Executive Summary / Key Takeaways

• Wetouch Technology Inc. (WETH) specializes in medium-to-large projected capacitive touchscreens for specialized industrial applications, carving out a niche with products known for durability and long lifespans.
• The company achieved record revenue of $42.3 million in fiscal year 2024, a 6.5% increase, driven by a strategic shift towards higher-end automotive, gaming, and industrial control touchscreens.
• Despite revenue growth, gross profit margins compressed to 32.2% in 2024 from 43.3% in 2023, primarily due to rising raw material and labor costs.
• WETH maintains a strong liquidity position with $103.7 million in cash as of December 31, 2024, providing a buffer for ongoing operations and capital expenditures for its new facility.
• Significant risks include heavy customer concentration, material weaknesses in internal controls, and ongoing Nasdaq compliance challenges related to late filings and minimum bid price, alongside the critical need to secure land use rights for its new production facility.

A Specialist's Ascent in the Touchscreen Market

Wetouch Technology Inc. (WETH) has established itself as a focused player in the global touchscreen display industry, specializing in the research, development, manufacturing, sales, and servicing of medium- to large-sized projected capacitive touchscreens. The company's strategic emphasis lies in large-format displays, ranging from 7 to 42 inches, tailored for demanding sectors such as financial terminals, automotive, Point of Sale (POS), gaming, lottery, medical, and Human-Machine Interface (HMI) applications. This deliberate focus on specialized, high-durability products requiring stable supply and longer lifespans differentiates WETH from competitors primarily serving the high-volume, small-sized touchscreen market.

The company's journey began with its incorporation in Nevada in 1992 as Gulf West Investment Properties, Inc., remaining dormant for many years. A pivotal transformation occurred with a reverse merger on October 9, 2020, leading to its current structure under Wetouch Holding Group Limited (BVI Wetouch) and its primary operating subsidiary, Sichuan Vtouch Technology Co., Ltd. in mainland China. This restructuring, coupled with a 1-for-70 reverse stock split in 2020 and a 1-for-20 split in 2023, streamlined its corporate identity. A significant milestone was achieved on February 21, 2024, when WETH's common stock commenced trading on the Nasdaq Capital Market, marking its entry into a broader investment landscape.

Technological Edge and Product Versatility

Wetouch's core technology is built around projected capacitive touchscreens, offering a diverse product portfolio designed to meet varied industrial requirements. The company's offerings include:

• Glass-Glass (GG): These double-glass layer products are primarily deployed in mid-size and luxury car GPS/entertainment panels, industrial HMI, financial and banking terminals, POS, and lottery machines. They are noted for ease of manufacture and relatively low cost, though larger sizes present technical challenges in signal penetration.
• Glass-Film-Film (GFF): Utilizing a double layer of conductive films with tempered glass, GFF products are anti-explosive and cost-effective to manufacture. They are predominantly used in high-end GPS and entertainment panels, industrial HMI, and the lottery and gaming industries.
• Plastic-Glass (PG): This variant combines conductive glass with a surface-intensified PMMA layer, finding application in motor vehicle GPS, smart home devices, robotics, and charging stations, also benefiting from relatively low manufacturing costs.
• Glass-Film (GF): Primarily for industrial HMI, GF products offer similar manufacturing cost advantages to GFF.

These technologies collectively provide tangible benefits such as long lifespan, low maintenance, strong anti-interference, anti-corrosion solutions, multi-touch capability, and high light-transmittance ratio and stability. In 2024, GG and GFF product types were the main revenue drivers, accounting for approximately 52.7% and 38.5% of total revenues, respectively. The company maintains an 11-person R&D department, with employees holding at least a bachelor's degree and an average of three years of experience, focused on continuous product enhancement and new function development. While R&D expenses were nil in 2024, management anticipates an increase in future R&D investments to accelerate innovation and upgrade existing products. This commitment to technological evolution is crucial for WETH to maintain its competitive moat and potentially enhance its pricing power and market share in specialized segments.

Competitive Landscape and Strategic Positioning

The touchscreen display industry is intensely competitive and characterized by rapid technological change. Wetouch strategically positions itself by focusing on the medium- to large-sized touchscreen segment for specific industrial applications, which generally demands more stable supply, longer guarantees, and extended lifespans compared to the small-sized touchscreen market. This niche focus helps mitigate direct competition from larger, more diversified players.

Competitors such as TPK Holding (TPK), AU Optronics (AUO), and Corning Incorporated (GLW) operate in overlapping segments. TPK, a major touch panel manufacturer, offers a broad portfolio but WETH differentiates through tailored designs for niche markets like vehicle entertainment and financial terminals, potentially offering greater efficiency in these specific environments. Against AU Optronics, a display panel provider, WETH's Glass-Film variants may offer superior durability in demanding industrial settings. While AUO excels in integrated display ecosystems, WETH's China-based manufacturing provides a cost advantage. Corning, a materials science company, provides robust materials, but WETH's end-to-end manufacturing and service model offers greater flexibility for custom applications, particularly in smart home devices. WETH's strength lies in customization and operational execution, fostering customer loyalty, though it may lag in innovation speed and scale compared to its larger rivals.

Indirect competitors include providers of alternative display technologies like OLED or e-ink, and emerging interfaces such as haptic feedback or voice-activated systems. These alternatives could erode demand for traditional touchscreens, particularly if they offer significantly cheaper or more intuitive user experiences. The broader industry trend of AI and data center growth is expected to increase demand for touchscreens in connected devices, presenting both opportunities and challenges for WETH to keep pace with technological integration.

