Sinolink: Initial "Buy" rating for GLOBAL NEW MAT (06616) with a target price of HKD 6.19.

Sinolink released a research report stating that they have initiated coverage on GLOBAL NEW MAT (06616) with a "buy" rating. The company is expected to achieve a net profit attributable to shareholders of 275 million, 467 million, and 576 million yuan respectively in 2025, 2026, and 2027. The corresponding dynamic PE ratios are 21x, 12x, and 10x. Based on a 16x valuation for 2026, the target price is set at 6.19 Hong Kong dollars. The firm is optimistic about the company's prospects due to the following factors: 1) overseas acquisition of Germany's Merck surface materials business/CQV to cultivate a leading global pearlescent pigment company, 2) capacity expansion and product structure optimization leading to a rise in both volume and price, and 3) promising prospects in new consumption markets such as cosmetics and automotive industries for pearlescent pigments, with synthetic mica replacing natural mica being a clear trend. Sinolink's main points are as follows: Pearlescent pigment industry: Promising prospects in new consumption markets such as cosmetics and automotive According to the company's announcement, the combined market share of the two leading pearlescent pigment companies (Global + Kuncolor) in China exceeds 30%. The high-end consumer cosmetics and automotive sectors (both new consumption areas with double-digit growth rates in cosmetics and automotive industries) will become the main drivers of industry growth in the future. In addition, the trend of domestic substitution will encourage domestic cosmetics and automotive manufacturers to prioritize purchasing from domestic supply chains. Timing is right for overseas acquisitions to cultivate a leading global pearlescent pigment company In January 2023, the company acquired a 42.45% stake in CQV, the largest pearlescent pigment manufacturer in South Korea, for 500 million yuan. In 2024, CQV achieved revenue of 297 million yuan, a year-on-year increase of 18%, and a net profit of 46 million yuan, a year-on-year increase of 170%. In July 2025, the company completed the acquisition of Merck's global surface solutions business. The procurement of natural mica has been a core issue for Merck's surface solutions business, and the company is expected to empower Merck in the supply chain. Capacity expansion and product structure optimization to drive both volume and price growth The company's domestic workforce in Qise has capacity planning in place. The current pearlescent pigment production capacity is 33,000 tons, with a long-term plan for 48,000 tons. The combined capacity of CQV's South Korean base is 26,000 tons. Capacity expansion will support sales growth. The planned production capacity of synthetic mica at the Tonglu factory is 100,000 tons, scheduled to be completed and put into operation in the second half of 2025. Expansion in Guangxi Phase II and the acquisition of CQV/Merck will provide channels for synthetic mica capacity digestion. Currently, the domestic production cost of synthetic mica is still higher than that of natural mica. The company anticipates a cost reduction through expansion, leading to a tipping point in costs. Risk warning Risks associated with cross-border acquisitions, lack of synergy in cross-border business operations, product structure upgrades not meeting expectations, and macroeconomic fluctuations.