NOVORAY New Materials(688300.HK) SH) is a leading electronic grade functional powder new material enterprise in China, and has formed a multi-category product layout based on silicon-based oxides and aluminum-based oxides, and its downstream application fields include various epoxy molding materials (EMC, LMC, GMC, etc.), underfill materials, electronic circuit substrate materials, thermal interface materials, etc.

Specifically, semiconductor packaging and testing is one of the main downstream fields of Novoray New Materials, and its spherical silicon powder is mostly used in the field of epoxy plastic molding materials, which is highly related to the packaging market.

In the first half of 2024, the semiconductor market demand will pick up, and the industry expects the semiconductor sales market to achieve strong growth from 2024 to 2025. In the first half of the year, Novoray seized the development opportunities of the industry, with a year-on-year increase in overall business revenue, further optimization of product structure, an increase in the proportion of high-end products, and a year-on-year increase in profits. In the first half of 2024, Novoray achieved operating income of 443 million yuan, a year-on-year increase of 41.15%; the net profit attributable to the parent company was 117 million yuan, a year-on-year increase of 60.86%; The net profit was 106 million yuan, a year-on-year increase of 70.32%.

In the future, driven by the wave of generative AI and HPC, the advanced packaging market is expected to maintain stable growth. According to Yole data, the global advanced packaging market will reach $37.8 billion in 2023, and the market size is expected to grow by 13% in 2024 and reach $69.5 billion by 2029. The advanced packaging process is more complex and has higher requirements for the physical and chemical properties of the encapsulation materials, so in addition to driving the growth of electronic-grade filler shipments, it also drives the volume of high-value-added high-end filler products.

In addition, another major application area of Novoray's core products is in the copper clad laminate market, and the industry demand is highly correlated with the copper clad laminate and its downstream PCB market, and is affected by the end demand of consumer electronics. Prismark predicts that the compound annual growth rate of global PCB output value is expected to reach 5.4% from 2023 to 2028, which will drive the growth of demand for copper clad laminates and upstream silicon powder fillers. At the same time, the growth of demand for high-end products such as high-speed copper clad laminates and packaging substrates under the wave of AI is also expected to drive the growth of high-end silicon powder fillers for copper clad laminates.

According to the semi-annual report of NOVORAY, the growth of demand for advanced chip packaging materials, liquid potting materials, and high-frequency and high-speed copper clad laminates has driven the growth of demand for silicon powder with lower CUT point, tighter filling, lower radioactive content, spherical silicon powder and high-purity spherical alumina powder with special electrical properties such as LowDf (low dielectric loss). The spherical inorganic non-metallic powder materials produced by Novoray relying on core technology have industry-leading electrical properties, low CUT points, high filling rate, high purity and other excellent characteristics, which can accurately meet the requirements of low transmission loss, low transmission delay, high heat resistance, high thermal conductivity and high reliability of the new generation of HPC, high-frequency and high-speed substrates for 5G communication and the new generation of chip packaging materials.

As a leading enterprise in the domestic industry, Novoray has always focused on the R&D and manufacturing of advanced inorganic non-metallic powder materials since its establishment, with 40 years of R&D experience and technology accumulation in the field of inorganic non-metallic powder materials, and independent systematic intellectual property rights. At present, NOVORAY has become a national high-tech enterprise, recognized by the Ministry of Industry and Information Technology as the first batch of specialized and new "little giant" enterprises, and successfully selected as a national manufacturing single champion demonstration enterprise.

According to Novoray New Materials disclosed in the 2023 annual report, the company has undertaken many special research projects of science and technology of the Ministry of Science and Technology, Jiangsu Provincial Science and Technology Achievement Transformation Project and Jiangsu Provincial Development and Reform Commission Major Project Project, and its "complete set of technology and industrialization development and application in integrated circuits for the preparation of spherical silicon powder by flame method" won the first prize of China Building Materials Federation/China Ceramic Society Science and Technology Progress Category. As of June 30, 2024, Novoray has obtained a total of 117 intellectual property rights, including 51 invention patents, 58 utility model patents, 3 design patents, and 5 software copyrights.

After years of development, Novoray has basically established extensive and gradient cooperative relations with leading companies in many application fields. High-quality customer resources are conducive to the stable growth of Novoray's main business income in the future.

"Novoray has been a stable enterprise for 40 years. We have been focusing on investment in technology research and development and product quality. Now the consistency and stability of our product quality, as well as our response speed to customer needs and feedback, have gained a good position in the minds of customers. Berlin, secretary of the board of directors of Novoray, told Yicai that facing the future, Novoray has always taken becoming a trusted partner of customers as its goal and vision, and has made continuous efforts to this end. In the future, Novoray will continue to deepen technological innovation, continuously accumulate talents, and at the same time, improve the company's system, improve the level of informatization, and expand in depth.