IPO Preview | Hunan Yuneng New Energy Battery Material: Lithium Iron Phosphate Oligopoly's Profit Frenzy, Yet Three Mountains of Cash Flow, Customers, and Capacity Remain to Be Overcome

In August 2026, Hunan Yuneng New Energy Battery Material submitted an H-share listing application to the Hong Kong Stock Exchange, embarking on the path to an A+H dual capital platform layout. This lithium iron phosphate material company, which listed on the ChiNext board in 2023, has leveraged the tailwinds of the power battery and energy storage sectors to secure the world's number one position in phosphate cathode material shipments for six consecutive years. In 2025, its global market share reached 28.2%, and its share of high-end lithium iron phosphate products exceeded 55%, establishing a (leapfrog-style) leading advantage in the midstream materials sector. But the phrase "industry number one" is far from enough to summarize the full narrative of this company. Opening the prospectus, you will see a set of tension-filled images: net profit of 1.356 billion yuan in the first quarter of 2026 alone, exceeding the full year of 2025; yet operating cash flow recorded large net outflows for two consecutive years during the same period, with a net outflow of 1.546 billion yuan in 2025. The gap between the income statement and the cash flow statement is precisely the key entry point for understanding this company's investment value. Strong "V-shaped reversal" in revenue and profit VS continuous cash flow bleeding From an operational performance perspective, Hunan Yuneng New Energy Battery Material's performance curve is a microcosm of the cyclical fluctuations in the lithium battery materials industry over the past three years. In 2022, the company achieved revenue of 42.790 billion yuan and net profit attributable to shareholders of 3.01 billion yuan, reaching its growth peak; in 2024, the company's revenue slid to 22.599 billion yuan, and net profit attributable to shareholders fell to 594 million yuan, nearly a "knee-jerk cut"; in 2025, revenue recovered to 34.625 billion yuan, and profit rebounded to 1.277 billion yuan (a year-on-year increase of 115.18%); by the first quarter of 2026, the company's revenue was 14.965 billion yuan, and net profit attributable to shareholders was 1.356 billion yuan, with a single quarter's net profit already exceeding the full year of 2025. The change in gross margin was equally dramatic. In the first quarter of 2026, the company's gross margin jumped from 9.1% in the same period last year to 16.2%, an increase of more than 7 percentage points. Phosphate cathode material sales reached 1,137,100 tons, a year-on-year increase of 60.03%, with a global market share of 28.2%, ranking first for six consecutive years. This elasticity is impressive, but also warrants caution. From peak to trough and then to a V-shaped reversal, Hunan Yuneng New Energy Battery Material completed a full industry cycle in three years. This elasticity is both attractive and a reminderthe investment logic of cyclical stocks has never been as simple as "buy low, sell high." Looking further, the profit recovery of Hunan Yuneng New Energy Battery Material is mainly due to the dual support of product structure upgrading and integrated cost advantages. According to prospectus data, in 2025, Hunan Yuneng New Energy Battery Material's phosphate cathode material sales increased by approximately 60% year-on-year, with the proportion of high-end products and high-value-added energy storage products significantly increasing. At the same time, the company's own phosphate rock mine production released cost dividends, and the high-quality customer structure continued to optimize, driving steady improvement in per-ton gross profit and a year-on-year increase in gross margin. It can be seen that the company's profit recovery is not simply benefiting from industry price increases, but rather endogenous growth momentum jointly built by product iteration and cost control. However, the brilliance of the income statement stands in sharp contrast to the distress of the cash flow statement. In 2024 and 2025, the company's net cash flow from operating activities was -1.042 billion yuan and -1.546 billion yuan, respectively, with large net outflows for two consecutive years. The reason is that customers settle with bank acceptance bills and electronic debt certificates, and the bills are endorsed and transferred to pay for long-term asset purchases, rather than being redeemed at maturity to form operating cash inflows. In other words, what the company earns is "paper profit," not "real gold and silver." At the same time, 30 billion yuan in liabilities and a 24 billion yuan expansion plan have further intensified the liquidity pressure on Hunan Yuneng New Energy Battery Material. As of the end of the first quarter of 2026, Hunan Yuneng New Energy Battery Material's liabilities exceeded 30 billion yuan. In April, the company had just completed a 4.788 billion yuan A-share private placement. According to the prospectus, the company plans to invest 24 billion yuan in Guizhou to build an integrated mining and chemical project, with plans to add 800,000 tons of lithium iron phosphate and 1 million tons of iron phosphate production capacity. In addition, the company is simultaneously advancing its overseas layout. Its 50,000-ton cathode material project in Spain has started construction and is expected to commence production in 2027, mainly supporting local battery plants such as Contemporary Amperex Technology and Volkswagen; its 90,000-ton project in Malaysia has entered the planning stage. With 4.788 billion yuan just landed in the left hand and 24 billion yuan already laid out in the right hand, overseas bases in Spain and Malaysia are being advanced simultaneously. Hunan Yuneng New Energy Battery Material's expansion logic is to make the numerator bigger, but the problem is that the denominator is also expanding, and the pressure of its capital expenditure is undoubtedly leaving obvious marks on the balance sheet. In addition, at the customer structure level, the concentration risk of Hunan Yuneng New Energy Battery Material has not been fundamentally alleviated. In 2025, the revenue share of the company's largest customer reached 29.7%, and procurement from the top five battery manufacturers contributed the majority of the company's revenue. Downstream battery giants hold strong bargaining power, and when the industry has overcapacity, price pressure quickly transmits upstream, squeezing the company's gross margin space. There are also shortcomings on the product side. Lithium iron phosphate products contribute more than 97% of operating