Shoujia Technology expands into industrial rayon and robot tendon cords, adding valuation flexibility to its new materials business

Shoujia Technology (00103.HK)$SHOUGANG CENT (00103.HK)$$Hang Seng Index (800000.HK)$ In recent years, the company has continuously promoted product premiumization and overseas market expansion. It recently announced the signing of a letter of intent with Hong Kong Meili Jingjie European M&A Fund (Phase I) Co., Ltd. The two parties preliminarily plan to jointly establish a joint venture to explore the global industrial rayon market. Coupled with the robot tendon cord business gradually entering small-batch supply, the company's business landscape is extending from traditional steel cord to tire skeleton materials and high-end advanced materials.

Shoujia's revenue in the first half of 2026 was approximately HK$1.324 billion, representing a year-on-year increase of 14.1%, with total sales volume reaching about 148,000 tonnes. Overseas business grew rapidly, with steel cord export volume reaching 48,200 tonnes, a 25.4% year-on-year increase. The proportion of export sales further rose to 34.6%, reflecting that overseas markets are gradually becoming an important source of incremental growth for its traditional core business.

The company also enjoys certain advantages in its international customer base. In the first half of 2026, Shoujia’s customer coverage among the global top 10, top 20, and top 50 tire manufacturers was approximately 90%, 70%, and 66%, respectively. Its top three customers remain well-known overseas tire enterprises, collectively accounting for over 30% of the company’s total sales. For material suppliers, the certification cycle with leading tire manufacturers is lengthy; once a stable supply relationship is established, the existing customer base facilitates the introduction of new products.

This collaboration in industrial rayon leverages the aforementioned synergistic foundation. Meili Jingjie Capital is the controlling shareholder of Germany’s Cordenka, a global leader in high-performance industrial rayon production. As both industrial rayon and steel cord serve as tire skeleton materials, their customer bases are highly overlapping. If the cooperation is successfully implemented, Shoujia’s product portfolio is expected to expand from solely steel cord to a “steel cord + industrial rayon” combination, positioning the company closer to a comprehensive supplier of tire skeleton materials.

It is worth noting that industrial rayon is currently at a low penetration stage. Industry research data indicates that global demand for polyester tire cord fabric is approximately 825,000 tons, with China accounting for about 480,000 tons, or roughly 58% of the global total. Currently, the penetration rate of industrial rayon in the global tire cord market is less than 5%. With further optimization of comprehensive costs, the premiumization of new energy vehicles (NEVs), increased adoption of large-sized tires, and the shift of global tire production capacity to Asia, the potential market for industrial rayon cord fabric is expected to grow significantly.

New energy vehicles (NEVs) may also become a key driver of demand growth. Due to their heavier body weight and higher torque, NEVs impose stricter performance requirements on tire carcass materials. Industrial rayon, with its characteristics of low creep, low heat generation, and low thermal shrinkage, is better suited for high-performance tire applications. Furthermore, industrial rayon has a lower carbon footprint, helping the company further expand its portfolio of high-performance and low-carbon material products.

In our view, while industrial rayon represents an extension within Shoujia’s existing tire skeleton material system, the significance of robot tendons lies in the company’s first expansion of its years-accumulated precision metal processing capabilities into the entirely new sector of humanoid robots. Leveraging its technical foundation in steel cord production, precision wire drawing, and rope twisting, Shoujia has laid out plans for steel and tungsten wire robot tendons and is currently engaging with multiple downstream enterprises, with some products already entering the small-batch supply stage. This implies that the manufacturing capabilities accumulated by the company are beginning to enable cross-industry applications and the exploration of new growth scenarios. For the market, this is not merely the addition of a new product but signifies that Shoujia’s technological capabilities are starting to spill over from tire materials into high-growth advanced material scenarios, creating new room for valuation imagination.

Regarding shareholder returns, the company’s total dividends for 2025 amounted to approximately HK$40.5 million, with a payout ratio of about 72%. According to the previously announced plan, subject to meeting relevant conditions, annual dividends from 2024 to 2028 will be no less than HK$40 million. Stable dividend payments provide certain support for valuation, while the progress of new material business implementation will determine the upside potential for future valuation.

From a valuation perspective, Shoujia is gradually forming a more layered business structure: traditional steel cord provides the baseline for revenue, cash flow, and profitability; overseas markets and high-end products such as ST and UT drive quality improvement in the core business; while industrial rayon and robot tendons open up new growth spaces for the company. The most critical factor for the market to watch subsequently is whether these two new businesses can transition from “expectations” to “actual performance.” If industrial rayon successfully advances capacity construction and customer onboarding, it is expected to become a new growth pillar in the tire skeleton material sector. If robot tendons move from small-batch supply to规模化 (scale-up), it could further amplify the company’s growth elasticity. With traditional businesses providing stable support and new material businesses gradually realizing incremental growth, Shoujia’s market positioning is expected to extend from a traditional manufacturer to a high-end material platform. Consequently, its valuation framework has the opportunity to shift from a single manufacturing logic to a multi-layered valuation system comprising “mature manufacturing + high-end tire skeleton materials + advanced material growth businesses.”

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