Huazheng New Materials announces a 1.2 billion yuan private placement to fund projects such as high-grade copper-clad laminate, after the previous fundraising project failed to achieve expected benefits within three years.

Recently, Huazheng New Material announced a private placement plan. The company plans to raise no more than 1.2 billion yuan, with 1 billion yuan allocated to a project producing 12 million high-grade copper-clad boards annually. In the past year or two, the copper-clad board market has experienced a structural recovery, and the stock prices of listed companies in the copper-clad board sector on the A-share market have performed strongly, including Huazheng New Material. By 2025, Huazheng New Material turned losses into profits, with both revenue and net profit reaching new highs. However, a reporter from Daily Economic News (hereafter referred to as “the reporter”) noted that the company’s net profit mainly comes from government subsidies and gains from asset disposals.

Government subsidies and other income became the main sources of profit last year

Huazheng New Material mainly engages in the design, research and development, production, and sales of copper-clad boards, bonding sheets, composite materials, and film materials. Its products are widely used in 5G communications, servers, data centers, semiconductor packaging, new energy vehicles, smart home appliances, medical equipment, rail transit, and green logistics.

The industry leader in copper-clad boards holds a relatively high market share. Huazheng New Material’s 2025 annual report shows that in 2024, the market shares for CR1, CR3, CR5, and CR10 in the copper-clad board industry were 14%, 41%, 56%, and 77%, respectively, indicating high concentration. Huazheng New Material’s global market share in 2024 was approximately 2.8%, ranking 11th.

In 2025, driven by demand in AI and automotive electronics applications, the copper-clad board market showed a structural recovery. Against this backdrop, Huazheng New Material’s profitability improved. In 2025, the company achieved operating revenue of 4.369 billion yuan, a year-on-year increase of 13.05%; net profit of 277 million yuan, a year-on-year increase of 384.01%, turning profitable. However, the company’s non-recurring profit net profit was only 65.67 million yuan, still far from its historical best.

Compared to industry leaders, Huazheng New Material’s profitability still needs improvement. The leading copper-clad board company on the A-share market is Shengyi Technology. According to Tonghuashun, by the third quarter of 2025, Shengyi’s gross profit margin and net profit margin were 26.74% and 13.89%, respectively. In contrast, Huazheng New Material’s gross profit margin and net profit margin for the same period were only 12.78% and 2.07%.

In fact, most of Huazheng New Material’s profits in 2025 came from other income. The 2025 annual report shows that the company received a total of about 171 million yuan in government subsidies related to assets and revenue, an increase of over 90 million yuan compared to 2024.

（Image source: Screenshot from Huazheng New Material’s 2025 annual report）

Additionally, in 2025, Huazheng New Material also gained about 134 million yuan from asset disposals. The reporter noted that the gains from asset disposals and other income mainly occurred in the fourth quarter of 2025.

（Image source: Screenshot from Huazheng New Material’s 2025 annual report）

With improved performance, the concept of PCB, and other factors, Huazheng New Material’s stock price performed strongly in 2026, continuously hitting new highs. On March 3, 2026, during trading, the stock price reached a high of 88.15 yuan. As of March 24, 2026, Huazheng New Material closed at 61.69 yuan, with a market value of approximately 9.672 billion yuan.

Previous fundraising projects did not meet expectations

On the evening of March 23, 2026, Huazheng New Material announced a plan for a targeted A-share stock issuance in 2026. The plan shows that to meet the demands of the AI computing power era and seize industry strategic opportunities, the company intends to raise no more than 1.2 billion yuan through a targeted issuance of shares, with net proceeds after issuance costs to be invested in the following projects: 1) a project producing 12 million high-grade copper-clad boards annually; 2) supplementing working capital. The first project alone plans to use up to 1 billion yuan of the raised funds.

（Image source: Screenshot from Huazheng New Material’s announcement）

The reporter noted that Huazheng New Material’s previous fundraising projects did not achieve the expected benefits. In 2022, the company raised approximately 562 million yuan through convertible bonds, which were used for two projects: 1) a project to produce 24 million high-grade copper-clad boards at the Toyama Industrial Park manufacturing base; 2) supplementing working capital. The actual investment in the first project was 400 million yuan.

（Image source: Screenshot from Huazheng New Material’s announcement）

Huazheng New Material’s 2022 fundraising project reached the operational state in April 2023, but in recent years, the project has not achieved the promised benefits. The company’s verified report on the use of the previous funds shows that the “annual production of 24 million high-grade copper-clad boards at Toyama Industrial Park” was expected to generate an after-tax profit of 69.28 million yuan at full capacity. However, from 2023 to 2025, the actual benefits were -17.49 million yuan, 2.62 million yuan, and 54.81 million yuan, respectively.

（Image source: Screenshot from Huazheng New Material’s announcement）

The main reasons for the actual benefits of the 2022 projects being lower than promised are: first, after production started, macroeconomic, market, and industry competition factors changed compared to the initial planning, affecting product demand and gross margins; second, the capacity of the project has not been fully utilized due to issues like production line debugging and order volume, impacting expected benefits.

Both the 2022 and 2026 fundraising projects involve high-grade copper-clad boards. The capacity of the 2022 project was twice that of the 2026 project, so why does the 2026 project plan to invest a much higher amount of funds? In recent years, the copper-clad board market has experienced a structural recovery. Expanding capacity now might face significant changes in industry competition when the project is completed. Given the poor performance of the 2022 project, how will the company ensure that the 2026 project meets its expected benefits? The reporter sent these questions to Huazheng New Material’s securities department but had not received a response as of press time.

Daily Economic News