Varyou New Energy (688275) In-Depth Analysis Report: Judgment on 11 Consecutive Quarterly Losses and the Prospects of CATL's Large Orders

Varyou New Energy (stock code: 688275.SS) is a high-tech enterprise focusing on the R&D, production, and sales of new energy battery materials. Its main business covers the core manufacturing fields of lithium iron phosphate, iron phosphate, and other lithium battery cathode materials. As an important upstream supplier in the new energy vehicle industry chain, Varyou New Energy’s products mainly serve power battery and energy storage battery manufacturers [1].

From the perspective of industry chain positioning, Varyou New Energy is in the midstream of the lithium battery industry chain, and its core customer groups include domestic leading power battery enterprises such as CATL and BYD. Among them, CATL, as the world’s largest electric vehicle battery manufacturer, has long been one of Varyou New Energy’s most important strategic customers. The supply cooperation relationship between the two parties has lasted for many years, and Varyou New Energy has repeatedly obtained large order supply qualifications from CATL [2].

The company’s listing on the Sci-Tech Innovation Board reflects its technological innovation capabilities in the new energy materials field and recognition from the capital market. However, since its listing, the company’s financial performance has continued to be under pressure, and the continuous loss operating situation has triggered widespread market attention and discussion on the company’s fundamentals and future development path.

According to public financial data, Varyou New Energy has reported operating losses for 11 consecutive quarters. Behind this persistent financial困境 lies multiple complex factors:

The production cost of lithium battery cathode materials is highly dependent on the prices of raw materials such as lithium, phosphorus, and iron. From 2022 to 2024, the price of lithium carbonate experienced a sharp roller-coaster ride—rising from about 600,000 yuan/ton at the beginning of the year to nearly 600,000 yuan/ton in November, then falling sharply to below 100,000 yuan/ton. This large fluctuation in raw material prices directly hit the company’s gross profit margin, leading to significant increases in inventory impairment losses and cost control difficulties [3].

Against the backdrop of rapid growth in the new energy vehicle market, Varyou New Energy previously made large-scale capacity expansion investments. However, the actual growth in market demand failed to fully absorb the new capacity, leading to insufficient capacity utilization and increased pressure on fixed cost allocation. Especially in 2024, some newly put-into-production lines faced the dilemma of insufficient orders, and depreciation and amortization expenses significantly dragged down profits [4].

Competition in the lithium battery cathode material industry is becoming increasingly fierce, and overall overcapacity in the industry has led to continuous pressure on product prices. The market price of lithium iron phosphate materials has continued to decline from its high in 2022, and the overall profitability of the industry has dropped significantly. Varyou New Energy faces dual pressures on market share and profits in price competition [5].

The company’s revenue share from leading customers such as CATL is relatively high. Although this ensures the source of orders, it is relatively weak in terms of bargaining power. When the overall industry prices decline, the company finds it difficult to fully pass on cost pressures, further compressing profit margins.

From a financial health perspective, the challenges faced by Varyou New Energy are not only reflected in continuous net profit losses but also in the deterioration of cash flow conditions and asset-liability structures:

• Gross Profit Margin Under Continuous Pressure
  : The decline in product prices exceeds the decline in costs, leading to negative or low gross profit margins
• Net Operating Cash Flow
  : Negative for consecutive quarters, reflecting insufficient hematopoietic capacity of the main business
• Decline in Inventory Turnover Efficiency
  : Inventory impairment risks and reduced turnover efficiency due to falling raw material prices
• Pressure on Accounts Receivable Management
  : Increased capital occupation costs due to extended customer payment cycles

As the absolute leader in the global power battery industry, CATL’s procurement decisions have a decisive impact on the operating conditions of upstream suppliers. Varyou New Energy winning a large supply agreement from CATL is regarded by the market as a key opportunity for the company to reverse its loss situation [6].

From a strategic perspective, the potential considerations for CATL to place large orders with Varyou New Energy include:

Out of strategic considerations to diversify supplier risks and ensure supply chain safety and stability, CATL needs to maintain a diversified cathode material supply system. As an important domestic supplier of lithium iron phosphate materials, Varyou New Energy has certain competitive advantages in technical accumulation and capacity scale, making it an indispensable part of CATL’s supply chain [7].

By placing orders with suppliers such as Varyou New Energy, CATL can use economies of scale to reduce procurement costs to a certain extent while maintaining supply chain competition vitality. This game relationship makes Varyou New Energy relatively passive in order acquisition and price negotiations.

CATL and Varyou New Energy have in-depth cooperation in the R&D of new battery materials. A stable supply agreement helps the two parties form synergies in material performance improvement and joint development of new products.

:

• Revenue Boost
  : Large orders will directly increase the company’s operating revenue scale, improve capacity utilization, and reduce unit fixed costs
• Cash Flow Improvement
  : As a high-quality customer, CATL’s orders have relatively guaranteed payment, which helps improve the company’s operating cash flow
• Market Confidence Boost
  : Winning recognition from leading industry enterprises for large orders helps enhance the company’s image in the capital market and investor confidence
• Release of Scale Effects
  : After capacity utilization increases, economies of scale are expected to gradually emerge, and there is room for marginal improvement in gross profit margins

:

• Continuous Price Pressure
  : Even with large orders, order prices may still be at a low level against the backdrop of industry overcapacity
• Limited Gross Profit Margin Repair
  : Fluctuations in raw material costs and fierce market competition may continue to suppress profit margins
• Time Needed to Digest Overcapacity
  : The overall capacity clearance of the industry has not yet been completed, and fundamental improvements are difficult to see in the short term
• Single Customer Dependence Risk
  : Over-reliance on CATL’s orders may lead to reduced operational flexibility and weak anti-risk capabilities

From a macro-industry perspective, although the new energy vehicle market still maintains growth, its growth rate has slowed compared to previous years. In 2025, the penetration rate of China’s new energy vehicle market is expected to continue to rise, but the trend of the industry shifting from incremental competition to stock competition is becoming increasingly obvious [8].

