The leading electrolyte manufacturer, with a market capitalization of 50 billion yuan, has reported a recovery in its financial performance and now announces securing a significant 300,000-ton order from the battery giant.

On June 7th, Shenzhen Capchem Technology Co., Ltd. (referred to as Capchem) issued an announcement confirming the signing of an Electrolyte Cooperation Agreement with CATL. The agreement stipulates that CATL will purchase a total of 300,000 metric tons of electrolyte from Capchem over a three-year period.

However, this development was met with a tepid response in the capital markets. On the trading day following the announcement, June 8th, Capchem's share price fell by 3.58%, closing at 73.26 yuan per share.

Financially, the company has rebounded from its previous downturn. For the full year 2025, Capchem achieved revenue of 9.639 billion yuan, representing a year-on-year increase of 22.84%. Its net profit attributable to shareholders reached 1.097 billion yuan, growing 16.48% compared to the previous year.

Despite the overall recovery, the gross profit margin for its core battery chemicals business, which is the primary revenue driver, has continued to decline. In 2025, the gross margin for this segment was 10.93%, a decrease of 1.33 percentage points from the prior year.

It is noteworthy that Capchem is currently advancing plans for a listing in Hong Kong. Concurrently, the company is intensifying its overseas expansion efforts, aiming to uncover new sources of growth in international markets.

Additionally, the company plans to utilize up to 2 billion yuan in idle proprietary funds and up to 300 million yuan in idle raised capital for financial management purposes. This move is intended to enhance capital efficiency and generate investment returns.

Securing a Major Contract

The agreement between Capchem and CATL involves the purchase and sale of electrolyte materials during its effective term. Specific details such as product names, specifications, unit prices, quantities, and technical standards will be determined by mutually confirmed purchase orders or other written documents.

According to the procurement plan, CATL will purchase a total of 300,000 tons of electrolyte from Capchem over three years. The breakdown is as follows: 50,000 tons in 2026 (with a ±10% tolerance), 100,000 tons in 2027 (±12% tolerance), and the remaining 150,000 tons in 2028 (±15% tolerance).

Both parties have agreed to conduct monthly reviews and follow-ups on the plan. Any shortfall in a given month should be corrected in the following month. Deviations within the annual tolerance limits are not considered a breach of contract. If deviations exceed the limits, both parties agree to make up the shortfall in the following year.

The agreement also includes penalty clauses. If either party commits a material breach, the non-breaching party has the right to unilaterally terminate the agreement and claim liquidated damages of 25 million yuan.

Capchem stated that the signing of this agreement is conducive to establishing a long-term, stable cooperative relationship with CATL. It is expected to further enhance the company's position in the industrial chain, its market influence, core competitiveness, and solidify its market advantages.

If the agreement is successfully executed, it is anticipated to have a positive impact on Capchem's operating results for the years 2026 through 2028.

According to the company's annual report, Capchem's battery chemicals production capacity in the previous year was 681,600 tons, with an output of 529,300 tons, resulting in a capacity utilization rate of approximately 77.66%. An additional 536,000 tons of battery chemicals capacity is under construction.

Nevertheless, Capchem explicitly mentioned potential risks in its announcement. Factors such as market demand fluctuations or changes in technological pathways during the execution of the agreement could lead to delays, partial fulfillment, or termination.

Profitability Pressures Amid Recovery

Shenzhen Capchem Technology Co., Ltd. is a company focused on the research and development, production, and sales of electronic chemicals. As a leader in the electrolyte sector, the company delivered a strong financial performance last year.

In 2025, the company achieved revenue of 9.639 billion yuan, a year-on-year increase of 22.84%. Net profit attributable to shareholders reached 1.097 billion yuan, growing 16.48% year-on-year, reversing the trend of declining profits seen in the two preceding years.

Entering 2026, Capchem maintained its growth momentum. First-quarter revenue surged 67.85% year-on-year to 3.361 billion yuan, while net profit attributable to shareholders skyrocketed 109.02% to 480 million yuan, indicating a continued strengthening of the company's fundamentals.

Revenue is primarily derived from three business segments: battery chemicals, organic fluorine chemicals, and electronic information chemicals.

