EPIWORLD (02726): The demand for AIDC has driven a significant year-on-year increase of 193.5% in the gross profit of global industry leaders, signaling that the industry's inflection point has arrived and the "inbound" dividend is about to be released.

On August 28, EPIWORLD (02726) announced its mid-term results for 2026. During the reporting period, the company achieved an operating income of RMB 578 million, a year-on-year increase of 92%; gross profit of RMB 161 million, a year-on-year increase of 193.5%; and an adjusted net profit of RMB 139 million, a year-on-year increase of 43.4%. Amidst a deep adjustment in the silicon carbide industry and many peers still experiencing losses, EPIWORLD, as a leading company in global silicon carbide epitaxy, benefited from several major customers entering the NVIDIA supply chain. With the outbreak of AIDC (AI Data Center), it achieved substantial growth in performance ahead of others. Key Highlights from the Mid-Term Report: Revenue, Gross Profit, and Earnings Show Comprehensive High Growth 1. AIDC Outbreak Drives Significant Year-on-Year Growth in Revenue, Gross Profit, and Gross Margin, with Profitability Far Exceeding Peers During the reporting period, the company achieved an operating income of RMB 578 million, a 92% increase from RMB 301 million in the same period last year, continuing the trend of high revenue growth. Benefiting from the AIDC outbreak, product structure optimization, and the release of scale effects, the company reported a gross profit of RMB 161 million, a year-on-year increase of 193.5%, with a growth rate significantly faster than that of revenue. The gross profit margin rose from 18.2% in the same period last year to 27.8% in the reporting period, an increase of 9.6 percentage points, corresponding to a growth rate of 52.8%, marking a significant leap in profitability. 2. Adjusted Net Profit Shows Significant Year-on-Year Growth The adjusted net profit for the company during the reporting period was RMB 139 million, a 43.4% increase compared to the same period last year. In a backdrop of industry-wide losses, EPIWORLD achieved outstanding profitability first, driven by its continuous expansion of technological and market advantages. 3. Cash Reserves and Asset Scale Increase Simultaneously, Further Enhancing Financial Strength As of June 30, 2026, the company had cash and cash equivalents (including time deposits) totaling RMB 3.22 billion, a 76.3% increase from the end of the previous year; total assets and net assets were RMB 6.31 billion and RMB 4.54 billion, respectively, representing increases of 39.4% and 50.8% year-on-year. Ample cash reserves provide strong support for capacity expansion and R&D investment. 4. Seizing the AI Data Center Strategic Lane with Strong Growth Momentum The company is the only silicon carbide epitaxy enterprise in China to enter the international supply chain on a large scale, with 4 out of the top 5 global silicon carbide power device manufacturers as its customers, all of whom are part of the NVIDIA AI Data Center supply chain. As the demand for efficient and reliable power electronic devices in AI Data Centers surges, the company has begun to significantly benefit from the rapidly growing demand for power chips driven by AI Data Centers, displaying strong growth momentum. 5. Important Breakthrough in 12-Inch Product Orders, Leading Global Market Layout As the world's first and currently the only company to release a new generation of 12-inch SiC epitaxy wafers, the company achieved a breakthrough in receiving small batch orders for 12-inch silicon carbide epitaxy during the reporting period. A single 12-inch epitaxy wafer can carry 4.4 times the number of chips compared to a 6-inch wafer and 2.3 times that of an 8-inch wafer, reducing the single-chip cost by over 40%. The company has completed a generational leap from 8-inch to 12-inch on a global scale, leading the global market layout. Epitaxy is the "value highland" in the industry chain, with an increasing value proportion If the mid-term performance is already impressive, the "value highland" represented by the epitaxial segment determines the sustainability of this growth. Silicon carbide substrates, as single-crystal substrates, are standard products. The substrates do not contain the product structure required by customers; it is the epitaxial segment that truly determines device performance and creates core value. In other words, the core performance metrics of silicon carbide power devices, such as voltage resistance, switching efficiency, and energy loss, are all determined by the epitaxial layer, which directly influences the ultimate performance limits of the devices. From the value chain perspective of automotive-grade silicon carbide chips, the value of the epitaxial segment has surpassed that of the substrate, and as voltage levels rise, this gap continues to widen, completely overturning the outdated conclusion that "the substrate is twice the value of the epitaxial segment." In 1200V automotive-grade devices (with epitaxial thickness of 10 to 13 m), the value of the epitaxy has surpassed that of the substrate; in 3300V solid-state transformers/grid devices (with epitaxial thickness of 30 m+), the value of the epitaxy exceeds that of the