IPO Foresight | Hunan Yuneng: Lithium iron phosphate oligopoly profit spree, but the three mountains of cash flow, customers, and production capacity have yet to be overturned

In August 2026, Hunan Yuneng submitted an H share listing application to the Hong Kong Stock Exchange, starting the path of an A+H dual capital platform layout.

This lithium iron phosphate materials company, which landed on the GEM in 2023, has relied on Dongfeng on the power battery and energy storage circuit to win the first place in global phosphate cathode material shipments for six consecutive years. In 2025, the global market share reached 28.2%, and the share of high-end lithium iron phosphate products surpassed 55%, establishing a fault-like leading advantage on the midstream materials circuit.

But the words “number one in the industry” are far from enough to sum up the entire story of this company.

If you open the prospectus, you'll see a set of tense images: net profit for the first quarter of 2026 was 1,356 billion yuan, exceeding the full year of 2025; cash flow from operating activities during the same period was large for two consecutive years, with a net outflow of 1,546 billion yuan in 2025. The gap between the income statement and the cash flow statement is a key entry point for understanding the investment value of this company.

Strong revenue and profit “V-shaped reversal” vs. continued loss of cash flow

Judging from business performance, Hunan Yuneng's performance curve is a microcosm of the fluctuations in the lithium battery materials industry cycle over the past three years.

In 2022, the company achieved revenue of 42,790 billion yuan and net profit to mother of 3.01 billion yuan, reaching a peak of growth; in 2024, the company's revenue fell to 22.599 billion yuan, and net profit fell to 594 million yuan, almost a “knee break”; in 2025, revenue recovered to 34.625 billion yuan, and profit rebounded to 1,277 billion yuan (up 115.18% year on year); by the first quarter of 2026, the company's revenue was 14.965 billion yuan, and net profit for the single quarter had exceeded the full year of 2025.

The changes in gross margin were also drastic. 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. The sales volume of phosphate cathode materials reached 1,1371 million tons, up 60.03% year on year, with a global market share of 28.2%, ranking first for six consecutive years.

This elasticity is impressive, but it's also worth being wary of. From peak to bottom to V-shaped reversal, Hunan Yuneng completed a complete industrial cycle in three years. This flexibility is both an appeal and a reminder — the investment logic of cyclical stocks has never been a simple “buy low sell high”.

Looking further, the reason behind Hunan Yuneng's profit recovery is mainly due to the dual support of product structure upgrades and integrated cost advantages. According to the prospectus data, in 2025, the sales volume of Hunan Yuneng phosphate cathode materials surged by about 60% year on year, and the proportion of high-end products and products with high added value for energy storage increased dramatically. At the same time, the commissioning of the company's own phosphate ore released cost dividends and the high-quality customer structure continued to be optimized, driving a steady improvement in gross profit per ton and a year-on-year increase in gross margin. It can be seen from this that the recovery in the company's profits is not simply benefiting from price increases in the industry, but rather a strong endogenous growth engine built by product iteration and cost control.

However, there is a stark contrast between the bright income statement and the difficult 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 drafts and electronic debt vouchers, and note endorsement transfers are used to pay for long-term asset purchases rather than matured payments to form operating cash inflows. In other words, the company earns “paper profits” rather than “real money.”

At the same time, debt of 30 billion yuan and plans to expand production of 24 billion yuan have further increased the pressure on Hunan Yuneng's capital liquidity.

As of the end of the first quarter of 2026, Hunan Yuneng's debt exceeded 30 billion yuan. In April, the company just completed a fixed increase of 4.788 billion yuan in A-shares. According to the prospectus, the company plans to invest 24 billion yuan to build an integrated mineralization project in Guizhou, and plans to add 800,000 tons of lithium iron phosphate and 1 million tons of iron phosphate production capacity. In addition, the company is also simultaneously promoting overseas layout. The 50,000-ton cathode material project in Spain has already started and is expected to be put into operation in 2027, mainly supporting local battery factories such as Ningde Times and Volkswagen; the 90,000-ton project in Malaysia has entered the planning stage.

4.788 billion yuan has just landed on the left hand, 24 billion yuan on the right hand has been rolled out, and overseas bases in Spain and Malaysia are progressing simultaneously. Hunan Yuneng's expansion logic is to expand, but the problem is that the denominator is also expanding, and the pressure on its capital expenditure is undoubtedly leaving a clear mark on its balance sheet.

In addition to this, at the customer structure level, the risk of concentration in Hunan Yuneng has not been fundamentally mitigated. In 2025, the company's largest customer accounted for 29.7% of revenue, and the procurement of the top five battery manufacturers contributed most of the company's revenue. Downstream battery giants have strong bargaining power. When the industry has excess production capacity, price pressure will quickly be transmitted upstream, squeezing the company's gross profit space. There are also shortcomings on the product side. Lithium iron phosphate products contribute more than 97% of operating revenue. New materials such as lithium manganese iron phosphate are still being cultivated, have not generated significant revenue, and lack a second growth curve that can hedge against fluctuations in the lithium iron phosphate cycle.