In 2025, against the backdrop of expanding global demand for lithium batteries and rising demand for lithium-ion battery materials, the battery chemicals segment became Capchem's core growth driver. It generated revenue of 6.679 billion yuan, a 30.57% year-on-year increase, accounting for 69.29% of total revenue.

During the same period, revenue from the organic fluorine chemicals and electronic information chemicals segments was 1.426 billion yuan and 1.465 billion yuan, representing year-on-year changes of -6.7% and +29.14%, respectively.

Capchem noted in its 2025 annual report that the decline in organic fluorine chemicals revenue was mainly due to intensified international trade frictions and fierce competition in the fluorinated pharmaceutical intermediates market.

The growth in electronic information chemicals revenue was attributed to a recovery in industry sentiment and increased product demand driven by the rapid development of emerging fields such as new energy, AI, and semiconductors.

However, beneath the seemingly impressive growth, the gross profit margin for the key battery chemicals business has been on a persistent downward trend.

Data shows that from 2022 to 2024, the gross margin for this segment was 26.11%, 16.11%, and 12.26%, respectively. In 2025, it further decreased by 1.33 percentage points to 10.93%.

This decline has impacted the company's overall profitability. In 2025, Capchem's overall sales gross margin was 24.28%, down 2.21 percentage points from 26.49% in 2024.

Regarding cash flow, Capchem exhibited characteristics of "significant increase in operating inflows, expanded investment outflows, and a sharp increase in financing outflows."

Specifically, net cash flow from operating activities in 2025 increased by 42.8%, primarily due to increased sales collections and the impact of matured entrusted collection of notes receivable.

Net cash flow from investing activities saw an outflow increase of 114.37%, mainly influenced by a reduction in bank deposit-type investments compared to the same period.

Net cash flow from financing activities increased by 316.39%, primarily due to the repayment of bank loans and dividend distributions.

Influenced by the aforementioned factors, Capchem's net cash and cash equivalents decreased by 1.608 billion yuan by the end of 2025, a substantial increase of 703.08% compared to 2024.

Dual Strategy: Overseas Expansion and Financial Management

Capchem was listed on the Shenzhen Stock Exchange as early as 2010. More recently, the company has set its sights on the Hong Kong market.

In December of last year, Capchem announced its plan to issue H-shares, formally initiating the process for a Hong Kong listing.

The company stated that this move aims to deeply advance its global development strategy, achieve localized supply of global resources, enhance its international brand image, and strengthen its comprehensive competitiveness in the global market.

Simultaneously, a Hong Kong listing would provide an international platform for capital operations, optimize the capital structure and shareholder composition, and improve corporate governance and core competitiveness.

According to its prospectus, the funds raised from the Hong Kong listing are intended for localized and integrated strategic layouts, supporting the enhancement of full-chain R&D capabilities across its three business segments, advancing digital infrastructure upgrades, and supplementing working capital.

In fact, Capchem began its overseas market布局 during its early stages. Its website indicates that in 1999, the company established a factory in Shenzhen to develop export business, primarily involved in toll processing of capacitor chemicals for markets in Taiwan, China, and South Korea.

During an earnings conference call on March 24th, Capchem revealed that it is accelerating the construction of overseas projects in Southeast Asia (Malaysia), Europe (Poland), the Middle East (Saudi Arabia), and the United States (Ohio).

Among these, the first phase of electrolyte capacity at the Poland project is already operational, with a second phase planned for further expansion. The Malaysia project, building an electrolyte and core materials production base, is expected to commence operations by the end of 2026. The Saudi Arabia project plans to construct a carbonate solvent facility. The Ohio project in the US has completed land acquisition and is preparing to build an electrolyte and battery chemicals base.

In April, Capchem announced that it had submitted its application materials for the H-share issuance and Hong Kong main board listing to the China Securities Regulatory Commission (CSRC) and that the materials had been accepted, marking a substantive step forward in its Hong Kong listing plan.

It is also worth noting that to improve the efficiency of its capital usage and obtain certain investment returns, Capchem plans to use up to 2 billion yuan (or equivalent in foreign currency) of idle proprietary funds and up to 300 million yuan of idle raised capital for cash management.

Capchem emphasized that this cash management will be implemented under the premise of ensuring sufficient funds for daily operations and the normal progress of projects funded by raised capital. The funds will be used to purchase financial products characterized by high safety, good liquidity, and low risk.