SENIOR MATERIAL (06067) climbed nearly 6% during the morning trading session, with shares last up 5.64% at HK$7.89, on turnover of HK$17.54 million.

The company had earlier disclosed its 2026 interim results, reporting group revenue of RMB 2.631 billion, up 39.9% year-on-year, while profit attributable to owners of the company reached RMB 137 million, an increase of 36.82%.

According to Guosen Securities, the company's separator business generated RMB 2.631 billion in revenue for the first half of 2026, representing a 40% year-on-year increase, with a gross margin of 29.24%, up 4.40 percentage points. The brokerage estimates that the company's separator shipments exceeded 2.3 billion square meters in H1 2026, with Q2 shipments surpassing 1.3 billion square meters, reflecting a sequential improvement of approximately 30%.

Guosen also projects that the company's wet-process separator shipments exceeded 1.1 billion square meters in Q2 2026, with net profit per square meter of approximately RMB 0.15-0.16, continuing the positive sequential trend.

Regarding emerging business initiatives, the company has established a subsidiary, Nantong Dingyuan Precision, to develop polymer tantalum capacitors, targeting high-precision voltage regulation and filtering applications in computing data centers, consumer electronics, and automotive electronics. Additionally, through the acquisition of Bangci Electronics, the company has entered the piezoelectric ceramics sector, leveraging its technological expertise to tap into the incremental market for semiconductor equipment and components. The move is expected to broaden the company's long-term growth prospects while creating industrial synergies between new materials and its core lithium battery business.

Where to begin with the investment thesis

The company's separator segment continues to demonstrate improving profitability, supported by robust shipment growth and margin expansion. Meanwhile, its strategic diversification into tantalum capacitors and piezoelectric ceramics positions it to capture additional growth opportunities beyond its traditional lithium battery materials business.

Why the focus on just these select business lines

The separator business remains the core revenue driver, while the newly developed segments offer potential upside that could further enhance the company's valuation over the medium to long term.