In-Depth Investment Value Analysis Report of Hunan Yuneng (301358.SZ)

I will now conduct a comprehensive analysis. Based on collected data and research materials, I will systematically assess the sustainability of high growth in Hunan Yuneng’s phosphate cathode material business.

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Hunan Yuneng New Energy Battery Material Co., Ltd. is the absolute leader in China’s lithium iron phosphate cathode material industry. Founded in Xiangtan, Hunan in 2016, the company focuses on the R&D, production, and sales of lithium-ion battery cathode materials, with phosphate cathode materials as its main products, which are mainly used in power batteries and energy storage batteries, ultimately serving the new energy vehicle and energy storage industries[1].

From the perspective of market share, Hunan Yuneng continues to expand its market share with significant cost advantages. According to industry data, the company’s market share in China’s lithium iron phosphate cathode material market was 24%, 32%, and 34% in 2022, 2023, and the first half of 2024 respectively, ranking first in the industry. The industry CR5 was 50%, 53%, and 53% respectively, with relatively stable concentration[2][3].

: The company’s main clients are CATL and BYD, whose combined sales accounted for as high as 95.42% of the company’s total sales in 2021. As of September 30, 2024, CATL holds 7.9% of the company’s equity, while BYD holds 3.95%, making them the third and seventh largest shareholders respectively, forming a deeply bound strategic cooperative relationship[4].

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According to the performance forecast disclosed by the company on January 19, 2025, it is expected to achieve net profit of RMB 1.15 billion to RMB 1.4 billion in 2025, representing a year-on-year increase of 93.75% to 135.87%[1]. This outstanding performance mainly benefits from the following multiple factors:

The new energy vehicle and energy storage markets continued to develop rapidly in 2025, driving a substantial increase in demand for lithium battery cathode materials. Data shows that from January to November 2025, the volume of lithium iron phosphate materials used in power and other batteries in China reached 2.902 million tons, a 50% increase compared with 1.934 million tons in the same period of 2024. Power battery loading volume reached 545.5 GWh, a year-on-year increase of 56.7%, with lithium iron phosphate batteries accounting for 81.2% of the total loading volume[5].

The energy storage sector also performed strongly. Global energy storage battery output reached approximately 540 GWh in 2025, a year-on-year increase of about 73%. Domestic energy storage bids saw a sharp increase, with new bids for domestic energy storage projects reaching 255.8 GWh from January to September 2025, a year-on-year increase of 97.7%[5][6].

In the second half of 2025, the rebound in the price of lithium carbonate, a key raw material, brought inventory gains to the company. The company has deployed the Huangjiapo Phosphate Mine (designed with an annual production capacity of 1.2 million tons of phosphate rock) and Dashichang Phosphate Mine (expected annual production capacity of 2.5 million tons) in Guizhou Province, and is expected to achieve full self-supply of phosphorus sources in the long term, effectively reducing costs through phosphorus source integration[2][4].

From an industry comparison perspective, Hunan Yuneng’s profitability is significantly better than that of its competitors. In the first half of 2024, the per-ton gross profit of LFP (lithium iron phosphate) for Hunan Yuneng, Fulin Precision, Wanrun New Energy, Defang Nano, Longpan Technology, and Anda Technology was RMB 0.27 million, RMB 0.07 million, break-even, -RMB 0.1 million, RMB 0.1 million, and -RMB 0.38 million per ton respectively[2].

The company’s cost advantages mainly come from three aspects:

• Technological advantage
  : Adopts low-cost ammonia process, the cost of phosphorus obtained from monoammonium phosphate is lower than that from concentrated sulfuric acid, and the by-product ammonium sulfate has high value for external sales
• Location advantage
  : Main production capacity is distributed in southwest China with lower electricity prices, and the total electricity demand for integrated preparation is about 4,000 kWh per ton
• Integration advantage
  : Integrated layout of phosphorus and lithium sources reduces costs and mitigates the impact of raw material price fluctuations[2]

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Lithium iron phosphate batteries are rapidly seizing the market share of ternary batteries by virtue of cost advantages and technological breakthroughs. In November 2025, the loading volume of lithium iron phosphate batteries reached 75.3 GWh, accounting for 80.5% of the total loading volume, a year-on-year increase of 40.7%; the loading volume of ternary batteries reached 18.2 GWh, accounting for 19.4%, a year-on-year increase of 33.7%[5].

Overseas power markets are emerging as new growth points. From January to November 2025, China’s cumulative export of power batteries reached 169.8 GWh, a year-on-year increase of 40.6%. A number of international automakers such as Volkswagen, BMW, Ford, Renault, and Daimler are gradually adopting lithium iron phosphate batteries, and it is expected that the overseas loading share of lithium iron phosphate batteries will further increase in 2026[5][7].

