Comprehensive Impact Analysis of Lopal Technologies' Lithium Iron Phosphate Capacity Expansion

Based on publicly available information and online search results, I provide the following analysis and judgments on the impact of the 2 billion yuan lithium iron phosphate capacity expansion project by Changzhou Lithium Source, a holding subsidiary of Lopal Technologies, on the company’s market competitiveness in the lithium battery materials sector and future performance growth:

Lopal Technologies (02465.HK)'s holding subsidiary Changzhou Lithium Source signed a cooperation agreement with the Huaguangao New Area Administration Committee to plan the construction of a “High-performance Lithium Battery Cathode Material Project”, including a R&D center and an annual production base of 240,000 tons of high-density lithium iron phosphate, with a total investment not exceeding 2 billion yuan. The project will be implemented in two phases, with Phase I planning 120,000 tons of capacity [2]. This is a key strategic initiative for the company to transform from traditional lubricants and automotive chemicals to the new energy lithium battery materials field.

The 120,000-ton lithium iron phosphate capacity in Phase I of this project, if successfully completed and ramped up, will significantly enhance the company’s supply capacity in the cathode material segment. This will help the company connect with leading customers in power and energy storage batteries, and secure more stable long-term orders against the backdrop of growing demand for LFP driven by new energy vehicles and energy storage. However, it should be noted that the industry experienced large-scale capacity expansion and price declines in 2023-2024, and the competitive landscape is still evolving; there is uncertainty whether the new capacity can be fully absorbed by the market [6][7].

The project includes a R&D center and production base, which is expected to form synergy in process improvement, energy consumption control, and lean management, providing support for cost optimization and delivery reliability. In the phase of industry price pressure, improvements in cost and operational efficiency will help enhance bargaining power and risk resistance. However, this advantage needs to be evaluated based on actual yield and capacity utilization after production operation.

The “high-performance/high-density” route aligns with the technical evolution direction of lithium iron phosphate in terms of energy density and cycle life, which is conducive to the company’s ability to enhance product competitiveness in mid-end and cost-effective power and energy storage scenarios. In addition, the supporting R&D center will help continuously iterate material formulas and processes, enhancing technical reserves and customer stickiness.

Currently, leading domestic lithium iron phosphate companies have scale and technical advantages, and the industry integration trend is obvious. Lopal Technologies needs to continue to focus on customer certification, technical stability, and supply chain collaboration to evolve from the second and third tiers to a higher market share. In the short term, the company faces pressures from industry cycles and competitive landscape; in the medium to long term, if it can form differentiated technical and cost advantages, it is expected to gain a foothold in some segmented markets.

After the project reaches full production, the company will add a new revenue source from cathode material business, promoting the formation of a dual-main business pattern of “lubricants + new energy materials”, which is expected to improve the revenue structure. However, the specific increment depends on the production rhythm and customer orders, and there is no public detailed data to support quantitative forecasting.

The 2 billion yuan capital expenditure will put pressure on cash flow. Against the backdrop of falling lithium iron phosphate prices and sufficient industry capacity, short-term profit elasticity may be limited, and we need to wait for the improvement of industry supply and demand and price stabilization. Some institutions are cautiously optimistic about the industry profit inflection point in 2026 [4], but this view is an institutional forecast, not a deterministic fact, and should be comprehensively judged based on subsequent price and capacity clearance rhythm.

Industry demand is still growing, but short-term price fluctuations and intensified competition lead to uncertainty in investment returns. If industry supply and demand gradually return to balance from 2026 onwards, the investment recovery period may be shortened; if the recovery is less than expected, the return cycle may be extended.

The long-term growth trend of power battery and energy storage demand is relatively clear. China’s policy support for new energy storage and other fields (such as related investment targets in 2027) provides certain support for industry demand [4][5]. However, factors such as downstream installation growth rate, inventory rhythm, and subsidy withdrawal will still affect short-term order fluctuations.