substrate by 3 times; and in kilovolt-level ultra-high voltage devices (with epitaxial thickness of approximately 100 m), the value of the epitaxy far exceeds that of the substrate by more than 10 times. From an industry trend perspective, the continuous shift to high voltage is raising the weight of epitaxial value. Applications such as the 800V/1000V new energy platform, 1700V+ photovoltaic systems, solid-state transformers (SST) for AI Data Centers, and 3300V+ for rail transit grids all require devices to evolve towards higher voltage capabilities, and for each increase in voltage level, the proportion of epitaxy in the value chain rises accordingly. The widely accepted conclusion in the industry is that the global market size for epitaxy far exceeds that of substrates and will continue to increase. AI Data Center Outbreak: Strong Incremental Demand for Silicon Carbide, EPIWORLD Positions Accurately With the global demand for AI computing power surging, the power per cabinet has risen from thousands of kilowatts to megawatt levels, and traditional low-voltage AC power supply architectures are gradually approaching performance limits, driving upgrades of AI Data Center power supply architectures towards higher voltage, higher frequency, and higher density. Silicon carbide, with its wide bandgap, high breakdown field, and high thermal conductivity, is the core material for the upgrade of AI Data Centers, applicable in mid-to-high voltage segments such as grid entrances and solid-state transformers. According to CICC's estimates, from 2026 to 2030, during the iterative upgrade of AI Data Center power supply architecture, the compound annual growth rate of the value of silicon carbide power devices corresponding to each megawatt of computing power is expected to reach 144%-379%; by 2030, the corresponding value of silicon carbide devices for each megawatt of AI Data Center is expected to be around USD 220,000, with the market size for silicon carbide devices in AI Data Centers expected to exceed USD 6.8 billion by 2030. For EPIWORLD, this represents a historic opportunity. The company is the only silicon carbide epitaxy enterprise in China that has entered the international supply chain on a large scale. Four out of the top five global silicon carbide power device manufacturers are customers of EPIWORLD, all of whom are part of the NVIDIA AI Data Center supply chain. This indicates that the company has fully engaged with the core industry chain of global AI computing power expansion. With demand surging, the company has started to significantly benefit from the rapidly growing demand for power chips in AI Data Centers. Electric Vehicles, Energy Storage, and Smart Grids Flourish in Multiple Areas with Strong Multifaceted Traction In addition to AI Data Centers, other downstream application areas for silicon carbide are also experiencing rapid development. Currently, new energy vehicles represent the foundation for industry growth. The electrification rate of automobiles is continuously increasing, with 800V and higher voltage platforms accelerating their penetration, and the application of silicon carbide power semiconductors is extending from high-end models to more economical ones. According to Yole, by 2031, the penetration rate of 800V voltage architecture models is expected to exceed 50%, with the market size for silicon carbide power devices in new energy vehicles reaching USD 6.8 billion, and the compound annual growth rate from 2025 to 2031 expected to exceed 20%, as the demand for automotive-grade silicon carbide continues to be released. Regarding the energy storage sector, silicon carbide can enhance system conversion efficiency to over 99% due to its low loss and high power density characteristics, while effectively reducing equipment size and cooling costs. With rapid expansion of installations in new types of energy storage globally, silicon carbide is accelerating its replacement of traditional silicon-based IGBTs; the growing demand for new energy consumption, along with the proliferation of household, commercial, and large public storage scenarios, opens a broad market space for silicon carbide devices. Furthermore, during the "14th Five-Year Plan" period, national grid fixed asset investment is expected to exceed RMB 5 trillion, representing an increase of over 80% compared to the same period of the "13th Five-Year Plan", with a key focus on promoting the intelligent upgrading of the grid. Due to the significant performance advantages of silicon carbide devices in core equipment such as solid-state transformers and flexible direct current converters, market demand will continue to be released along with the intelligent upgrading of the grid. Given the rapid growth across multiple application areas mentioned above, EPIWORLD, as a leading proponent of international silicon carbide standards and a leader in the global silicon carbide epitaxy industry, is well-positioned to swiftly capitalize on demand growth, regardless of which downstream application expands first. Peer Comparison: Financial Indicators Fully Lead, Alpha Attribute Highlights Comparing EPIWORLD with other listed companies in the third-generation semiconductor track reveals the high value of this mid-term performance report. Summary: Epitaxy