assign this risk a high probability of occurrence and a high impact. The logic is direct: the current trailing PE of about 66.9x, price-to-sales of about 20.9x, and owner-earnings yield of less than 1% themselves mean the share price is highly dependent on "sustained growth plus cash repair plus second-curve delivery." As long as the risk-free rate rises, the growth style rotates, or peers' high valuations shift down together, Anji could be knocked down by valuation while its fundamentals are still decent. The most painful moment for a high-quality growth stock is often when earnings are still growing but the growth is no longer enough to support the original multiple, not when earnings are at their worst.

The fifth type of risk is trade friction and supply-chain geopolitics. Medium probability of occurrence, medium-to-high impact. The company's annual report has clearly flagged that changes in global tariff policy, escalating trade friction, and geopolitical risk could lead to higher supply-chain costs, supply-chain instability, and falling demand. Anji's products are sold mainly to Chinese fabs, which provides protection in the short term; but its upstream still cannot fully decouple from the international materials and equipment system. If geopolitical risk evolves into constraints on upstream raw materials, equipment parts, or specific process routes, it would deliver a chain shock to revenue, gross margin, and customer-validation pace.

Catalysts and Tracking Metrics

Positive catalysts first come from earnings continuing to beat expectations, especially a rising revenue share for wet electronic chemicals and electroplating solutions. If the 2026 interim report shows the functional-wet-electronic-chemicals revenue share stepping up further while the core CMP business still holds growth of about 25%, the market's confidence that "the second curve is starting to take over" will strengthen. The second positive catalyst is a recovery in operating cash flow and improving inventory turnover. For a high-valuation company like this, the role of cash-flow repair is no less than profit growth. The third catalyst is clearer progress in customer validation for materials related to advanced packaging, HBM, and hybrid bonding, which would strengthen the company's "indirect but real" link to the AI supply chain.

Negative catalysts tend to appear more suddenly. First, if in any earnings report revenue is still growing but cash flow and inventory deteriorate significantly, the market will start to re-rate profit quality. Second, if the top-five-customer share rises again or the largest customer's share approaches 30%, the market will worry more about single-customer cyclicality. Third, if electroplating solutions and additives are slow to turn from a "mass-production breakthrough" into "visible revenue," the heat of the second-curve narrative will cool first. Fourth, if a style rotation hits the entire semiconductor-materials sector, high-valuation names often fall first and then it is debated whether they were unfairly sold off.

Among these metrics, the ones to watch first are product structure, customer concentration, and cash flow, not the share price. Research tracking of Anji should not stop at "whether the semiconductor cycle is good," but should land on "whether the second curve's share has truly come up, whether inventory has been digested by revenue, and whether cash has kept up with profit." The data sources are mainly periodic reports, earnings briefings, and exchange announcements; PE and the interest rate are used to judge valuation pressure during a style rotation.

Cross-Sectional and Longitudinal Summary

Viewed longitudinally, the ability Anji has truly proven over the past two decades is that it can turn a process material with extremely slow validation, extremely high technical requirements, and extreme switching difficulty into a core consumable that mainstream domestic fabs are willing to reorder repeatedly, not that it "caught a wave of domestic substitution." Many will attribute its success to industrial policy or the STAR Market dividend, but if it relied on the era's dividend alone it could not have raised global semiconductor polishing slurry share from about 8% to about 13% over the past three years, nor could it have produced 63.73% high growth and a 50.05% high gross margin in functional wet electronic chemicals in 2025. There are of course era factors in Anji's success, but the more crucial part is the stacking of two abilities: one is understanding customer processes and completing long-cycle validation, and the other is replicating that validation ability from one category into an adjacent category. The former has been amply proven; the latter is being validated.

Viewed cross-sectionally, Anji's real advantage relative to domestic peers is that it runs the deepest in the most core step of high-end CMP polishing slurry and has the best profit quality, not that it is the largest in size. Dinglong's threat is very real, because it is upgrading competition from a single point of materials into a one-stop pad-plus-slurry-plus-cleaner CMP solution; the global leaders' threat is equally real, because what they offer is global consistency and a more complete process ecosystem. But Anji still holds a position very hard to replace: within high-end process materials for domestic Chinese fabs, it has both a validated track record and the advantages of high gross margin, high R&D, and localized service. Its weaknesses are also clear: too little overseas revenue, too high customer concentration, and a second curve not yet large enough to diversify risk. This weakness is structural and will not disappear on its own in a single quarter.

The place the market is most likely to misjudge right now is equating "the company is hard to build" directly with "the stock is worth chasing." Anji is of course a rare good company, but a good company and a good price do not always appear together. As of the 2026-06-12 close, the market's pricing already counts in most of the elements of sustained core-business growth, the second-curve ramp, and stronger demand for advanced-process materials. What has truly not been fully written into the price is only two things: one is whether electroplating solutions and additives can become substantial revenue; the other is whether operating cash flow can catch up with profit again. If these two materialize, Anji could still be a high-quality growth company worth owning for the long term; but before they are fully delivered, investors are already asked to pay for a PE above 60x, and this is the reason restraint must be kept in the research conclusion.