revenue, while new materials such as lithium manganese iron phosphate are still in the cultivation stage and have not formed considerable revenue, lacking a second growth curve that can hedge against the cyclical fluctuations of lithium iron phosphate. From the above manifestations, it can be seen that although the V-shaped reversal of Hunan Yuneng New Energy Battery Material confirms the quality of cyclical elasticity and product upgrading, "paper profit," consecutive net outflows of operating cash flow, customer dependence and product singularity, as well as 30 billion yuan in liabilities and 24 billion yuan in expansion, are still questioning the company's growth quality. High growth in both power and energy storage tracks, overcapacity and technological iteration suppress industry profitability From an industry perspective, against the backdrop of global carbon neutrality, lithium iron phosphate, with its advantages in safety and cost-effectiveness, is continuously increasing its penetration rate in the power battery and energy storage battery fields. According to prospectus data, global lithium iron phosphate power battery shipments surged from 46.8GWh in 2020 to 849.9GWh in 2025, with a compound annual growth rate of 78.6% during the period. It is expected that by 2030, lithium iron phosphate power battery shipments will further grow to 2,786.7GWh, with a compound annual growth rate of 26.8%, continuously consolidating its dominant position. The proportion of lithium iron phosphate batteries in global power lithium-ion battery shipments surged from 25.0% in 2020 to 60.7% in 2025, and is expected to reach 67.5% by 2030. In addition, in the global energy storage lithium-ion battery field, driven by the continuous demand of energy storage systems for long cycle life, high safety, and high cost-effectiveness, lithium iron phosphate batteries have long remained the mainstream technology route. From 2020 to 2025, energy storage lithium iron phosphate battery shipments grew from 27.5GWh to 597.8GWh, with a compound annual growth rate of 85.1% during the period. It is expected that by 2030, energy storage lithium iron phosphate battery shipments will further grow to 2,461.3GWh, with a compound annual growth rate of 32.7%, and by 2030, the proportion of lithium iron phosphate batteries in energy storage lithium-ion batteries will reach approximately 98.0%. Subsequently, with the steady increase in global penetration of new energy vehicles, the energy storage industry entering a peak construction period, and the rapid growth of installed capacity for large-scale grid-side energy storage, commercial and industrial energy storage, and residential energy storage, lithium iron phosphate is expected to further open up a broader demand market. However, unlike the accelerating expansion of the market, the global lithium iron phosphate track has entered an oligopolistic competition stage. Many small and medium-sized lithium iron phosphate manufacturers have gradually withdrawn from the market due to high costs and lack of customer resources, and market share is concentrating toward leading enterprises such as Hunan Yuneng New Energy Battery Material. According to Frost & Sullivan data, Hunan Yuneng New Energy Battery Material's phosphate cathode material market share (28.2%) almost exceeds the combined total of the second to fourth places (28.5%). This also means that the industry's competitive logic has changed: the early stage of simply competing on production capacity construction speed is over, and what is now being competed on is comprehensive capability in full-chain cost control, cutting-edge material research and development, overseas market channel layout, and joint development of new products with downstream customers. The survival window for small and medium-sized manufacturers is continuously narrowing, and industry reshuffling will continue. In addition, the track in which Hunan Yuneng New Energy Battery Material operates is also facing the superposition of three core industry risks: overcapacity, cyclical volatility, and technological iteration. It is reported that the biggest opportunity in the upstream new energy sector is demand expansion, and the biggest risk is the capacity expansion speed that can never be outrun. At present, the most acute contradiction in the industry comes from the mismatch between supply and demand. In the past few years, a large amount of capital poured into the lithium iron phosphate track, and the release pace of new domestic capacity continued to be faster than the demand growth rate of downstream batteries, resulting in periodic oversupply, repeated price wars, and suppression of the industry's average gross margin. As a core raw material, lithium ore prices are disturbed by multiple factors such as resource supply, speculation, and policy, and drastic price fluctuations transmit along the industrial chain to midstream cathode material enterprises, causing large profit volatility. At the same time, it is also necessary to see the long-term technological threat. Research and development of cathode materials for lithium manganese iron phosphate, sodium-ion, and solid-state batteries continues to advance. If new materials achieve large-scale commercialization, the market space for traditional lithium iron phosphate will be squeezed. There is also uncertainty on the downstream demand side. If global electric vehicle consumption falls short of expectations and overseas energy storage project construction is delayed, orders for upstream materials will contract accordingly. Based on the above, it is not difficult to see that the penetration of lithium iron phosphate in the power battery and energy storage tracks continues to accelerate. The industry's high prosperity combined with clearing dividends allows Hunan Yuneng New Energy Battery Material to continue harvesting the market with its leading share and comprehensive strength. However, the risks of overcapacity, cyclical fluctuations, and new technology iteration in the track cannot be ignored. Conclusion In summary, the Hong Kong listing of Hunan Yuneng New Energy Battery Material is essentially a head-on confrontation between the growth and cyclicality of an industry leader. In the short term, the landing of the price increase cycle and the volume release of high-end products will support performance elasticity; in the medium term, the integrated layout and overseas bases are expected to open a second growth curve; but in the long term, the triple tests of customer dependence, cash flow management, and capacity digestion will determine whether this company can evolve from a "cyclical leader" into a "value leader."