The "Plan B" of the shares: silica microspheres will be put into production within the year, pointing to the 15.7 billion cosmetics market.

In the first half of 2026, the sales volume of silica, the company's main product, increased by 13.19 year-on-year, mainly due to the discharge of capacity from IPO projects, strong demand to silica from biomass (rice husk) and the new increase in silica contribution from toothpaste.

However, the decline in profits stems from three main factors.

First, cost pressures have surged. The new production line is still in the climbing stage, and the fixed costs such as depreciation are allocated to the unit production cost. At the same time, the completion of the new R & D building generates depreciation, resulting in a 43.16 year-on-year increase in regulation expenses, from 40.53 million yuan in the same period last year to 58.02 million yuan. In addition, the geopolitical conflict in the Middle East in February 2026 led to a sharp rise in the prices of commodities such as LNG and sulfur, and the company's production mainly relied on natural gaseous to heating, with a significant impact on costs. Data show that in the second quarter of 2026, the purchase price of sulfur increased by 113.23 over the same period last year.

Second, exchange losses have widened significantly. The exchange rate of RMB against the US dollar has appreciated significantly, the company's overseas sales account to a relatively high proportion, and the financial expenses have changed from -15.58 million yuan (exchange gain) to 14.52 million yuan (exchange loss) in the same period last year, which has a positive and negative impact on the pre-tax profit of about 30.1 million yuan.

Third, the external ecological stability of the sector is under pressure. In the first half of 2026, the tire sector was affected by the Middle East geopolitical conflict, European anti-dumping and other factors, semi-steel tire production and sales pressure increased significantly, the overall profit space of the sector continued to squeeze.

The company is mainly engaged in the research and research, manufacturing and sales of precipitated silica, and has formed a complete manufacturing chain from raw material sulfuric acid and sodium silicate to final product silica. items are mainly focused on the rubber sector in the field of environmentally friendly tire supporting special materials, animal life nutrition carrier, toothpaste sector and silicone rubber sector.

At present, the total production capacity of precipitated silica ranks third in the world, with four domestic production bases in Wuxi, Jiangsu, Chuzhou, Anhui, Sanming, Fujian and Yancheng Binhai (under construction), as well as an overseas production base in Thailand.

In terms of customers, the company's highly dispersed silica items have been certified by Michelin, Pirelli, Goodyear, Hantai, Zhongce Group and other domestic and foreign tire companies, and is also one of the world's major producers of silica to animal life nutrition carriers, with customers including DSM and other international leaders.

In order to break the relatively single product structure and seize the high ground of the new material sector, the company is accelerating the industrialization process of a number of differentiated projects. Among them, the much-watched silica microsphere project is planned to be completed and put into production in 2026, which marks that the company will officially enter high-end applications such as makeup and biomedicine. Given that the global cosmetic microsphere market is expected to reach 15.71 billion yuan in 2032, the landing of the project is expected to significantly raise the company's profit ceiling. At the same time, the company and the university cooperation of the loose agent project has also entered the civil construction of the final stage, is expected to complete the construction and enter the trial run link, further enrich the inorganic silicide product matrix.

In terms of international layout, the promotion of Thailand's second phase project is not only to expand production capacity, however also to prevent geo-trade risks and close to the needs of overseas customers. In China, with the construction of Yancheng Binhai Phase I project, the base will have become the company's largest environmentally friendly silica production base by virtue of biomass (rice husk) methodology in the future, providing solid support to the scale expansion under the goal of "double carbon.