Key takeaway

The company’s anode material shipments reached 199,000 tonnes in 1H26, representing a YoY increase of 4 0%, of which shipments in 2Q26 are estimated at approximately 103,000 tonnes, up 42% YoY, mainly driven by incremental demand from energy storage. Amid supply shortages, the company’s outsourcing ratio reached 33%-40% in 2Q26. The company’s operating net profit per tonne for anode materials in 2Q26 is estimated at RMB2,400, including graphitized coke and other businesses. The QoQ decline was attributable to higher raw material prices, a higher outsourcing ratio, and a lag in the company’s price pass-through. Net profit attributable to shareholders of the parent company per tonne is estimated at RMB2,100. The QoQ recovery was mainly because 1Q26 earnings were significantly affected by impairment losses. The company’s profit per tonne is expected to recover significantly from 4Q26 as its integrated production capacity gradually comes online. The company’s shipments are expected to exceed 450,000 /650,000 tonnes in 2026/2027, with net profit of RMB1.12bn /1.86bn, respectively.

Event

In 1H26, the company achieved revenue/net profit attributable to shareholders of the parent company/net profit after deducting non-recurring items of RMB4.51bn/0.40bn/0.42bn, representing YoY changes of +33%/-17%/-15%; of which, 2Q26 revenue/net profit attributable to shareholders of the parent company/net profit after deducting non-recurring items were RMB2.31bn/0.22bn/0.22bn, +31%/-9%/-8% YoY and +5%/+21%/ +1 7% QoQ.

Quick Take

Anode materials: Shipments maintain strong growth amid robust industry demand, while the outsourcing ratio remains high

1) Sales volume: The company’s anode material shipments are estimated at 199,000 tonnes in 1H26, up 40% YoY. Anode material shipments are estimated at approximately 103,000 tonnes in 2Q26, up 42% YoY and 7% QoQ, mainly driven by strong growth in energy storage demand. Amid supply shortages, the company’s outsourcing volume has remained high, with the outsourcing ratio estimated at 33%-40% in 2Q26.

2) Profit: The company’s operating profit per tonne, including graphitized coke and other businesses, is estimated at approximately RMB2,900/RMB2,400 in 1Q26/2Q26. The QoQ decline in 2Q26 was mainly attributable to: ① higher prices for upstream coke-based raw materials in the core anode material business, while strong demand growth further increased the outsourcing ratio QoQ and intensified cost pressure; and ② a lag in the company’s product price pass-through, which put short-term pressure on gross margin. The company’s net profit attributable to shareholders of the parent company per tonne is estimated at approximately RMB1,900/RMB2,100 in 1Q26/2Q26. The QoQ recovery in 2Q26 was mainly because 1Q26 earnings were significantly affected by impairment losses.

Carbon products: Higher raw material prices put pressure on gross margin

The company’s raw material costs for carbon products increased. Relatively inelastic downstream demand for graphitized coke limited the scope for price increases. The constrained cost pass-through put profitability in the carbon products segment under pressure.

Construction in progress: The company’s construction in progress stood at RMB371mn/RMB706mn at the end of 1Q26/2Q26, up RMB79mn/RMB335mn, respectively. The strong QoQ increase in 2Q26 was mainly driven by progress on the company’s Shanxi phase IV/V and Malaysia projects. These projects are expected to gradually come online from 4Q26, with overseas capacity expected to come online in early 2027 and Shanxi phase V in 2H27. Interest expense: The company’s interest expense was RMB67mn in 1H26, up 56% YoY, representing an increase of RMB24mn. This was mainly because: ① the company actively accelerated the development of integrated production capacity and expanded its operating scale, resulting in a substantial increase in bank borrowings; and ② the successful issuance of convertible bonds.

Operating cash flow: The company’s net cash flow from operating activities was RMB-1.72bn in 1H26. Net cash flow from operating activities was RMB-1.44bn/RMB-280mn in 1Q26/2Q26, down RMB410mn/RMB870mn YoY, respectively. The company’s operating cash flow in 1H26 was mainly affected by the rapid expansion of its business and the construction of new capacity projects. The collection of accounts receivable and bank acceptance notes lagged behind business expansion. In addition, after receiving proceeds from the convertible bond issuance, the company did not discount acceptance notes or factor accounts receivable.

Equity incentives: The company announced its 2026 equity incentive plan. The targets require 2027 revenue/net profit to increase by no less than 30% from 2026 and 2028 revenue/net profit to increase by no less than 65% from 2026.

Investment recommendation: Shipm ents are expected to exceed 450,000/650,000 tonnes in 2026/2027. Profit per tonne is expected to rebound significantly after capacity comes online in 4Q26. Net profit attributable to shareholders of the parent company is expected to reach RMB1.12bn/RMB1.86 bn in 2026/2027, implying P/E multiples of 21x/12x at the current share price.

Risks

1) Downstream demand falls short of expectations: Sales may fall short of expectations due to weak demand; production may fall short of expectations due to sharp fluctuations in upstream raw material prices and power restrictions, which could in turn affect the shipment volume and profitability of the company’s relevant businesses.

2) Raw material price increases exceed expectatio ns: Since 2026, prices of upstream coke based raw materials have continued to rise. High and volatile prices have had some impact on end market demand while also disrupting the company’s short term earnings.

3) The company’s capacity expansion falls shor t of expectations: The company currently has a high outsourcing ratio. The commissioning of integrated capacity can effectively reduce outsourcing costs, but slower than expected progress on key capacity projects would affect both current and long term ear nings.