Financial Performance and Operational Dynamics

Wetouch Technology Inc. reported a record revenue of $42.30 million for the fiscal year ended December 31, 2024, marking a 6.5% increase from $39.70 million in 2023. This growth was primarily fueled by a 4.8% increase in sales volume and a 3.2% rise in the average selling price of products in RMB, despite a 1.6% negative impact from exchange rate fluctuations. Overseas market revenue notably surged by 24.1% to $14.90 million, driven by higher demand for automotive, gaming, and industrial control touchscreens, where the company demonstrated greater pricing power. Conversely, domestic market revenue saw a slight decrease of 1.2%, primarily due to weakened macroeconomic conditions in China, though proactive marketing of higher-end products helped mitigate this decline.

The company's strategic shift towards higher-end touchscreens for automotive (27.2% of total revenue), industrial control (19.4%), gaming (15.3%), and medical applications (14.9%) reflects its focus on segments with greater growth potential and demand for quality.

However, this period also saw a significant compression in profitability. Gross profit decreased by 20.9% to $13.60 million, with the gross profit margin falling to 32.2% in 2024 from 43.3% in 2023. This decline was largely attributable to a 29.9% increase in the cost of goods sold, driven by a 31.8% rise in raw material costs (with chip costs accounting for 43% of this increase) and a 24.3% increase in labor costs. Selling expenses also increased by 33.3% to $0.80 million, reflecting increased marketing efforts. Consequently, net income for 2024 was $6.0 million, a 27.7% decrease from $8.30 million in 2023.

Robust Liquidity and Capital Allocation

WETH maintains a strong liquidity position, with current assets totaling $114.10 million and cash and cash equivalents of $103.70 million as of December 31, 2024. This significantly outweighs current liabilities of $3 million, providing substantial financial flexibility. The company's Days Sales Outstanding (DSO) improved to 64 days in 2024 from 75 days in 2023, indicating more efficient accounts receivable collection.

Net cash provided by operating activities, however, saw a notable decrease to $1.10 million in 2024 from $12.70 million in 2023, reflecting the impact of lower net income and changes in working capital. Financing activities provided $7.60 million in 2024, primarily from $9 million in net proceeds from its Nasdaq uplisting offering, which also facilitated the repayment of $1.40 million in convertible promissory notes.

A key capital initiative involves the construction of new facilities in Chengdu, Sichuan province, following a government-directed relocation. The company purchased land use rights for approximately 131,010 square feet in August 2021, with an estimated total capital need of $26.20 million for the acquisition and construction. While the building construction is estimated to be completed by the end of 2025, production at the new facilities is expected to commence in the second half of 2026. The company may require additional financing to fully realize this expansion.

Outlook and Significant Risks

Wetouch Technology Inc. has provided optimistic guidance for fiscal year 2025, projecting revenue of approximately $46.15 million and net income of approximately $11.88 million, representing a substantial 97% increase in net income. This outlook is predicated on the continued success of its strategic shift towards higher-end products and the anticipated operationalization of its new manufacturing facilities. The expected increase in R&D expenses underscores a commitment to innovation, which is vital for sustaining long-term growth in a technologically dynamic market.

However, the investment thesis for WETH is accompanied by several material risks. The company faces significant customer concentration, with its top five customers accounting for approximately 82.4% of total revenues in 2024. Any disruption in these relationships or failure to attract new customers could materially impact financial performance. Operational risks include potential delays in securing the land use right certificate and completing the new factory construction, which could hinder expansion plans.

Furthermore, WETH has identified material weaknesses in its internal control over financial reporting, specifically a "Lack of competent financial reporting and accounting personnel with appropriate understanding of U.S. GAAP and financial reporting requirements to design and implement key controls over financial reporting process" and a "Lack of risk assessment procedures on internal controls to detect financial reporting risks on a timely manner." Remediation efforts are underway, but failure to establish effective controls could impair financial reporting accuracy.

Regulatory and listing compliance issues also pose considerable threats. The company received Nasdaq notices for delinquent periodic reports (Form 10-K for FY2024 and Forms 10-Q for Q1 and Q2 2025) and for failing to maintain the $1 minimum bid price. While Nasdaq has granted an extension for the filings until October 13, 2025, continued non-compliance could lead to delisting, severely impacting liquidity and investor confidence. The company also faces potential fines from the China Securities Regulatory Commission (CSRC) for incomplete post-offering filing obligations under the Trial Administrative Measures. Moreover, under the Holding Foreign Companies Accountable Act (HFCAA), WETH's common stock could be prohibited from trading in the U.S. if its auditor is not subject to complete inspection by the PCAOB for two consecutive years, a risk that could render the stock worthless. The lack of business liability or disruption insurance further exposes the company to significant unforeseen costs.

Conclusion

Wetouch Technology Inc. presents a compelling investment narrative rooted in its specialized focus on medium-to-large projected capacitive touchscreens for industrial applications. The company's strategic pivot towards higher-end automotive, gaming, and medical segments, coupled with its ongoing investment in new manufacturing capabilities, positions it for continued revenue growth as evidenced by its 2025 guidance. WETH's robust liquidity provides a solid financial foundation to support these strategic initiatives.

However, investors must weigh this growth potential against significant operational and regulatory challenges. The compression in gross margins due to rising costs, coupled with critical internal control weaknesses and persistent Nasdaq compliance issues, demands close monitoring. The successful completion and operationalization of the new production facility, along with effective remediation of financial reporting deficiencies and adherence to listing rules, will be paramount in realizing WETH's long-term value proposition and solidifying its competitive standing in a dynamic global market.