Electric heavy-duty trucks are gaining momentum with continuously increasing penetration rate. It is expected that they will contribute an additional 20-30 GWh of lithium iron phosphate battery demand from 2024 to 2025, becoming an important growth driver for power battery demand[4].

The energy storage business has become an important growth driver in the lithium battery industry chain. From January to September 2025, new bids for domestic energy storage projects reached 255.8 GWh, a year-on-year increase of 97.7%. This stands in stark contrast to the previous pessimistic expectations for domestic energy storage demand due to the “cancellation of mandatory energy storage allocation” policy[5][6].

After the implementation of Document No. 136, the domestic energy storage market is accelerating marketization. Against the backdrop of local market-oriented energy storage policies (capacity compensation, capacity electricity prices, etc.), the full grid connection of new energy, and the widening peak-valley price gap, the energy storage market is moving towards healthy development. It is expected that new domestic energy storage installations will reach 130 GWh, 160 GWh, and 210 GWh in 2025, 2026, and 2027 respectively[5][6].

According to CITIC Securities’ calculation, global lithium iron phosphate cathode material shipments are expected to reach 5.25 million tons in 2026, a year-on-year increase of 36%. SMM expects global lithium iron phosphate cathode material output to reach 5.6-5.8 million tons in 2026, a year-on-year increase of about 55%[5][8].

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Industry capital expenditure slowed significantly from 2024 to 2025. New production capacity in 2025 is expected to reach approximately 400,000 tons, corresponding to a capacity utilization rate of about 76%, a significant increase from 67% in 2024. A tight supply-demand balance emerged in the peak season of Q3 2025, which is expected to further intensify in 2026[6][8].

High-compaction density lithium iron phosphate (compaction density >2.6g/cm³) has become the development direction of the industry. This product has high technological requirements, and currently only a few leading enterprises can achieve mass shipments. Hunan Yuneng’s fourth-generation lithium iron phosphate product series YN-13 has passed certification by key clients and achieved mass supply, and the R&D of the fifth-generation product is progressing smoothly[9].

The company has deployed overseas production bases in Spain and Malaysia. The 50,000-ton annual lithium battery cathode material project in Spain is undergoing EIA approval procedures, and the 90,000-ton annual lithium battery cathode material project in Malaysia is in the preliminary preparation stage, which is expected to seize the high-margin overseas market[9].

In November 2025, the Ministry of Industry and Information Technology organized a symposium on the manufacturing industry of power and energy storage batteries, and the China Chemical and Physical Power Sources Industry Association released the “Cost Research on the Lithium Iron Phosphate Material Industry”, which is expected to promote the industry’s shift from “price war” to “value war” and return to healthy competition[5][9].

Major cathode material manufacturers are expanding production rapidly, and some chemical companies have also entered the lithium iron phosphate supply chain. China’s nominal annual production capacity of lithium iron phosphate is expected to reach approximately 9.5 million tons in 2026, with effective capacity of about 9 million tons. The new production capacity that can be put into operation is as high as 2.5 million tons per year, which is higher than the demand growth rate, indicating that competition in conventional capacity remains fierce[8].

Fluctuations in the prices of key raw materials such as lithium carbonate will have a direct impact on the company’s performance. Lithium carbonate prices remained in a low-level fluctuation throughout 2025. Although prices have rebounded recently, the supply-demand inflection point has not yet fully arrived, and price fluctuations may still affect profits[6][8].

The company is highly dependent on CATL and BYD. If the demand of major clients changes or they adjust their supplier relationships, it may have an adverse impact on the company’s performance.

The construction progress of overseas projects and capacity expansion projects may be affected by various factors, and there is a risk that production capacity release will fall short of expectations.

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The theoretical capacity upper limit of lithium iron phosphate is not high, and future room for improvement largely depends on continuous optimization of manufacturing processes, increasing the volumetric capacity of batteries by continuously improving compaction density. As compaction density increases from 2.4g/cm³ to 2.6g/cm³, the energy density of batteries increases effectively, and the product value increases accordingly[9].