The most critical variable over the next year is the revenue share of wet electronic chemicals and electroplating solutions, the repair of operating cash flow, and whether customer adoption keeps advancing. The most critical variable over the next three years is whether Anji can turn the "3+1 platform" from a concept into a profit structure, so the core CMP business no longer bears the high valuation alone. The most critical variable over the next five years is whether the company can meaningfully raise its overseas revenue share and prove it is not merely a Chinese domestic substitute but holds a seat in global high-end process materials. If these variables move in the right direction, Anji will move further from "high-quality growth but a demanding buy point" toward "long-term compounding." If they go astray, today's high valuation will in turn amplify the risk.

Bull and Bear Cases

Bull case:

• Global semiconductor polishing slurry share rose from about 8% to about 13% over the past three years, showing that its share gains in the global high-end segment have been validated.

• The core CMP business still grew revenue 32.06% in 2025, not a passive category expansion after a mature business stalled.

• Functional wet electronic chemicals grew 63.73% in 2025 with a gross margin of 50.05%, so the second curve already has earning power.

• 2025 ROE reached 25.18%, with period expenses growing slower than revenue and operating leverage being released.

• Trends in advanced logic, DRAM, HBM, and hybrid bonding will keep pushing up CMP materials usage and validation value.

Bear case:

• The top five customers account for 75.65% and the largest customer for 26.40%, so customer concentration is still on the high side.

• 2025 operating cash flow to net profit was only about 0.56, with a clear decline in the speed of converting profit into cash.

• Mainland China revenue share is about 96.5%, overseas expansion is still weak, and geographic concentration is very high.

• The current trailing PE is about 66.9x with an owner-earnings yield below 1%, leaving limited room for valuation error.

• Although electroplating solutions and additives have achieved a mass-production breakthrough, they do not yet provide a large enough revenue base to support the platformization premium.

Pre-mortem

The first script that could lose me 50% three years out is a sudden escalation of competition in domestic integrated CMP solutions. Suppose that by the end of 2027 Dinglong, leveraging its pad-plus-slurry-plus-cleaner systems solution, wins more share at several core fabs, and Anji is forced to cut prices on some process steps; at the same time wet electronic chemicals growth drops from 60%+ to below 20%, and electroplating solutions are still slow to scale. The result would be a blended gross margin sliding from the 56%-57% platform to 48%-50%, net profit stalling near 800 million to 900 million yuan, and the market cutting its valuation from above 60x to 30-35x, so the share price could retreat to the 110-130 yuan range.

The second script is customer expansion pace and cash flow deteriorating together. Suppose in 2027 the industry is not in recession, but China's major domestic fabs enter a capex-digestion period and new-material validation generally lengthens; Anji keeps high stocking to protect its adoption pace, inventory keeps rising, and operating cash flow stays below 70% of net profit for two consecutive years. At this point the problem would not show up first on the income statement but in the valuation system: the market realizes it is a high-investment growth company rather than an asset-light cash cow, and re-prices it from "high-quality compounding growth" to a "high-growth but heavy-investment materials stock," with PE possibly returning to 25-30x. For today's price, that is still enough to halve it.

Final Research Conclusion

Anji Technology is a genuinely scarce high-end semiconductor materials company. It has already proven, through long-term customer validation, global share gains, and high margins, that it is a process-materials supplier that can enter the main process and keep capturing consumables-type revenue, rather than an ordinary electronic chemicals maker. More rare still, it is spilling its polishing-slurry capability over into the functional-wet-electronic-chemicals and electroplating-solution systems, not stopping at a "single star product," which keeps open the possibility of evolving from a single-product champion into a platform growth stock.

The problem is the price. The market currently does not undervalue Anji; on the contrary, it is already willing to price it as a platform growth stock. For a company with a trailing 2025 PE of about 66.9x, operating cash flow clearly lagging net profit, and a second curve still needing to be delivered, a share price near 230 yuan looks more like "can keep holding, but not suitable for committing cautious money right now." What I worry about most is the high valuation buying up future good news first, after which any growth slightly below expectations means the share price bears valuation compression first, rather than the company failing to make its products. The conditions that would change my view are also clear: if the revenue share of wet electronic chemicals and electroplating solutions keeps rising while operating cash flow catches up with profit again, I am willing to accept a higher intrinsic value; if the reverse, with the second curve slow and inventory and cash flow deteriorating, then its growth premium should be marked down.

【Company Profile Score】

• Fundamental quality: high

• Growth: high

• Moat: strong

• Financial soundness: strong

• Management credibility: medium-high

• Valuation attractiveness: low

• Risk level: medium-high

• Suitable investor type: long-term growth

【Investment Rating】

• Rating: Hold

• One-line investment thesis: import substitution is converting strongly, but the current price has already counted in the second curve.

• 【Ideal Buy Price】135-145 CNY Basis: applying an additional roughly 20% margin of safety to the intrinsic value of around 175 yuan in the conservative scenario; suitable only for building a position in tranches when a more visible sentiment pullback appears.

