New Stock Preview | Behind Hong Kong IPO of Macro & Electronics Standing at the Wind of AI Computing Power

With the sweeping wave of artificial intelligence (AI) around the world, the explosive growth of AI computing power infrastructure is profoundly reshaping the landscape of the upstream core materials industry. As an indispensable "skeleton" for printed circuit boards (PCBs), electronic grade glass fiber cloth (referred to as "electronic cloth") is experiencing unprecedented structural upgrades. Driven by the strong demand for AI servers, data centers, and high-performance computing, the market demand for high-end electronic cloth with high frequency, high speed, and low signal loss is soaring. Against this background, Honghe Electronic Materials Technology Co., Ltd. (hereinafter referred to as "Honghe Electronics"), a leading enterprise in high-end electronic cloth in China, recently submitted an application for listing on the Hong Kong Stock Exchange, aiming for a dual listing in both A and H markets. According to Frost & Sullivan data, based on 2025 revenue, the company ranks first globally in the high-end conventional electronic cloth field (ultra-thin cloth + ultra-thin cloth), with a market share of 20.5%. In the field of special electronic cloth with higher technical barriers, the company is the only domestic manufacturer that mass produces a complete series of low CTE cloths, and is also one of the only two enterprises that have achieved stable supply of the second generation low Dk/Df cloth. With its leading position in ultra-thin cloth and special electronic cloth fields, Honghe Electronics not only experienced explosive growth in performance in 2025, but also positioned itself at the forefront of the AI computing hardware iteration. Can Honghe Electronics leverage the power of capital through this Hong Kong IPO to further consolidate its market position as the "hidden hero behind AI computing power"? Let us first look at its fundamentals. AI computing power drives performance growth, significant optimization of high-end product structure It is understood that Honghe Electronics is a supplier of high-end electronic grade glass fiber cloth (referred to as "electronic cloth"). The company focuses on the research, development, production, and sales of high-end conventional electronic cloths such as ultra-thin cloths, super-thin cloths, as well as special electronic cloths with low dielectric constant/low dielectric loss factor ("low Dk/Df") and low coefficient of thermal expansion ("low CTE"). The company has integrated production capabilities for electronic yarn and electronic cloth, and owns production lines for low, medium, and high-end products, making it one of the few enterprises globally with a complete product line. From the prospectus, Honghe Electronics' performance shows a very distinctive reversal feature, which coincides with the upgrade cycle of the electronic cloth industry driven by the iteration of AI computing hardware. According to Frost & Sullivan data, the value of PCB and electronic cloth used in a single AI server is much higher than that in traditional servers, and as AI applications continue to expand, the demand for high functional special electronic cloths such as low dielectric constant and low dielectric loss factor (Dk/Df) cloth, and low coefficient of thermal expansion (CTE) cloth is expected to increase significantly. By 2025, the global shipments of AI servers are estimated to be around 2.5 million units, and it is projected to increase to approximately 6.8 million units by 2030 at a compound annual growth rate of 22.2%. It is this structural shift in demand that is driving the electronic cloth industry from being mainly driven by consumer electronics with conventional thick cloths in the past, to a new cycle dominated by special electronic cloths and ultra-thin cloths driven by AI computing power. The financial data of Honghe Electronics accurately reflects this industry transformation: in 2023, 2024, and 2025, the company's revenue was RMB 661 million, RMB 835 million, and RMB 1.171 billion, respectively, with a year-on-year growth rate of 40.3% in 2025. More importantly, there has been a qualitative change in profitability - the company's gross profit margin sharply increased from 7.3% in 2023 to 17.6% in 2024, and further jumped to 35.1% in 2025; in terms of net profit, after recording a net loss of RMB 63.094 million in 2023, the company turned losses into profits in 2024 with a net profit of RMB 22.801 million, and in 2025, the net profit soared to RMB 202 million, with a net profit margin of 17.2%. This financial curve of "accelerating revenue growth, doubling gross profit margin, and explosive net profit growth" accurately portrays the performance elasticity of a technology-oriented company switching from a downturn in the industry to an upturn in demand driven by AI. A closer look at the income statement reveals that Honghe Electronics' performance breakthrough in 2025 