Nomura: Hubei Dinglong: Semiconductor materials account for a larger share as third-quarter revenue edges up and net profit rises 55%

Why did net profit rise 55% when revenue grew just 2%?

In the third quarter of 2026, the company reported revenue of 988 million yuan, up 2% year over year and 9% quarter over quarter; growth in semiconductor materials was offset by the disposal of some printing consumables businesses. Net profit was 322 million yuan, up 55% year over year.
Semiconductor materials revenue rose 17% year over year during the quarter, accounting for 70% of company revenue, up from 57% in 2025. Within that, CMP polishing pad revenue rose 22%, while polishing and cleaning liquids revenue rose 65%.
The shift in the revenue mix toward semiconductor materials, together with the company’s in-house supply of raw materials, lifted its quarterly gross margin by 8.7 percentage points year over year to 62.3%. Excluding the disposed printing businesses, Nomura estimates net profit grew approximately 79% year over year.

Management said CMP polishing pad shipments reached a monthly record of approximately 55 thousand pads in October and are expected to increase further from November to December. Current annual hard-pad capacity is 600 thousand pads, and Nomura expects it to rise to 700 thousand pads by the end of 2026.
A second plant is under construction, and Nomura expects it to begin production in the second half of 2027, bringing total annual capacity to more than 1.3 million pads. The additional capacity provides room for shipment growth, while its contribution also depends on the ramp-up of customers’ production lines.
Photoresists have begun contributing revenue, generating 10.25 million yuan in the third quarter; a second production line was completed in the first quarter of 2026 and is ramping up, with a target annual capacity of 300 tonnes. Nomura includes higher photoresist sales volumes in its growth assessment, while warning that ArF and KrF order conversion could be slower than expected.

Downstream panel makers’ utilization rates were low, and display materials revenue fell 25% year over year in the third quarter; Nomura expects this pressure to persist in the fourth quarter.
Nomura expects China’s G8.6 production lines to drive a recovery in display materials from 2027: a single G8.6 line consumes approximately 2.2 to 2.4 times as much material as a G6 line. The timing and extent of the recovery therefore depend on progress with downstream production lines.

Company management guided for 2026 net profit of 1.1 billion to 1.2 billion yuan; Nomura forecasts 1.167 billion yuan and expects semiconductor materials revenue to grow 35% and 34% year over year in 2026 and 2027, respectively.
Taking into account the revenue outlook from capacity ramp-ups and new products, Nomura raised its earnings forecasts for 2027 and 2028 by approximately 2% and 1%, respectively. Its 2027 net profit forecast is 1.446 billion yuan, up from its previous forecast of approximately 1.414 billion yuan.
Nomura maintained its buy rating and raised its target price from 104 yuan to 105 yuan, based on forecast 2027 earnings per share of 1.50 yuan and a target price-to-earnings multiple of 70 times. The bank also cautioned that slower-than-expected capacity ramp-ups at major customers and goodwill or integration issues related to a lithium materials acquisition could affect achievement of the target price.