is the Highest Value Segment; EPIWORLD's Four Barriers and One Major Favorable Trend Create the Strongest Alpha Epitaxy is at the core of the silicon carbide industry chain's value. As the demand trend in the silicon carbide industry reverses, driven by customized barriers and a trend towards higher voltages, epitaxy will become the most certain and highest value segment in this upward cycle of the silicon carbide industry chain. As the worlds largest epitaxy manufacturer, EPIWORLD is expected to become the most prominent alpha player in this cycle, supported by four core barriers and one major favorable trend: The first barrier is the world-leading market share and first-mover advantage in 8-inch technology. By 2024, the companys global sales volume for epitaxy is projected to reach 31.6%, firmly securing its leadership position. In May 2023, the company became the first domestic producer to break through 8-inch epitaxy technology and began commercial production of epitaxy chips; by 2024, it further became the only company globally to achieve mass sales of 8-inch epitaxy chips. As of June 2026, the company has established partnerships for 8-inch products with 35 global clients, with the shipment volume in the first half of the year significantly exceeding the full-year level of the previous year, while maintaining an industry-leading product yield. The "first to break through globally" and "first to supply in large quantities" showcases the semiconductor industry's development rule of "the strong getting stronger." The second barrier is the generational gap brought by the global debut of 12-inch technology. In December 2025, the company will globally debut the 12-inch silicon carbide epitaxy chip, currently the largest size of SiC epitaxy wafer achieved globally, which can carry 4.4 times the number of chips compared to a 6-inch wafer and 2.3 times compared to an 8-inch wafer, effectively lowering the single-chip cost by over 40%. It is noteworthy that while there are currently as many as 24 companies worldwide capable of providing 12-inch substrates, only EPIWORLD has publicly announced and achieved breakthroughs in 12-inch epitaxy orders. The thickness uniformity and doping concentration of the 12-inch epitaxy layer have been narrowed to 2.8% and 2.1%, respectively. The company is expected to leverage this significant generational gap to establish a first-mover advantage in the commercialization process of 12-inch silicon carbide and fully benefit from the industry's upgrade dividend towards larger sizes. The third barrier is the deep binding with key customers and the flywheel effect of rapid capacity expansion. The company serves 4 of the top 5 global silicon carbide power device manufacturers, and 8 of the top 10 power device manufacturers, showcasing strong customer stickiness. On the production side, by the end of June 2026, the companys monthly production capacity is expected to reach 60,000 wafers, with steady and ongoing capacity expansion. With cash reserves far exceeding those of its peers, EPIWORLD has strong confidence in capacity expansion, and its advantages are expected to further increase in the future. The fourth barrier is the unique competitiveness derived from high yield rates. The yield directly determines unit cost, which is a core variable affecting gross profit margin. The company is significantly leading the industry in yield rates, which directly translates into high gross margins. In the first half of 2026, while market prices for epitaxy had not increased, EPIWORLD's gross margin rose from 18.2% in the same period last year to 27.8% in the reporting period, marking a significant increase of 9.6 percentage points, with a relative growth of 52.8%. One major favorable trend is the imminent inclusion of EPIWORLD in the Stock Connect. On August 21, the Hang Seng Index Company announced the results of the quarterly review for the Hang Seng Index series as of June 30, 2026, and EPIWORLD has been included in the Hang Seng Composite Index. The related changes will take effect after market close on September 4 and be effective on September 7, at which point the Shanghai and Shenzhen Stock Exchanges will adjust the range of investable stocks under the Stock Connect accordingly. Following its inclusion, the company will directly open channels for the allocation of hundreds of billions of RMB of growth capital in the mainland. Considering that silicon carbide is a hot track in the A-shares market, as a "global epitaxy leader + large-scale supply of 8-inch products + world debut of 12-inch," a rare target, coupled with its products fully entering the rapidly growing AIDC applications, it is expected to attract mainland capital's interest and enjoy a higher valuation premium. It is foreseeable that with the disclosure of this remarkable mid-term report and the companys imminent inclusion in Stock Connect, the revaluation of its value under a high growth logic is expected to accelerate. (This article's data sources include EPIWORLD's 2026 mid-term performance announcement, publicly disclosed documents from various companies, as well as CICC and Industrial research reports, etc. This does not constitute any investment advice; the market carries risks, and investment should be approached with caution.)