Upcoming IPO | Zhejiang Hailiang: Six consecutive championships in copper tubes and revenue exceeding 80 billion, why is the net profit less than one billion?

New Stock Outlook | Zhejiang Hailiang: Revenue Exceeds 80 Billion vs. Net Profit Below 1 Billion The A-side and B-side of the Scale King Many people may not have heard of Zhejiang Hailiang, but it is highly likely that they have used its products. The condensing pipes in air conditioners, battery copper foils in new energy vehicles, and cooling modules in data center servers behind these core components stands this Zhejiang enterprise. On August 30, 2026, Zhejiang Hailiang submitted its application to the Hong Kong Stock Exchange for the second time. This copper processing leader, which debuted on the Shenzhen Stock Exchange in 2008, has ranked first in global copper pipe production and sales for six consecutive years. As of the market close on September 3, its A-shares had a market capitalization of approximately 44.6 billion yuan. But this is merely one side of the coin. A look at Zhejiang Hailiang's financial report reveals that while the company's revenue is impressive, its profits are as thin as a copper foil. This also means that determining whether it is worth investing boils down to answering one question: In an industry with a net profit margin of only 1.2%, is scale a protective moat or a shackle? Revenue Exceeds 80 Billion, Net Profit Below 1 Billion According to GMTEight observations, Zhejiang Hailiang was founded in 2001 and is a global supplier of copper-based products. The company's products cover four major sectors: HVAC and industrial copper processing products, lithium battery and PCB copper foil products, AI application copper processing products, and aluminum-based products. These are widely used in refrigeration equipment, piping, construction, machinery, and power fields, and have further extended to emerging scenarios like lithium batteries, PCBs, and AIDC. After over 20 years of development, Zhejiang Hailiang has become a genuine leader in the industry. According to data from Frost & Sullivan, the company's copper pipe exports have ranked first in China for 17 consecutive years, and its shipments have ranked first globally for six years. In the lithium battery copper foil sector, the company is expected to ship 62,500 tons of lithium battery copper foil products by 2025, ranking fifth globally with a market share of 4.3%. By May 31, 2026, the company had established 23 production bases across Asia, Europe, North America, and Africa. Such market share has contributed to Zhejiang Hailiang's astounding revenue figures. From 2023 to 2025, the company maintained revenue between 75 billion to 87 billion yuan. In 2025, the revenue slightly retreated to 83.307 billion yuan, not due to weakness in its main business, but because it chose to actively reduce low-efficiency copper trading operations, concentrating resources on its high-value-added copper processing main business. In 2026, the companys operations returned to a growth trajectory, with first half revenue of 48.941 billion yuan, a year-on-year increase of 9.95%, fully highlighting the resilience of its main business. Despite the astonishing revenue figures, Zhejiang Hailiang's real pain point lies in its profitability. The net profit for the company in 2023 was 1.169 billion yuan, plummeting to 624 million yuan in 2024, a decline of 46.6%; in 2025, it rebounded to 1.01 billion yuan, indicating significant volatility. For the first half of this year, the net profit attributable to shareholders was 641 million yuan, again experiencing nearly a 10% decline year-on-year. Revenue of 80 billion yuan with profits lingering in single digits this "big but weak" awkwardness serves as the starting point for understanding the entire narrative of Zhejiang Hailiang. The root cause lies in the business model. Hailiang is not mining but processing. Raw material copper accounts for over 95% of costs; the company earns processing fees rather than resource premiums. From 2023 to 2025, the company's net profit margins were 1.5%, 0.7%, and 1.2%, with gross margins of 4.1%, 3.3%, and 3.8% respectively. More critically, when copper prices rise, costs follow suit, squeezing profits; when copper prices fall, profits can catch a breather. The halving of profits in 2024 and the strong rebound in 2025 were all orchestrated by fluctuations in copper prices. Meanwhile, alongside the volatility in net profits, Zhejiang Hailiang's cash flow has also been steadily decreasing. From 2023 to 2025, its net cash flows from operating activities were -776 million, -2.3 billion, and -1.679 billion yuan, marking three consecutive years of net outflow. In the first five months of this year alone, there was a further outflow of 6.147 billion yuan. As of the first five months of 2026, the company had cash and cash equivalents amounting to 2.739 billion yuan. However, from a business composition perspective, some positive changes are emerging. Zhejiang Hailiangs core remains its copper pipe business. In the first half of 2026, revenue reached 32.748 billion yuan, a year-on-year increase of 20%, accounting for over 60% of total revenue. Yet the gross margin for this segment is only about 4.2%, placing it in the typical "volume over price" category. The real highlights lie in the new business. Copper foil is the first growth engine. In the first half of 2026, revenue reached 4.755 billion yuan, skyrocketing by 137%, raising its proportion of total revenue from 4.5% to 9.7%. More importantly, the gross margin of copper foil jumped from -1.39% in the same period last year to 8.12%, an increase of nearly 10 percentage points in a year; AI copper-based materials have emerged as the second growth pole. Products like oxygen-free copper and liquid cooling plate components have entered numerous GPU cooling solutions worldwide. In the first half, sales reached 3,800 tons, with a gross margin of approximately 12.5%, far exceeding that of traditional copper pipes. Although currently the scale is small, the potential is substantial. As the growth curve of traditional copper pipe business flattens, copper foils and AI cooling are becoming the second chapter in the narrative of Zhejiang Hailiang presented to the capital markets. The dual tracks of new energy and AI reshape growth logic, with simultaneously existing dividends and volatility. Currently, the