is not simply due to economies of scale, but it successfully seized the industry's upgrade dividend and achieved a strategic shift in product structure from conventional electronic cloths to special electronic cloths. Notably, driven by the strong demand for AI computing power, the company's revenue from special electronic cloths increased from RMB 12.506 million in 2024 to RMB 178 million in 2025, with the proportion of total revenue increasing from 1.5% to 15.2%, becoming the core engine driving overall gross profit margin. Revenues from low Dk/Df cloths increased from RMB 10.024 million to RMB 133 million, a product that significantly reduces signal transmission loss, primarily used in AI, high-performance computing, high-end communications, and other areas; revenues from low CTE cloths increased from RMB 2.482 million to RMB 44.866 million, a product that addresses stability issues in chip stacking packaging, being a core material for high-end IC packaging substrates, applied in AI, high-performance computing, high-end consumer electronics, intelligent driving, and other cutting-edge fields. This increase indicates that the company's special products have successfully passed the strict certification of downstream leading customers and entered the bulk supply stage, reflecting a substantial improvement in domestic capacity in the AI computing industry chain. At the same time, driven by the expansion cycle of the industry, revenue from ultra-thin cloths in the company's conventional electronic cloths increased from RMB 100 million in 2023 to RMB 234 million in 2025, reflecting the synergistic effect of the trend towards thinner consumer electronics and the upgrade of AI terminals. Double concentration risks in the supply chain and customer base, risk game in the high prosperity track Despite the impressive performance, there are still some warning signals in the financial health of Honghe Electronics. The company's asset-liability ratio increased from 58.6% in 2024 to 74.8% in 2025, and the current ratio decreased, indicating significant funding pressure brought about by capacity expansion. This also explains why, despite being already listed on the A-share market, the company is eager to establish an "A+H" dual financing platform. In the competition of industry expansion, whoever can take the lead in high-end capacity deployment will have a more advantageous position in the wave of domestic substitution of AI computing materials. At the same time, the operational stability of Honghe Electronics also faces a severe test of "double highly concentrated" customers and suppliers. Data from the prospectus shows that the company's customer structure exhibits a high level of concentration. From 2023 to 2025, the income from the top five customers accounted for 59.3%, 57.2%, and 62.3% of the total revenue, with the revenue share of the largest single customer reaching 20.1% in 2025. This high dependence on a few core customers makes the company's operational performance vulnerable to changes in the competitive landscape among downstream copper-clad laminate companies and adjustments in procurement strategies. If core customers reduce orders or lower purchase prices due to industry fluctuations, it will directly impact the company's revenue scale and bargaining power. Furthermore, the pressure from the raw material end is also significant. Electronic yarn, as the core raw material for producing electronic cloth, is subject to significant fluctuations in price influenced by the commodity cycle. From 2023 to 2025, the proportion of raw material costs to sales costs increased from 18.4% to 27.1%. More critically, the company's procurement concentration is also high, with the proportion of purchases from the top five suppliers increasing from 58.6% in 2023 to 71.2% in 2025, with the proportion of purchases from the largest supplier maintaining around 20% in the long term. This bidirectional dependency in the supply chain greatly compresses the company's ability to transfer costs. According to operating data for the first quarter of 2026, the average purchase price of major raw materials increased by as much as 206.55% year-on-year. Although favorable downstream demand led to an increase in product prices, with the average selling price of electronic cloth rising by 116.85% year-on-year in the first quarter of 2026, if raw material prices continue to remain high and the company is unable to smoothly transfer cost pressures downstream, the future profit space still faces the risk of compression. Overall, Honghe Electronics has achieved a leap in performance with the tailwind of AI computing power. Its technological barriers and customer stickiness in the field of ultra-thin and special electronic cloth constitute the core investment value, but facing aggressive capacity expansion plans and a complex and volatile international trade environment, the company needs to find a better balance between scale expansion and financial stability.