In-Depth Analysis of the Investment Rationality of Fulin Precision's RMB 6 Billion Lithium Iron Phosphate Capacity Expansion Project

Based on the latest collected information, I now provide you with a systematic and comprehensive analysis report.

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On the evening of January 5, 2026, Fulin Precision (300432.SZ) issued an announcement stating that its subsidiary, Jiangxi Shenghua New Materials Co., Ltd., plans to build an

in Yijinhuoluo Banner, Ordos City, Inner Mongolia, with a total investment of [1][2][3].

• Capacity Scale
  : Constructed in two phases, 250,000 tons per phase, with an expected construction period of 12 months
• Supporting Projects
  : Simultaneously planning a 400,000-ton precursor oxalic acid project (RMB 1.2 billion) and a 600,000-ton precursor ferrous oxalate project (RMB 1.5 billion)
• Cumulative Planned Capacity within Three Months
  : Over 1.025 million tons, with total investment exceeding RMB 12.7 billion
• Capacity Expansion Multiple
  : Expanding from the existing 300,000 tons to 1.325 million tons (
  4.4x expansion
  )

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According to the latest industry data[4][5][6]:

Category	Capacity Utilization Rate	Profitability	Order Status
High-End Products (Leading Enterprises)	Over 90%, nearly full capacity	Relatively good	Orders scheduled through the first half of 2026
Low-End Products (Small and Medium-Sized Manufacturers)	Operating at a low level	Average gross profit margin of only 0.4%	Most are loss-making

Industry data for November 2025 shows[4]:

• Average Selling Price
  : RMB 14,704.8 per ton
• Cost Range
  : RMB 16,798-17,216 per ton
• Price-Cost Inversion
  : Approximately -RMB 2,000 to -RMB 2,500 per ton

• Power Batteries
  : From January to October 2025, the installed capacity of lithium iron phosphate batteries reached 470.2 GWh, accounting for 81.3% of the total, surging 59.7% year-on-year[5]
• Energy Storage Batteries
  : Global shipments of energy storage batteries in the first 10 months reached 489.9 GWh, increasing 99% year-on-year[5]
• Industry Forecast
  : Lithium iron phosphate materials will see an additional million-ton level of demand in the next two years[6]

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The cooperation between Contemporary Amperex Technology Co., Limited (CATL) and Jiangxi Shenghua has extended from the business level to the equity level[1][2]:

Cooperation Content	Specific Arrangements
CATL’s Investment Amount	RMB 2.563 billion
Shareholding Ratio	51% (to become controlling shareholder)
Prepayment	RMB 1.5 billion
Term of Supply Agreement	2025-2029
Annual Procurement Volume Commitment	No less than 80% of the committed capacity

• Current high tap density lithium iron phosphate capacity of
  300,000 tons
  (industry-leading)
• Leading market share in high-end products
• Has in-depth cooperation with leading battery manufacturers such as CATL
• Has received numerous large orders since 2025[1]

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• The industry’s expected capacity in 2025 will reach
  3.7 million tons
  [6]
• Wanhua Chemical has a cross-sector layout with planned capacity exceeding
  1.25 million tons
  [4]
• A new wave of capacity expansion may exacerbate the oversupply contradiction

• The industry is generally in losses, with the gross profit margin of low-end products only 0.4%
• Raw material price increases are difficult to pass on to the downstream
• There is uncertainty about whether processing fees can be increased in 2026

Risk Type	Specific Performance
Financial Pressure	Planned investment exceeds RMB 12.7 billion within three months, with negative free cash flow (-RMB 237 million)
Customer Concentration	High dependence on CATL (procurement volume is no less than 80%)
Capacity Absorption	Capacity expansion of over 1 million tons within 3 months, leading to capacity absorption pressure
Management Challenges	Rapid expansion puts forward higher requirements for management capabilities