copper processing industry presents a dual structure of stable stocks and explosive increments; the industry's valuation logic has thoroughly shifted from "scale supremacy" to "structural victory." The traditional HVAC and industrial copper processing sectors have entered a mature stock era, with slowing growth rates in downstream demand in home appliances and real estate, marking a definitive farewell to rampant growth. The industry previously relied on price wars, causing collective thin profits. In this stage, the industry structure continues to optimize, with small and backward capacities accelerating their exit, and market share steadily concentrating in leading companies like Hailiang that possess scale advantages, global capacities, stable delivery, and comprehensive hedging systems. Although traditional businesses lack high-growth potential, they can provide stable cash flows and customer resources, which are core foundations for navigating through cycles. The true value increment in the industry comes from the high-end copper-based new materials sector driven by dual engines of new energy and AI computing power, fundamentally reshaping the growth ceiling of the industry. In the new energy field, the dynamic battery and energy storage industries continue to expand, with long-term supply tightness for ultra-thin and extremely thin lithium battery copper foils. High-end capacity faces a long-term structural gap due to high process barriers and slow yield ramp-up, providing ample room for domestic alternatives abroad. AI computing power also bestows a new growth logic on the traditional copper industry. The demand for high-precision oxygen-free copper and micro-channel cooling components has surged due to AI training servers and data center liquid cooling systems, with a single AI server using significantly more copper than a standard server. Copper metal has transitioned from traditional industrial building materials to a core strategic material of computational infrastructure, experiencing rapid growth rates and high product added value, creating a fresh valuation increment within the industry. According to the prospectus, the global copper processing product industry has continued to grow, driven by stable development in basic applications and strong expansion in emerging applications. The global market size of copper processing products is projected to grow from approximately 30.26 million tons in 2021 to about 32.86 million tons by 2025, with a compound annual growth rate of 2.1%. Driven by emerging fields such as 5G communications and AI technology, the demand for high-end copper processing products continues to rise, with the global market size expected to reach 36.46 million tons by 2030, also reflecting a compound annual growth rate of 2.1%. However, it is important to note that even high-growth lanes are not without clear risks. On one hand, the influx of capital into the lithium battery copper foil sector may result in the centralized release of capacity in the future, potentially inciting price wars and declines in processing fees. On the other hand, capital expenditure in new energy vehicles and AI computing power is cyclical, and if downstream demand does not meet expectations, it will directly impact orders for high-end materials. Furthermore, the global supply chain is being restructured, with continuous changes in geopolitical factors, tariff policies, and carbon barriers, escalating the uncertainties for overseas operations. In such an environment of opportunities and challenges, Zhejiang Hailiang has three significant competitive barriers. First is the scale leader barrier. As a six-time champion in copper pipes, Zhejiang Hailiang has held the first place in domestic copper pipe exports for 17 consecutive years. The purchasing bargaining power and customer stickiness that come with such scale is a threshold that smaller manufacturers cannot surpass. Second is the globalization advantage barrier. As the leading domestic copper processor with the deepest overseas footprint, the company operates 23 major production bases worldwide in localized operations, avoiding trade barriers and reducing logistics costs, while continuously earning overseas gross profits higher than those of the domestic market. Third is the technological iteration barrier. The company consistently focuses on R&D of high-end materials, with ultra-thin copper foils, solid-state battery copper foils, and cooling components for computing power seeing continuous advancements, effectively positioning itself technologically in high-end sectors and escaping low-end homogenized competition. It is evident that Zhejiang Hailiang is equipped with a threefold protective moat comprising scale, global layout, and technology, seizing the first-mover advantage in the overlapping areas of traditional business and new tracks, and is expected to continue harvesting the dividends of industry structural upgrades. However, the pressure from processing fees stemming from the release of lithium battery copper foil capacity, the cyclical fluctuations in capital expenditure in AI and, as well as the uncertainties in the overseas operational environment, cannot be ignored. Conclusion In summary, Zhejiang Hailiang is currently at a turning point as it transitions from traditional cyclical manufacturing to a high-end new materials platform. In the short term, the company leverages its absolute leading scale to solidify its core foundation; it possesses sufficient profit resilience and will transform its scale advantage into visible growth momentum. In the medium term, the continuous release of lithium battery copper foil capacity will become a pillar of certain growth; in the long term, the new track of AI computing power thermal management opens new avenues for the company. This signifies that the company's investment value does not lie in short-term performance explosions but in a structural transformation that unfolds over several years: evolving from a single copper pipe processor to a global leader in copper-based new materials encompassing new energy and infrastructure for computing power. For investors, this undoubtedly resembles a pricing game about "time and transformation." Entering too early might expose one to the agony of valuation volatility, while entering too late might risk missing out on the dividends of the transformation realization.