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• Fourth-generation lithium iron phosphate product series YN-13: Features ultra-high compaction density, high capacity, and fast charging performance, which can significantly improve cell energy density to meet the needs of high-end power batteries and energy storage fields
• The R&D of the fifth-generation product is progressing smoothly, which will further optimize core performance such as compaction density
• Sales of high-compaction products hit a new high in the third quarter. Products such as the CN-5 series and YN-9 series are in short supply, and their shipment proportion continues to increase[9]

In the generational structure of lithium iron phosphate products in 2025:

• Third-generation products (compaction density 2.50g/cm³) are mainstream, accounting for about 44.8% on average annually
• Second-generation products (compaction density 2.40g/cm³) account for about 33.5% of output
• Third-and-a-half generation products (compaction density 2.55g/cm³) account for about 11.5% of annual output
• Fourth-generation products (compaction density 2.60g/cm³) account for about 10.3% of annual output[8]

High-compaction lithium iron phosphate generally can obtain a premium of RMB 1,000-3,000 per ton, and processing fees are also significantly higher than those of conventional products, so leading enterprises are expected to obtain excess profits[3].

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According to Tianfeng Securities’ forecast, the company’s operating revenue is expected to reach RMB 28.48 billion, RMB 38.38 billion, and RMB 47.95 billion in 2024, 2025, and 2026 respectively, with year-on-year growth rates of -31%, 35%, and 25%; net profit attributable to parent shareholders is expected to reach RMB 0.85 billion, RMB 1.92 billion, and RMB 2.72 billion respectively, with year-on-year growth rates of -46%, 126%, and 42%[4].

Compared with peer companies, the 2025 P/E ratios of Defang Nano and Longpan Technology are 38x and 19x respectively, while the 2025 P/E ratio of Tianci Materials, a leading electrolyte company at the bottom of the cycle, is 30x. Considering that the company, as a leader in the lithium iron phosphate industry, enjoys a certain valuation premium, we give it a 2025 P/E ratio of 23x, corresponding to a target price of RMB 58.3[4].

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, mainly based on the following judgments:

1. Demand side still has growth potential
   : Factors such as the continuous increase in new energy vehicle penetration rate (reaching 46.7% from January to October 2025), growth in battery capacity per vehicle, accelerated electrification of commercial vehicles, and expansion of overseas markets will support power battery demand to maintain a growth rate of over 20%; the energy storage market is expected to continue its high growth of over 50% driven by both policies and marketization

2. Supply side pattern marginally improved
   : Industry capital expenditure has slowed, the tight supply-demand balance is expected to intensify, and processing fees have a trend of stabilizing and rebounding

3. Company’s competitive advantages are solid
   : Cost advantages (integrated layout + technological advantages + location advantages), client advantages (deep binding with CATL and BYD), technological advantages (leading layout of high-compaction products), and leading overseas layout

4. Favorable industry policy environment
   : “Anti-cutthroat competition” policies promote the standardized development of the industry, which is conducive to leading enterprises obtaining higher profits

• Risk of intensified market competition and demand changes
• Risk of raw material price fluctuations
• Risk of high core customer concentration
• Risk of production capacity construction falling short of expectations
• Risk of major changes in industry technological routes

Considering the company’s industry status, cost advantages, client binding, and technological iteration capabilities,

. It is recommended that investors focus on the company’s high-compaction product shipment status, overseas production capacity construction progress, and changes in industry supply-demand patterns.

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[1] Eastmoney.com - Hunan Yuneng: 2025 Net Profit Expected to Increase 93.75% to 135.87% Year-on-Year (https://finance.eastmoney.com/a/202601193623486855.html)

[2] Guojin Securities - In-Depth Research Report on the Lithium Iron Phosphate Industry (https://pdf.dfcfw.com/pdf/H3_AP202501201642355215_1.pdf)

[3] Bank of China Securities - Outperform Market: In-Depth Report on the Lithium Iron Phosphate Industry (https://pdf.dfcfw.com/pdf/H3_AP202504251662024272_1.pdf)

[4] Tianfeng Securities - Initial Coverage Report on Hunan Yuneng (https://pdf.dfcfw.com/pdf/H3_AP202411191640954133_1.pdf)

[5] People’s Daily Online - Power Battery Industry Achieves Growth in Both Volume and Quality (http://paper.people.com.cn/zgnyb/pc/content/202601/12/content_30132369.html)

[6] Minmetals Securities - Four Key Focus Areas of the Lithium Battery Industry in 2026 (https://pdf.dfcfw.com/pdf/H3_AP202512311811875727_1.pdf)

[7] Bank of China Securities - 2026 Annual Strategy for the New Energy Vehicle Industry (https://pdf.dfcfw.com/pdf/H301_AP202601111816923573_1.pdf)

[8] SMM New Energy - 2025 Comprehensive Review and Analysis of the Lithium Iron Phosphate Industry + 2026 Market Outlook (https://new-energy.smm.cn/h5/content/14042/103725096)

[9] Shandong Provincial Department of Commerce - Leading Lithium Iron Phosphate Cathode Material Manufacturers Increase Investment in High-End Capacity (http://commerce.shandong.gov.cn/art/2025/10/31/art_21706_10359804.html)