【He Sheng New Materials* Wang Zijing】In-depth: Computing power business ushers in a second growth curve

Steady growth in its traditional core business provides support for a shift into computing power transformation. As a leading home appliance appearance composite materials company, Hesheng New Materials has been deeply involved in the industry for more than two decades, and has moved into the supply chains of leading domestic and international home appliance companies, with solid customer barriers. Benefiting from the “trade-in for upgrades” policy and the recovery in exports, the company’s revenue and profits have grown steadily, profitability quality has improved, and at the same time it has ample R&D investment and excellent cost management, providing strong cash flow support for its transition to the computing power sector.

Hesheng undergoes a change in control and links with Yizhi Electronics to deploy AI CPUs, making its computing power business the second growth curve. After the change in control of Hesheng New Materials in 2026, the new controlling shareholder, with both semiconductor industry and capital background, is expected to drive the company’s transformation into the computing power field. Recently, Yizhi Electronics, in which Hesheng currently holds 10% of the shares, released its third-generation AI CPU (“CPU+NPU” integrated processor). Based on ARM V9 and targeting NV Grace, its performance has been greatly improved and is expected to achieve continued breakthroughs at leading CSP companies. At the same time, Yizhi Electronics and Hesheng’s controlling subsidiary Haixi Technology have deep collaborative efforts to form a full-stack layout of “chip + hardware + solutions,” and released an AI all-in-one unit that can run the DeepSeek full-power model on a single machine. The computing power business has become Hesheng’s second growth curve.

Amid the flourishing trend of Agents such as “lobsters,” AI CPUs are expected to become the core compute power foundation for the Agent era. With the arrival of the Agent era, the focus of infrastructure development is expected to shift from “stacking GPU compute power” to “CPU emphasis,” and the demand for both the volume and performance of CPUs is expected to keep exceeding expectations. And with its “general-purpose control + dedicated acceleration” dual characteristics, the heterogeneous AI CPU integrated with “CPU+NPU” is expected to become the core computing power foundation for the Agent era. For example, by leveraging Apple’s self-developed M-series heterogeneous chips, Mac has become the tool that “lobster” enthusiasts rush to buy. In this setup, the CPU handles core control functions such as Agent task scheduling and tool invocation, while the NPU accelerates lightweight AI tasks; with deep integration, the two together form a more advantageous processor for the Agent era.

Intel and AMD CPU shortages and price hikes mean that domestic CPUs are expected to see both volume and price increases. At present, China’s CPU market is at a turning point where computing power demand growth and domestic substitution resonate with each other. Intel and AMD CPUs have raised prices and are in short supply due to supply-demand mismatches. Domestic high-end CPUs are expected to see both volume and price increases, delivering a dual bonus of substitution and independent benefits. Yizhi Electronics, as a scarce domestic commercialized ARM architecture server CPU player, and Haixi Technology, as a pioneer in domestic computing power infrastructure, are both expected to continue to benefit.

Profit forecasts and investment ratings: We believe that Hesheng New Materials’ traditional home appliance materials business is expected to continue benefiting from domestic “trade-in for upgrades” initiatives and export growth. The company is actively laying out its AI computing power business, and through coordinated development between Haixi and Yizhi Electronics, the full-chain AI computing power business it has built—spanning chips, servers, all-in-one units, and solutions—is expected to flourish. Based on the above forecasts, we expect the company’s revenue for 2026–2028 to be RMB 30.29/39.18/570M, respectively, representing year-on-year growth of 18.6%, 29.4%, and 29.0%; and its net profit attributable to the parent to be RMB 2.52/3.88/5.70 billion, respectively, representing year-on-year growth of 54.5%, 53.8%, and 46.9%. We believe that Hesheng Technology’s main business will grow steadily, its AI computing power business will expand rapidly, and its layout is broad. According to the valuation of comparable companies, we assign Hesheng New Materials a 2027 PE of 46x, a target price of RMB 71.76, initiate coverage, and give a “Buy” rating.

Risk disclosures: AI development falls short of expectations; industry competition intensifies; the company’s computing power business development falls short of expectations; geopolitical risk.

(Analyst Wang Zijing)

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