As can be seen from the various performances described above, although Hunan Yuneng's V-shaped reversal confirms the success of cyclical flexibility and product upgrades, performance such as “paper profit,” continuous net outflow of operating cash flow, customer dependency and single product, as well as 30 billion yuan of debt and 24 billion yuan expansion of production, is still questioning the quality of the company's growth.

High growth in the power+energy storage circuit, overcapacity and technological iteration suppress industry profits

From an industry perspective, in the context of global carbon neutrality, the penetration rate of lithium iron phosphate continues to increase in the field of power batteries and energy storage batteries due to its safety and cost performance advantages.

According to the prospectus data, global lithium iron phosphate power battery shipments surged from 46.8 GWh in 2020 to 849.9 GWh in 2025, with a compound annual growth rate of 78.6%. It is expected that by 2030, lithium iron phosphate power battery shipments will further grow to 2,786.7 GWh, with a compound annual growth rate of 26.8%, continuing to consolidate its dominant position. The share 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% in 2030.

Furthermore, in the field of lithium-ion batteries for energy storage around the world, lithium iron phosphate batteries have continued to be the mainstream technology route for a long time, driven by the demand for long cycle life, high safety and high cost performance of energy storage systems. From 2020 to 2025, shipments of lithium iron phosphate batteries for energy storage increased from 27.5 GWh to 597.8 GWh, with a compound annual growth rate of 85.1% during the period. It is estimated that by 2030, shipments of lithium iron phosphate batteries will further increase to 2,461.3 GWh, with a compound annual growth rate of 32.7%. In 2030, lithium iron phosphate batteries will account for about 98.0% of energy storage lithium-ion batteries.

Subsequently, as the global penetration rate of new energy vehicles steadily increases, the energy storage industry enters a peak construction period, and the installed volume of large-scale grid-side energy storage, industrial and commercial energy storage, and household energy storage is growing rapidly, lithium iron phosphate is expected to further open up a wider demand market.

However, unlike the accelerated expansion of the market, the global lithium iron phosphate circuit has entered the stage of oligopoly competition. 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 concentrated on leading companies such as Hunan Yuneng. According to Frost & Sullivan data, Hunan Yuneng's phosphate cathode material market share (28.2%) is more than the sum of second to fourth place (28.5%).

This also means that the competitive logic of the industry has changed: the early stage of simply competing for the speed of production capacity construction ended; now the competition is for full-chain cost control, cutting-edge materials research and development, overseas market channel layout, and the comprehensive ability to jointly develop new products with downstream customers. The survival window for small and medium-sized manufacturers continues to narrow, and the industry reshuffle will continue.

In addition to this, the track where Hunan Yuneng is located is also facing a combination of three factors: overcapacity, cycle shocks, and technological iteration

Core industry risks.

According to reports, the biggest opportunity for new energy upstream is demand expansion, and the biggest risk is the rate of capacity expansion, which will never beat. Currently, the industry's sharpest conflict comes from a mismatch between supply and demand. Over the past few years, large amounts of capital have poured into the lithium iron phosphate circuit. The pace of release of new domestic production capacity continues to be faster than the growth rate of demand for downstream batteries. Phased supply exceeds demand, and product price wars have been repeated, suppressing the average gross profit level of the industry. As a core raw material, the price of lithium ore is disturbed by multiple factors of resource supply, speculation, and policy. Drastic price fluctuations are transmitted along the industrial chain to midstream cathode material companies, causing sharp fluctuations in profits.

At the same time, we also need to see long-term technological threats. Research and development of cathode materials for lithium manganese iron phosphate, sodium ions, and solid-state batteries continues to advance. If new materials are commercialized on a large scale, the market space for traditional lithium iron phosphate will be squeezed out. There is also uncertainty on the downstream demand side. If global electric vehicle consumption falls short of expectations and construction of overseas energy storage projects is postponed, orders for upstream materials will shrink accordingly.

Based on the above, it is easy to see that the penetration of lithium iron phosphate in power batteries and energy storage tracks continues to accelerate, and the boom in the industry has compounded dividends, allowing Hunan Yuneng to continue to reap the market with its leading share and comprehensive strength. However, the risks of overcapacity on the racetrack, cycle fluctuations, and iteration of new technology cannot be ignored.

epilogue

In summary, Hunan Yuneng's Hong Kong stock listing is essentially a head-on confrontation between the growth and cyclicality of an industry leader. In the short term, the implementation of the price increase cycle and the release of high-end products will support flexible performance; in the medium term, the integrated layout and overseas bases are expected to open up a second growth curve; however, in the long run, the triple test of customer dependency, cash flow management, and capacity digestion will determine whether this company can evolve from a “cycle leader” to a “value leader.”