New stocks preview | Baogai new materials: China's leading producer of GFRP trench covers, with only 330 million yuan in cash on hand.

In the context of low consumer spending, investment has taken up the banner of boosting GDP. The "14th Five-Year Plan" sets a target of renovating 170,000 kilometers of old pipeline networks, with a total investment exceeding 500 billion yuan, bringing opportunities to the market to replace traditional cast iron and concrete cover plates with advanced composite material solutions. Recently, the leading Chinese GFRP trench cover manufacturer, Baogai New Material, submitted an application for listing on the Hong Kong Stock Exchange, with Central Thai International as its exclusive sponsor. The company is a professional manufacturer in the composite material trench cover industry. Based on Frost & Sullivan, by 2024, the company ranks first in both the Chinese cable trench cover and GFRP cable trench cover industries, as well as third in the cable trench cover industry. Baogai New Material's performance is average, with revenues of 137 million yuan, 131 million yuan, and 144 million yuan respectively from 2023 to 2025, and net profits to shareholders of 25 million yuan, 22 million yuan, and 24 million yuan, showing a slightly weak growth. As of December 2025, the company's cash and cash equivalents amounted to only 33 million yuan. Amid the wave of large-scale infrastructure construction, how will Baogai New Material's fundamentals fare, and can it benefit from policy dividends? Weak revenue growth but stable profitability Established in 2009, Baogai New Material specializes in producing GFRP trench cover products primarily for meeting engineering and infrastructure needs. Its product portfolio includes cable trench covers, drainage trench covers, and manhole covers, serving clients in important sectors such as electricity, transportation, urban utilities, water conservancy projects, real estate, and petrochemical engineering. The company has three main businesses: cable trench covers, drainage trench covers, and manhole covers. The company's GFRP trench cover products can be further classified into BMC and SMC according to key processing procedures. Both BMC and SMC are thermosetting composite materials. Compared to SMC, BMC's main feature is lower cost, achieving a balance between cost and performance, making it the company's core product with a revenue contribution of over 90% annually. In 2025, BMC and SMC contributed 93.2% and 5.8% to the revenue respectively. From a business perspective, Baogai New Material's core business is cable trench covers, with revenue contributions of 75.7%, 71.7%, and 70.1% from 2023 to 2025, showing a slight decline in contribution each year. The second-largest business is drainage trench covers, maintaining a growth trend with a compound annual growth rate of 32.75% over the past three years, increasing its revenue contribution from 10.5% to 17.5%. Additionally, revenue from manhole covers declined significantly in 2025, with a contribution of 6.6%. Baogai New Material's cable trench covers are widely used in Chinese railway and highway tunnels, as well as power facilities, especially grid operators and substations. Drainage trench cover products are widely used in petroleum refineries, municipal infrastructure, and other drainage applications, while manhole cover products cater to various infrastructure needs. The three main product customers are mainly distributed in East China, Northwest China, North China, and Central China, with a relatively balanced distribution. In 2025, revenue contributions were 38.7%, 17.9%, 19.9%, and 12.1% respectively. The customer base is relatively diversified, with the top five customers contributing only 14.9% of revenue in 2025. The company's direct and trade customers are domestic, but it is actively pursuing globalization through strategic expansion into major overseas markets. In terms of profitability, the company's gross profit margin is stable, with margins of 38.2%, 37.5%, and 38.2% from 2023 to 2025. The gross profit margins of the three main business products show minimal fluctuations, with margins of 36.8% for cable trench covers, 41.2% for drainage trench covers, and 40.1% for manhole covers in 2025. Additionally, various expenses have remained stable, with net profit margins to shareholders of 18.25%, 16.5%, and 16.75% over the period. Slow industry growth, lack of future prospects From an industry perspective, the Chinese trench cover industry is small in size and growing slowly. According to Frost & Sullivan, the market size of the industry was 9.68 billion yuan in 2024, with a compound annual growth rate of only 3.4% over the past five years. It is estimated that the market size will reach 11.5 billion yuan in 2029, with a compound annual growth rate of 3.5%. Electrical cable trench covers, drainage trench covers, and manhole covers all show low single-digit compound growth rates, with market shares of 41.1%, 21.6%, and 28.1% in 2024, respectively. Baogai New Material mainly offers GFRP trench cover products, with the Chinese market size reaching 1.052 billion yuan in 2024 and a compound annual growth rate of 6.5% over the past five years, accounting for 10.87% of the total market. While the industry is small in size, there are many participants, with around 300 production and processing companies in the Chinese CFRP industry in 2024. The top five participants by revenue share accounted for only 9.65% of the market, indicating a highly fragmented and competitive industry. The company ranks third with a market share of 1.35%, and also ranks first in the cable trench cover industry with a market share of 2.36%. However, the company's performance is significantly below the industry average, putting pressure on its market share. The company operates three production factories in China: Baogai Factory and Zhongdian Factory in Shandong Province, and Baogai (Xi'an) Factory in Shaanxi Province. While the overall capacity utilization rate was 77.7% in 2025, there was a notable improvement in the capacity utilization rate of the Baogai (Xi'an) Factory, rising from 42.6% to 74.7%. With a relatively small asset size, the company had total assets of 184 million yuan in 2025, of which property, factory buildings, and equipment accounted for 53 million yuan. The company has a healthy financial position with virtually no debt and an equity-to-asset ratio of 85%. However, despite being supported by large-scale infrastructure policies, the industry's small size and lack of growth prospects, coupled with the company's lack of expansion in recent years and a declining trend in fixed assets, may lead to a continued contraction in business scale. In conclusion, although Baogai New Material is a leader in the GFRP trench cover industry, the industry lacks growth potential, faces intense competition, and the company's revenue performance is slightly weak. With a small asset base and limited cash on hand, amounting to only 33 million yuan, the company faces challenges. However, there are bright spots, such as maintaining profitability and stable profit margins, an upward trend in capacity utilization rates at its three main production bases, and the absence of debt, indicating that an IPO may provide sufficient funds for transformation into new growth avenues.