Zhike丨The stock related to NVIDIA has doubled in a month. How much more can Walsin Nuclear Material & Technology Corporation rise?
Author | Fan Liang
Editor | Ding Mao
After NVIDIA's Blackwell series servers were released, incremental applications such as copper connections and liquid cooling have sparked an investment boom, and Wall Nuclear Materials is one of the beneficiaries of this frenzy.
According to market news, the copper connection solution for NVIDIA's flagship GB200 NVL72 server is mainly exclusively supplied by Amphenol, while Wall Nuclear Materials achieves indirect supply to NVIDIA by supplying copper cables to Amphenol.
Although Wall Nuclear Materials was previously the leading domestic heat shrinkable tube manufacturer, it has been relatively unknown in the capital market. However, after its copper cable business entered NVIDIA's supply chain, market attention has increased sharply, and NVIDIA's performance in the capital market has also deeply affected the stock price of Wall Nuclear Materials.
A recent research report from Morgan Stanley pointed out that NVIDIA's Blackwell architecture series products have been sold out within the next 12 months, and the current industry is in the early stage of a long-cycle AI investment. In addition, NVIDIA also started delivering B-series products from October. Since the beginning of August, NVIDIA's stock price has rebounded by more than 50% and has recently broken through its historical high again. The stock price of Wall Nuclear Materials has also doubled from 10 yuan per share at the end of September to 20 yuan per share, and the cumulative increase in the stock price within the year has exceeded 170%.
So, how much potential does Wall Nuclear Materials have? After the sharp increase, is there still room for the stock price to rise?
Starting with Heat Shrinkable Tubes, Looking at Cables for Imagination
In 2007, Wall Nuclear Materials was listed on the Shenzhen Main Board, with its main business being the production and sales of radiation chemical products such as heat shrinkable tubes and cable accessories, and it initially explored the cable business through its subsidiary Wall Cable. The heat-shrinkable property of the heat shrinkable tubes makes them an excellent packaging material for wires, mainly used in the fields of electrical appliances and electronic equipment; cable accessories are mainly used in the power field.
In the following more than ten years, Wall Nuclear Materials has continuously expanded its original business scale through self-research and mergers and acquisitions.
In 2012, Wall Nuclear Materials acquired Loting Wire to expand the cable business; In 2018, after Wall Nuclear Materials' attempt to take a controlling stake in its competitor Changyuan Group failed, it acquired the heat shrinkable material business Changyuan Electronics from Changyuan Group, thereby establishing an absolute leading position in the industry. In addition, Wall Nuclear Materials has also been laying out the wind power business since 2009 and merged with the charging gun and charging socket manufacturer Judi Network in 2018 to enter the new energy field.
Up to now, Wall Nuclear Materials has formed four business segments: electronics (heat shrinkable tubes), power (cable accessories), wires (communication wires, automotive wires), and new energy (wind power, charging guns).
From the perspective of revenue, Wall Nuclear Materials has achieved a cumulative operating income of 5.723 billion yuan in 2023, with the operating incomes of the four major businesses of electronics, power, wires, and new energy being 2.255 billion yuan, 1.278 billion yuan, 1.165 billion yuan, and 861 million yuan, respectively.
Figure: Changes in the operating income of each business of Wall Nuclear Materials Source: Wind, sorted by 36Kr
Specifically in the first half of 2024, Wall Nuclear Materials' operating income increased by 22% year-on-year, among which the four major businesses of electronics, power, wires, and new energy increased by 16%, 17%, 38%, and 25.83% respectively, and the cable and wire business had the strongest growth rate.
In terms of income changes, affected by the nature of different industries, the trends of the four major businesses in recent years have been different. The electronic business is similar to the retail sales trend of household appliances, and it began to recover slowly after a decline in income in 2022; the power and new energy businesses are in a state of steady growth overall; the wire and cable business rebounded strongly in 2024 after consecutive declines in 2022 and 2023.
Figure: Growth rate of operating income of each business of Wall Nuclear Materials Source: Wind, sorted by 36Kr
The rebound of Wall Nuclear Materials' cable and wire business is an important reason that the demand for communication wires in data centers has started to increase since 2024, and the imagination space of the company's wire and cable business has therefore been greatly enhanced.
