New stock outlook | The tide of lithium battery recycling has arrived, how will Jinsheng New Energy get out of the loss cycle?

With the continuous development of the new energy vehicle industry, the gradual entry of power batteries into the scale retirement stage, the tightening of circular economy policies, and the continuous standardization of the lithium battery recycling system, the track of lithium battery recycling and resource utilization has entered a period of high-speed growth. According to a Frost & Sullivan report, the total amount of retired lithium batteries in Mainland China is expected to increase from 212,000 tons in 2021 to 529,000 tons in 2025, with a compound annual growth rate of 25.7%. It is projected that from 2025 to 2031, the total amount of retired lithium batteries will grow at a compound annual growth rate of 46% to reach 5.1 million tons. Against this industry trend, Guangdong Jinsheng New Energy Co., Ltd. ("Jinsheng New Energy") submitted its listing application to the Hong Kong Stock Exchange on May 18, with CICC and CMB International as joint sponsors. As the world's second-largest lithium battery recycling and resource utilization enterprise, Jinsheng New Energy stands at the forefront of the industry with its integrated ecological system for lithium battery recycling, while also facing operational challenges such as fluctuating metal prices, high costs, and consecutive losses. Global leader in third-party lithium battery recycling and resource utilization The prospectus shows that Jinsheng New Energy is one of the earliest companies in Mainland China to engage in lithium battery recycling. Since 2014, with its first-mover advantage and comprehensive strength, Jinsheng New Energy has built an integrated ecological system for lithium battery recycling, including: "full-element" recycling: capable of recovering all valuable materials from retired lithium batteries, such as lithium, nickel, cobalt, manganese, and iron; "full-component" resource utilization: possessing the ability to recover the positive and negative electrode materials of batteries; and "full-system" layout: having established comprehensive end-to-end production capabilities covering the dismantling and crushing of retired batteries and the production of lithium battery positive and negative electrode raw materials. Jinsheng New Energy's resource utilization business covers mainstream battery systems such as ternary lithium batteries and lithium iron phosphate batteries. The company's products are widely used in downstream applications such as electric vehicles, energy storage systems, and consumer electronics, forming a comprehensive and vertically integrated business model with a complete industrial chain. For the fiscal year ending December 31, 2025, sales of lithium, nickel, and cobalt recycled products accounted for approximately 88.7% of total revenue, with lithium recycled products, nickel recycled products, and cobalt recycled products accounting for 44.8%, 24.4%, and 19.4%, respectively. Lithium battery recycling connects downstream lithium battery applications with upstream battery material production, forming a circular economy model within the lithium battery industry. Jinsheng New Energy has established production facilities in Zhaoqing, Guangdong Province, and Yichun and Ganzhou, Jiangxi Province. In 2025, the company's total production capacity for lithium carbonate, nickel sulfate, and cobalt sulfate is 63,600 tons, with a capacity utilization rate of 80.5%. According to the Frost & Sullivan report, based on the sales revenue of recycled products in 2025, Jinsheng New Energy is the world's second-largest lithium battery recycling and resource utilization enterprise, with a market share of 3.2%, and also the world's largest third-party lithium battery recycling and resource utilization enterprise. Revenue under pressure, nearly RMB 1 billion in accumulated losses over three years From 2023 to 2025, Jinsheng New Energy's operating revenues were RMB 2.892 billion, RMB 2.157 billion, and RMB 2.202 billion, respectively; gross profit margins were -5.4%, -4.1%, and 7.1%, respectively; and net profits were -RMB 471 million, -RMB 344 million, and -RMB 166 million, respectively. Jinsheng New Energy's revenue growth is under pressure, mainly due to sharp fluctuations in the prices of lithium carbonate, nickel sulfate, and cobalt sulfate. From 2023 to 2025, due to sufficient incremental supply from primary ore mining, market prices continued to decline for lithium carbonate and nickel sulfate, directly impacting the company's revenue and gross profit. According to the Frost & Sullivan report, the average market price of lithium carbonate dropped significantly from RMB 230,000 per ton in 2023 to RMB 68,000 per ton in 2025; the average market price of nickel sulfate decreased from approximately RMB 29,800 per ton in 2023 to RMB 24,700 per ton in 2025; and the price of cobalt sulfate initially fell and then rose, from about RMB 34,500 per ton in 2023 to RMB 26,900 per ton in 2024, and then rose to RMB 49,700 per ton in 2025. Price fluctuations directly impact the company's product selling prices. The prospectus shows that the average selling price of the company's lithium carbonate products decreased from RMB 196,400 per ton in 2023 to RMB 64,500 per ton in 2025; and the average selling price of nickel sulfate products decreased from RMB 28,200 per ton in 2023 to RMB 23,200 per ton in 2025. What's more, the company's production process takes about 30 days, and the turnover period from raw material procurement to product sales lasts two to three months, further amplifying the impact of the downward price cycle. In 2023 and 2024, the company purchased black powder and retired batteries at high prices, but could only sell