The upstream cathode material segment has increasing requirements for scale and cost; enterprises with integrated capabilities and leading customer stickiness are more resilient. Lopal Technologies needs to continue to invest in technical reserves, customer resources, and supply chain collaboration to maintain competitiveness in the industry clearance process.

Lithium iron phosphate prices in China declined significantly in 2023-2024, and industry profits were under pressure; lithium prices rebounded periodically in 2025, but there are differences in market views on sustainability [6]. The current industry is still in the transition period of capacity adjustment and price recovery; the investment return of new capacity will depend on subsequent price trends and the company’s cost control capabilities.

1. Industry competition and price risk: The recovery process of industry prices after a sharp decline is uncertain; if prices remain low, it will directly affect the project’s profitability.
2. Capacity absorption and customer certification: New capacity needs to establish stable orders with leading downstream battery manufacturers, and the customer certification cycle is long, so there is a risk that the landing rhythm and scale are not as expected.
3. Approval, construction, and ramping risk: The project is affected by approval progress, construction cycle, equipment commissioning, and ramping rhythm, and may face delays or阶段性 underperformance.
4. Capital pressure: The 2 billion yuan investment scale is large, which may put pressure on cash flow and financial costs during the industry’s profit pressure period.

• Short term: Limited contribution to performance and profit elasticity; focus on project production progress, capacity ramping, and industry price recovery rhythm.
• Medium to long term: If the company successfully completes construction and ramping, and obtains stable customers and orders through technical and cost advantages, it is expected to form certain competitiveness in the new energy materials field, optimize revenue structure, and support long-term growth.

• No detailed financial and market data of Lopal Technologies (02465.HK) was retrieved from the data sources used in this analysis, so no quantitative financial forecast or valuation judgment was made. The relevant conclusions are based on qualitative information from announcement summaries and public online news, combined with prudent inferences from industry and macro environments.

[2] Yahoo Finance (Hong Kong) - Lopal Technologies (02465.HK)'s holding subsidiary plans to invest up to 2 billion yuan to build a production base (reports Changzhou Lithium Source’s investment in a 240,000-ton annual high-density lithium iron phosphate project, Phase I 120,000 tons, total investment not exceeding 2 billion yuan) https://hk.finance.yahoo.com/news/龍蟠科技-02465-hk-控股子公司擬最多20億人民幣建設生產基地-112611503.html
[4] Yahoo Finance (Hong Kong) - Hong Kong Stocks After Hours: Semiconductor Stocks Lead Gains; CITIC Securities quoted in the article: It is expected that China’s macro economy will recover steadily in 2026, and the lithium iron phosphate industry’s profits are expected to迎来 a cyclical inflection point in 2026 (institutional view, not factual statement) https://hk.finance.yahoo.com/news/港股盤後-半導體股全天強勢領漲-恒指升0-86-科指上揚-084413712.html
[5] Wall Street Journal (WSJ Chinese) - Policy Boosts Chinese Auto and Battery Stocks, CATL Hits New High (China’s policy support for new energy storage and other directions and industry background) https://cn.wsj.com/articles/catlhits-new-high-as-policy-powers-up-chinese-auto-battery-stocks-23c08abc
[6] Bloomberg - Lithium Rally in China Prompts Caution Over Whether It Has Legs (Lithium prices rebounded in 2025, but the market is cautious about sustainability) https://www.bloomberg.com/news/articles/2025-11-19/lithium-rally-in-china-prompts-caution-over-whether-it-has-legs
[7] Yahoo Finance (Hong Kong) - China’s EV Battery Giant Is Trying to Find a New Road (Industry and company-related chart background for industry observation) https://www.bloomberg.com/news/newsletters/2024-07-09/china-s-batteries-are-now-cheap-enough-to-power-huge-shifts
[3] Zhihu - Energy Storage Battery Market Share Remains Global First! How Does CATL Do ESG? (Industry leading enterprises and demand side background) https://www.zhihu.com/tardis/bd/art/1908944086574019490
(Supplement: Industry observation chart materials)
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