The power battery industry shows the following development trends:

• Diversification of Technical Routes
  : Coexistence of lithium iron phosphate and ternary material routes, with lithium iron phosphate’s market share continuing to rise
• Increased Energy Density Requirements
  : Continuous upgrading of performance indicators for cathode materials, increasing investment in technical R&D
• Intensified Cost Competition
  : Vehicle manufacturers and battery factories continue to transmit cost reduction pressures to the supply chain
• Accelerated Capacity Integration
  : Accelerated industry reshuffling, elimination of backward capacity, and increased concentration of leading enterprises

Facing the persistent operating困境 of continuous losses, Varyou New Energy needs to seek breakthroughs in the following aspects:

Increase R&D investment in new materials such as high-voltage lithium iron phosphate and lithium manganese iron phosphate, obtain premium capabilities through product performance improvement, and adopt differentiated competition strategies.

Continuously optimize production processes, improve raw material utilization, strengthen strategic cooperation with upstream suppliers, and reduce procurement costs and manufacturing costs.

While maintaining cooperative relationships with CATL, actively expand other high-quality customers, reduce the risk of customer concentration, and enhance bargaining power.

Reasonably control the pace of capacity expansion according to the actual growth of market demand, and avoid overcapacity risks caused by blind investment.

Based on the above analysis, investors need to focus on the following risk factors:

• Risk of Continuous Performance Losses
  : If the industry environment and the company’s operating conditions do not improve significantly, the company may face continued losses or even delisting risks
• Industry Cycle Fluctuation Risk
  : The lithium battery material industry is highly related to the new energy vehicle market and has obvious cyclical fluctuation characteristics
• Raw Material Price Risk
  : Fluctuations in the prices of raw materials such as lithium and phosphorus will have a significant impact on the company’s profitability
• Risk of Intensified Competition
  : Industry overcapacity may lead to further deterioration of price competition
• Single Customer Dependence Risk
  : High dependence on CATL’s orders may lead to reduced operational flexibility and weak bargaining power

Based on the above analysis, Varyou New Energy’s dilemma of 11 consecutive quarterly losses is the result of multiple factors, including sharp fluctuations in raw material prices, industry overcapacity, worsening competition patterns, and mismatches between the company’s own expansion pace and market demand. Although CATL’s large orders can provide certain support on the revenue and cash flow sides, considering the overall downward price pressure in the industry and the limitations of the company’s gross profit margin repair,

.

From a long-term perspective, whether Varyou New Energy can get out of the dilemma depends on:

1. Progress of Industry Capacity Clearance
   : If the industry can bottom out and recover, the company is expected to benefit from the cycle reversal
2. Improvement of the Company’s Own Competitiveness
   : Internal cultivation such as technological innovation, cost control, and customer structure optimization
3. Continuous Growth of the New Energy Vehicle Market
   : Downstream demand expansion drives the recovery of midstream material demand

For investors, it is recommended to maintain a cautious attitude at the current stage and closely follow the company’s order execution, gross profit margin change trends, and industry fundamentals improvement signals. Before clear signals of overall industry recovery,

. Continuously track the company’s quarterly financial reports and industry dynamics, and carefully evaluate the matching degree of investment risks and returns.

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: This report is only an analysis based on public information and does not constitute investment advice. Investors should independently make investment decisions based on their own risk tolerance and investment objectives, combined with the latest market information.

[1] Wall Street Journal - Chinese Battery Pioneer Worth $40 Billion, But Claims “Not a Rich Man” (https://cn.wsj.com/articles/中國電池先驅-寧德時代曾毓群身家400億美元-卻自稱-不是有錢人-e2d2f8c3)

[2] Yahoo Finance - CONTEMPORARY AMPEREX TECHNOLOGY (CTATF) (https://hk.finance.yahoo.com/quote/CTATF/news/)

[3] Wall Street Journal - Policy Boosts Chinese Auto and Battery Stocks, CATL Hits New High (https://cn.wsj.com/articles/catlhits-new-high-as-policy-powers-up-chinese-auto-battery-stocks-23c08abc)

[4] Yahoo Finance - 4 Stocks Positioned to Benefit From Lithium Rebound in 2026 (https://finance.yahoo.com/news/4-stocks-positioned-benefit-lithium-123700435.html)

[5] Bloomberg - China’s EV Battery Giant Is Trying to Find a New Road (https://www.bloomberg.com/news/features/2025-12-23/ev-battery-giant-catl-s-expansion-plans-face-trump-and-european-pushback)

[6] Nissan Wants to Survive, Hon Hai Wants to Build Cars: Can a Century-Old Car Factory and代工 Giant Win Together? (https://hk.finance.yahoo.com/news/日產想求生-鴻海想造車-百年車廠搭上代工龍頭-能雙贏-082004651.html)

[7] China Concept Stock Briefing: Pinduoduo’s Market Value Re-enters the Top Four Domestic Internet Companies (https://cn.wsj.com/articles/中概股简报：拼多多市值再度跻身国内互联网四强-11572221398)

[8] Chinese Star Enterprise Deeply Trapped in Debt Dilemma, “Jewelry Queen” Zhou Xiaoguang’s Fate Takes a Sudden Turn (https://cn.wsj.com/articles/中国明星企业深陷债务困局，“饰品女皇”周晓光命运陡转-11562657412)