Specifically, in terms of the future development prospects of the four businesses, the highest proportion of electronic and power businesses is greatly affected by the macro environment and policy orientation, and it is difficult to achieve explosive growth. Therefore, the future growth of Wall Nuclear Materials will mainly depend on the wire and cable business, especially the growth of high-speed communication wires.
According to the disclosure of Wall Nuclear Materials, the company's major customers of high-speed communication wires include international customers such as Amphenol, Halley, Molex, Tyco, and domestic connector enterprises such as Luxshare and Yingfeilian, and they are used by domestic server manufacturers. The mass-produced high-speed communication wire products include internal wires (PCIe4.0, PCIe5.0, SAS4.0, SAS5.0 and other series of products), and external wires (100G/s, 400G/s, and 800G/s and other series of products).
From the composition point of view, high-speed copper cables are generally composed of multiple sets of single-channel lines superimposed. Currently, the maximum transmission speed of a single-channel communication line is 224G/s. Wall Nuclear Materials' single-channel 224G high-speed communication wire products have received order demands and are being delivered successively.
How Big is the Imagination Space of High-Speed Copper Cables
In the data center communication scenario, it mainly includes communication between data centers, communication between server cabinets, and communication within server cabinets. Communication within the cabinet includes intra-board communication and inter-board communication. When the total computing power demand of the data center remains unchanged, the lower the computing power density of a single cabinet, the more cabinets are required, and the more frequent the communication between cabinets.
In terms of communication solutions, it mainly includes three solutions: optical connection, copper connection, and PCB connection. Optical connection has a wide range of applications and can achieve communication at various distances, but the cost is relatively high; copper cables are only suitable for short-distance communication, but the cost is much lower than optical connection; the PCB solution is also suitable for short-distance communication. Compared with copper cables, it occupies less space, has faster heat dissipation, and lower cost, but it has poor flexibility and the signal is easily interfered with.
Currently, the communication between data centers usually uses the optical connection solution; the inter-cabinet interconnection is mainly the optical connection solution; in the intra-cabinet interconnection, the best solution is selected from the optical connection, copper connection, and PCB connection depending on considerations such as cost, heat dissipation, and technology.
In NVIDIA's GB200 NVL72 large cabinet server solution, the computing power density of a single cabinet is greatly increased, and the corresponding communication demand within the cabinet is also greatly increased. Since the internal communication of the NVL72 cabinet is mainly short-distance, the cost of optical connection is relatively high, and copper cables naturally become a cost-effective solution.
Specifically, the GB200 NVL72 server is composed of 18 computing board groups (computing Tray), 9 NVSwitch board groups (NVSwitch Tray), and the IB switch at the top, and each computing board group is composed of 2 Grace CPUs and 4 Blackwell GPUs. Therefore, the connection demand between the internal board groups is significantly increased.
The copper connection includes two parts: the copper cable and the connectors at both ends. Specifically, according to Huatai Securities' statistics, the copper cable is mainly applied in the following several parts:
1. Information transmission between the computing Tray and the NVSwitch Tray, that is, inter-board communication, which is mainly carried out by connecting the backplane connectors at both ends with the copper cable.
2. The connection between the internal chips of the computing Tray and the NVSwitch Tray and the backplane connector, that is, intra-board communication, also requires the use of copper cables.
3. In addition, for the GB200 NVL36*2 dual-cabinet solution, the connection between the two close cabinets also uses high-speed copper cables.
From the perspective of the value of the copper connection solution (to NVIDIA's terminal selling price), under the GB200 NLV72 server, Huatai Securities estimates that the value of the copper connection solution is about 650,000 yuan, while Shanxi Securities estimates that the value is about 117,000 US dollars. The calculation data of the two securities companies are basically the same.
However, under the GB200 NLV36*2 server, Huatai Securities estimates that the value of the copper connection solution is about 720,000 yuan, while Shanxi Securities estimates that the value is about 208,000 US dollars. The data of the two securities companies are quite different. Simply put, the calculation difference between the two securities companies mainly focuses on the demand for copper cables for intra-NVSwitch Tray communication. Since the GB200 NVL36*2 has 18 computing board groups and 18 NVSwitch board groups, which is 9 more NVSwitch board groups than NVL72, Shanxi Securities has proportionally increased the amount of copper cables corresponding to the intra-board. In the calculation of CICC's research report, although it considers the incremental cable demand brought by the NVSwitch board group, its final calculated value of the NVL36*2 connector and cable is 780,000 yuan, which is close to that of Huatai Securities.
