New Stock Outlook: Focusing on the core materials of film capacitors, with annual revenue of 300 million, can aggressive expansion of production capacity ensure the growth of Haiwei Electronics?

In the future, the market for capacitor dielectric films will experience moderate expansion at a relatively high growth rate. Although it may not be a super large market with huge growth potential, double-digit potential growth rates can still support one or even multiple promising growth companies.As a domestic manufacturer with outstanding first-mover advantage and economies of scale, Haiwei Electronics naturally will not miss the opportunity to seize the incremental market. As of now, Haiwei Electronics already has 5 capacitor film production lines and 3 metalized film production lines. According to the prospectus, in the next phase, Haiwei Electronics will significantly increase its production capacity. The company plans to invest in 4 additional capacitor film production lines within three years on top of the existing production lines. By 2027, Haiwei Electronics' annual production capacity of capacitor film is expected to increase by 16,000 tons, a 106.9% increase from its annualized production capacity of 14,967 tons as of the end of September 2024. At the current time point, it is difficult to say how Haiwei Electronics' ambitious expansion plans will impact the company. Indeed, in an industry with optimistic growth expectations, significantly expanding production capacity can allow a company to quickly capture the incremental market and further enhance its bargaining power. However, on the flip side, the "aftermath" of aggressive expansion may bring about challenges: on one hand, it can increase the company's cash flow and debt pressure; on the other hand, if competitors aggressively expand their production capacity in response, it may lead to supply-demand imbalances, price wars, or even drag the entire industry into a downturn. Looking at the company, it can be said that Haiwei Electronics, which is making a push towards the Hong Kong Stock Exchange, has reached a "crossroads" in its development. The industry it operates in is promising, and with major shareholders like BYD Company Limited and Sungrow Power Supply, Haiwei Electronics has the confidence to navigate through the challenges. However, with the weakened profitability and aggressive production expansion plans, it seems that a shadow has been cast over the company's investment value. The future of how Haiwei Electronics will capture the heart of the capital market may need to be left to time to answer.