• Acceptable holding price: 204-276 CNY

• Clearly overvalued price: above 347 CNY

• Current price classification: acceptable to hold

• Worth waiting for a better price: yes; if the share price returns to around 150 yuan and the operating cash flow to net profit ratio returns above 0.8, the risk-reward will improve markedly. The opportunity cost of waiting is potentially missing a phase of sector strength, but this is more controllable than chasing the rally with no margin of safety.

• Target holding period: 3-5 years

• Expected annualized return: conservative -24% / neutral +4% / optimistic +37% (estimated from the next-12-month scenario prices).

• Maximum loss risk: about 45%-55%; the trigger is the second-curve ramp falling short of expectations, customer expansion slowing, and cash flow continuing to weaken, compounded by valuation falling from a PE above 60x to 25-35x.

• Signals that trigger a reassessment: operating cash flow to net profit below 0.7 for two consecutive reporting periods

• functional wet electronic chemicals revenue share below 18% for two consecutive reporting periods

• top five customers' sales share rising above 80%

• core CMP business revenue growth dropping below 15%

• electroplating solutions and additives still showing no visible scale revenue over the next 4 quarters

【Valuation Range】

• current: 230.45 (as of the 2026-06-12 close)

• bear (conservative, ideal buying range): [135, 145]

• base (reasonable, acceptable holding range): [204, 276]

• bull (optimistic, above the clearly-overvalued line): [347, 400]

Key Data Tables

Although the overseas growth rate is very high, the low base means the company is currently still highly dependent on the pace of mainland wafer-manufacturing investment.

This set of numbers explains why this report gives a "Hold" rather than a "Buy": the company's quality is good enough, but the price leaves no room for error.

Research Uncertainties

• The company's 2025 annual report does not directly name the current top five customers, disclosing only the concentration; therefore this report's judgment that "core customers are still mainly SMIC, Yangtze Memory, Hua Hong, and the like" can only be based on the prospectus and the long-term customer lineage over the years, and cannot be taken as the 2025 list.

• The company does not publicly disclose the overall self-sufficiency rate of core raw materials such as silica sol and cerium oxide, nor does it break out their quantitative contribution to blended gross-margin improvement; this means the magnitude of "raw-material self-sufficiency driving margin improvement" can only be inferred cautiously.

• 2025 investing cash flow was affected by wealth-management and outbound investment, making it hard to directly purify manufacturing capex; this report's estimates of maintenance capex and owner earnings are research inferences, not the company's own figures.

• The segment definitions, accounting conventions, and currencies of overseas comparables differ considerably from Anji, so cross-sectional comparison is more suitable as a business-model reference than as a precise valuation anchor.

• This report's valuation scenarios are centered on the profit and multiple the market may accept over the next 12 months, and cannot replace a long-term DCF; sensitivity to extreme cases is high.

References

• Anji Microelectronics Technology (Shanghai) Co., Ltd. 2025 Annual Report, 2026-04-14.

• Anji Microelectronics Technology (Shanghai) Co., Ltd. 2026 First Quarter Report, 2026-04-25.

• Anji Technology Prospectus for the Initial Public Offering and Listing on the STAR Market (meeting draft), 2019-05.

• Shanghai Stock Exchange / financial data pages on Anji Technology's IPO offer price, listing date, and current quotes.

• Shanghai Stock Exchange announcement on Anji Technology's 2025 profit-distribution implementation.

• ChinaBond and China Money Network on the 2026-06-12 China 10-year government bond yield.

• FUJIFILM Semiconductor Materials Business Briefing, 2025-12-10.

• Entegris Investor Relations and 2026Q1 results disclosure.

• Dinglong 2025 Annual Report summary and earnings briefing summary.

• CMC and Jianghua Micro related announcements and quote data.

Other Tickers Mentioned in the Report

• ENTG.US — global semiconductor materials leader, used to contrast Anji's position and ecosystem gap within global high-end process materials

• 300054.SHE — Dinglong, a domestic integrated CMP materials platform, representing the most realistic one-stop competitive pressure on Anji's future

• 603078.SHG — Jianghua Micro, a representative domestic wet-electronic-chemicals company, used to contrast the business model of "broad platform but a relatively more dispersed barrier"

• 688549.SHG — CMC, a platform company in front-end chemicals and specialty gases, used to contrast the difference in profit quality between Anji and broad-spectrum chemicals platforms

• 300236.SHE — Shanghai Sinyang, a veteran domestic semiconductor chemical materials maker, used as a reference for the localization progress of cleaning solutions and wet chemistry

• 688981.SHG — SMIC, a long-term important customer of Anji and a key observation target for domestic advanced-process demand

• 688347.SHG — Hua Hong, a representative domestic specialty-process fab, reflecting Anji's local customer structure and mature-process demand

• TSM.US — TSMC, one of the important customers disclosed in Anji's prospectus period, and an important industry reference for the advanced-logic route

This report is based on public information and does not constitute investment advice. Markets carry risk; invest with caution.