Finally, in the market space calculation, although Huatai Securities and Shanxi Securities have the same forecast data for the shipment volume of NVL72/NVL36*2 in 2025, that is, 10,000 sets / 25,000 sets respectively, due to the large difference in the value of the copper connection of NVL36, Huatai Securities calculates that NVIDIA's copper connection market space in 2025 is 24.5 billion yuan, while Shanxi Securities calculates it to be 6.4 billion US dollars.
Therefore, it needs to be emphasized here that for the calculation of the market space of the copper connection and the calculation of the copper cable usage in NVL72, there are currently no authoritative institutions that have given actual measurement data, and it is impossible to tell which is right and which is wrong.
Of course, the above-mentioned copper connection market space includes both connectors and copper cables. In terms of the value proportion of copper cables alone, the market is also controversial, generally falling in the range of 30%-70%. Here, according to a conservative forecast, based on Huatai Securities' calculation of the market space, a 30% copper cable value proportion corresponds to a copper cable market space of 7.35 billion yuan, but this is calculated based on Amphenol's terminal selling price. If the sales revenue that cable suppliers such as Wall Nuclear Materials can obtain is to be calculated, Amphenol's gross profit should be deducted from this basis. Calculated based on Amphenol's 50% terminal gross profit, the market space of copper cables for cable manufacturers such as Wall Nuclear Materials is 3.675 billion yuan.
In absolute terms, this market space calculation is not very attractive, but considering the high profit margin of the high-speed copper cable business and the business volume of enterprises such as Wall Nuclear Materials, the imagination space of related companies has been greatly enhanced.
In addition, Wall Nuclear Materials' high-speed copper cable products will not only supply NVIDIA. Considering the demand for AI servers in the entire market, the revenue volume of the company's related products will also expand.
Why Does It Have a High Gross Profit Margin?
In terms of profitability, Wall Nuclear Materials' comprehensive gross profit margin has been above 30% for many years. In the first half of 2024, the company's comprehensive gross profit margin was 33.23%, among which the gross profit margins of the electronic and power businesses reached more than 40% in the first half of this year, with a rather outstanding performance, but the gross profit margin of the wire and cable business is only 15%.
Figure: Gross profit margin of Wall Nuclear Materials Source: Wind, sorted by 36Kr
Specifically, the high gross profit margins of Wall Nuclear Materials' electronic and power businesses mainly come from the following several reasons:
1. Low customer price sensitivity. Heat shrinkable tubes and cable accessory products have the characteristics of wide application and low usage. The downstream customers are relatively dispersed, and the purchase amount is small, belonging to a niche market. Therefore, customers have a low price sensitivity to related products, leaving a large profit margin for Wall Nuclear Materials.
2. Fewer industry participants. From the perspective of entry barriers, the operation of Wall Nuclear Materials belongs to a low-turnover model, with a fixed asset turnover rate of only about 2. In recent years, the payment collection period is about 4 months, especially the payment collection of the power business is relatively slow, and the capital occupation is relatively high. In addition, the dispersion of downstream customers leads to new entrants needing to continue to invest a large amount of sales expenses, and relying on only a few customers cannot form a scale effect, so it is difficult to compete with Wall Nuclear Materials in terms of cost and capital.
3. Has a brand effect. From the perspective of brand effect, Wall Nuclear Materials is currently a leading domestic heat shrinkable tube and cable accessory manufacturer. It has accumulated a high market reputation in its more than 20 years of operation. Since the related products involve electrical safety, a price premium can be obtained.
In addition, from the perspective of the cost structure, the raw materials of the electronic and power businesses are mainly petroleum by-products, so their costs are greatly affected by fluctuations in oil prices. For example, the gross profit margin of the company's electronic business decreased from 45% in 2020 to 35% in 2021, but the subsequent gross profit margin has rebounded to 40%, mainly due to fluctuations in oil prices.
In contrast, the wire and cable industry is a large industry with a market scale of over one trillion yuan and full competition, with tens of thousands of participating enterprises in the industry. Therefore, the gross profit margin of Wall Nuclear Materials' wire and cable business has hovered around 15% in the past few years, which is close to the gross profit margin level of the general manufacturing industry.
However, after the company indirectly entered NVIDIA's copper connection supply chain, the low gross profit margin state of the wire and cable business may reverse.
According to market news, NVIDIA's copper connection solution is directly supplied by Amphenol, and