them at lower market prices after processing, resulting in a significant gross profit pressure due to the severe price gap. In 2025, the company's operations significantly improved, driven in part by the rebound in cobalt sulfate prices leading to profit improvement, and also benefiting from the effective implementation of strategies to address price risk. The company locked in prices with traders and futures traders, employed dynamic pricing mechanisms with other customers, and reduced inventory turnover days from 66 days in 2023 to 36 days in 2025, significantly reducing price volatility exposure. With metal prices stabilizing in the second half of 2025, a combination of factors contributed to turning gross profit losses into profit. Rapid expansion of the lithium battery recycling industry, profitability tipping point may emerge In the future, Jinsheng New Energy is expected to reach a profitability tipping point with the rapid expansion of the lithium battery recycling industry. According to the Frost & Sullivan report, in recent years, as China's electric vehicle industry rapidly develops and consumer electronic products are upgraded, the supply of retired lithium batteries has increased significantly. The total amount of retired lithium batteries in Mainland China is expected to increase from 212,000 tons in 2021 to 529,000 tons in 2025, with a compound annual growth rate of 25.7%. Specifically, the quantity of retired consumer batteries is expected to increase from 76,000 tons in 2021 to 179,000 tons in 2025, with a compound annual growth rate of 24%; and the quantity of retired power batteries is expected to increase from 136,000 tons in 2021 to 349,000 tons in 2025, with a compound annual growth rate of 26.5%. The total amount of retired lithium batteries in Mainland China is expected to reach 5.1 million tons by 2031, with a compound annual growth rate of 46.0% from 2025 to 2031. Within retired lithium batteries, consumer batteries, power batteries, and energy storage batteries are expected to account for 302,000 tons, 4.8 million tons, and 36,000 tons respectively, with compound annual growth rates of 9.1%, 54.6%, and 111.5% from 2025 to 2031. The quantity of retired lithium iron phosphate batteries is expected to increase from 89,000 tons in 2021 to 144,000 tons in 2025, with a compound annual growth rate of 12.9%. The quantity of retired ternary lithium batteries is expected to increase from 45,000 tons in 2021 to 212,000 tons in 2025, with a compound annual growth rate of 47.7%. With the rapid development of electric vehicles and energy storage, the quantity of retired lithium iron phosphate batteries, retired ternary lithium batteries, and other types of retired batteries are expected to reach 3.9 million tons, 900,000 tons, and 300,000 tons respectively, with compound annual growth rates of 73.5%, 27%, and 9.4% from 2025 to 2031. To seize the industry opportunities, Jinsheng New Energy's Hong Kong Stock Exchange listing is mainly aimed at raising funds for four major areas, including the construction of production bases, expansion of upstream raw material resources, research and development and talent introduction, and supplementary operating funds. In terms of capacity layout, the company will focus on investing in lithium iron phosphate battery processing capacity. As the proportion of lithium iron phosphate batteries in installation continues to increase, leading to rapid growth in the corresponding retired volume, investing in related recycling capacity will help optimize product structures, reduce dependence on fluctuations in ternary materials prices, and enhance profitability stability. In the upstream raw material segment, the company plans to establish a network of battery recycling service points in key urban clusters in China, directly connecting with vehicle manufacturers, battery factories, dismantling companies, and other sources, increasing the direct procurement ratio of retired batteries, reducing intermediate circulation links, and lowering procurement and transportation costs to mitigate price fluctuation risks from the supply chain source. In terms of research and development investment, the funds raised will be used to upgrade the R&D center, advance technology research and development in automated dismantling, efficient recycling, energy conservation, and carbon reduction, continuously improve metal recovery rates, reduce unit production costs, and consolidate technological advantages. The company will also introduce high-end technology and management talents to enhance operational efficiency and innovation capabilities. Through these initiatives, the company aims to enhance its counter-cyclical capability, reduce cost fluctuations, and strengthen supply chain controllability. As a global leader in third-party lithium battery recycling, Jinsheng New Energy has established multiple barriers in scale, technology, customers, and compliance qualifications. With the wave of retired power battery on the rise, the company's long-term growth logic is clear, but in the short term, it still needs to face the challenges of periodic metal price fluctuations, intensified industry competition, and insufficient profit stability. The submission to the Hong Kong Stock Exchange is not only a key step for the company to alleviate financial pressure and optimize its financial structure, but also an important turning point for its transition from scale expansion to high-quality profitability. In the future, with the improvement of the recycling network, optimization of production capacity structure, and enhancement of counter-cyclical capabilities, whether this leading third-party can truly navigate through the cycle and achieve sustained profitability will remain a core concern of the capital market.