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Evaluation Dimension	Score	Core Logic
Industry Demand Prospects	80/100	Dual-drive of energy storage and power, with strong certainty of high demand growth
Competitiveness of High-End Products	85/100	In-depth cooperation with CATL ensures order security
Industrial Chain Integrated Layout	75/100	Supporting precursor projects reduce the risk of raw material cost fluctuations
Capacity Expansion Rhythm	60/100	Capacity expansion of over 1 million tons within 3 months is too fast, leading to absorption risks
Reliability of Funding Sources	70/100	CATL’s RMB 2.5 billion investment + RMB 1.5 billion prepayment, but there is still a funding gap
Industry Competition Pattern	55/100	Overcapacity risk objectively exists, and price war pressure continues
Valuation Rationality	65/100	4.4x capacity expansion, but the industry’s profitability has not yet improved

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1. Structural Opportunities
   : There is indeed a supply-demand gap for high-end lithium iron phosphate products, and leading enterprises maintain high capacity utilization rates
2. Leading Enterprise Cooperation
   : CATL will soon become the controlling shareholder, significantly reducing financial and order risks
3. Integrated Layout
   : Supporting precursor projects can reduce the risk of raw material cost fluctuations
4. Location Advantage
   : The Inner Mongolia project can benefit from lower electricity costs

1. Overly Rapid Expansion
   : Planned capacity expansion of over 1 million tons within 3 months, increasing capacity from 300,000 tons to 1.325 million tons (4.4x), leading to capacity absorption pressure
2. Price Pressure
   : The current industry faces price-cost inversion, so even after the project is put into production, profit margins will be limited
3. Cyclical Risk
   : The industry is obviously cyclical; if demand falls short of expectations, it may face price wars

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: The stock price has pulled back by approximately 18% from its peak; attention should be paid to the market reaction after the resumption of trading on January 6

: The key lies in whether the project can be put into production and reach full capacity smoothly; it is necessary to track the implementation of CATL’s procurement volume

: After substantial capacity expansion, the company’s industry position will be significantly improved, but attention should be paid to industry integration progress and profitability improvement

:

1. Approval progress of CATL’s investment in Jiangxi Shenghua
2. Construction start and production progress of the project
3. Price trend of lithium iron phosphate and changes in the company’s gross profit margin
4. Actual procurement implementation with CATL

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: Fulin Precision’s RMB 6 billion capacity expansion project is a “double-edged sword”. Against the backdrop of industry structural opportunities and in-depth cooperation with CATL, the capacity expansion has strategic rationality, but the over RMB 10 billion expansion plan within three months is overly aggressive, and investors should maintain a cautiously optimistic attitude.

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[1] Securities Times - “Expected RMB 6 Billion! 300432 Announces Important Investment!” (https://www.stcn.com/article/detail/3572090.html)

[2] Time Weekly - “Fulin Precision’s ‘Frenzy’ of RMB 10 Billion Lithium Iron Phosphate Capacity Expansion” (https://time-weekly.com/post/326647)

[3] Sina Finance - “Expected RMB 6 Billion! 300432 Announces Important Investment!” (https://finance.sina.com.cn/roll/2026-01-05/doc-inhfhicm7989295.shtml)

[4] China Powder Network - “Review of 2025: The ‘Four Waves’ Sweeping the Lithium Iron Phosphate Industry!” (https://zshq.zuiyouliao.com/zixun/detail-33e53675b76146418cf936ce3d2457e6.html)

[5] Phoenix Finance - “Lithium Iron Phosphate Price Surge: Supply-Demand Restructuring Amid Demand Explosion” (https://finance.ifeng.com/c/8p9syYyboKn)

[6] Securities Times - “Orders Scheduled for Next Year but Profits Under Pressure, Lithium Iron Phosphate Industry Discusses ‘Anti-Involution’” (https://www.stcn.com/article/detail/3501872.html)

[7] CLS - “Lithium Iron Phosphate Industry on a Tightrope: Enterprises Cautious About Capacity Expansion Amid Full Production, ‘Anti-Involution’ Still Awaiting…” (https://www.cls.cn/detail/2207968)