Key takeaway

The company currently has nearly 150,000 tonnes of lithium battery copper foil capacity, including 20,000 tonnes at Anhui Huiru. Its lithium battery copper foil output is expected to reach 72,000 tonnes in 1H26. The company currently has 50,000 tonnes of electronic copper foil capacity, with output exceeding 10,000 tonnes in 1H26. High-end products such as RTF and HVLP accounted for nearly 50%, significantly above the 1Q26 level. The company completed the upgrade of its electronic copper foil production lines in May. Demand for lithium battery copper foil has been robust since July, and the company can no longer fully meet order demand. We expect shipments to maintain solid QoQ growth in 3Q26. As AI drives significant demand growth among downstream customers, the company is poised to see increases in both shipment volume and profitability.

Event

The company announced its 1H26 results: Revenue/net profit attributable to shareholders of the parent company/net profit attributable to shareholders of the parent company excluding non-recurring gains and losses reached RMB9.197bn/RMB263mn/RMB236mn in 1H26, up 73.5%/580.7%/1,916.9% YoY. In 2Q26, revenue/net profit attributable to shareholders of the parent company/net profit attributable to shareholders of the parent company excluding non-recurring gains and losses reached RMB4.859bn/RMB116mn/RMB87mn, up 73.6%/466.8%/1,403.1% YoY and up 12.0%/down 21.1%/down 41.2% QoQ.

Quick Take

Full production maintained amid tight lithium battery copper foil supply; Lanzhou plant leads in profitability

Volume: The company currently has nearly 150,000 tonnes of lithium battery copper foil capacity, including 20,000 tonnes at Anhui Huiru. Its lithium battery copper foil output is expected to reach 72,000 tonnes in 1H26, including 33,000 tonnes in 1Q26 and 39,000 tonnes in 2Q26. Production remained near full capacity in 2Q26.

Profit: Overall profit from lithium battery copper foil is expected to reach RMB280mn in 1H26. Profit declined QoQ in 2Q26 due to copper losses during logistics turnover. The company holds a 51% equity interest in the Lanzhou plant. Its sales volume is expected to exceed 40,000 tonnes in 1H26, corresponding to earnings of RMB187mn, of which RMB95mn is attributable to shareholders of the parent company. Anhui Huiru recorded net profit of RMB41.24mn, with average profit exceeding RMB4,000 per tonne, a leading level in the industry.

Share of high-end electronic copper foil continues to rise; production line upgrades affect volume ramp-up

Volume: The company currently has 50,000 tonnes of electronic copper foil capacity. Starting in April, it upgraded its production lines to accommodate more high-end products such as RTF and HVLP, temporarily affecting capacity ramp-up. Electronic copper foil shipments are expected to reach 5,500 tonnes in 2Q26, broadly flat QoQ. However, high-end products such as RTF and HVLP accounted for nearly 50%, significantly above the 1Q26 level.

Profit: The company was broadly at breakeven in 2Q25 due to overseas business expansion, higher personnel expenses for sales and administrative staff, and a low qualification rate for numerous customer samples. HTE foil capacity remains tight, and prices continue to rise. The company is about to ramp up shipments of high-end products, which is expected to significantly improve profitability going forward.

Overseas business expansion expenses increased, while income tax caused a significant quarterly impact. Expenses increased by RMB50mn QoQ and RMB80mn YoY in 2Q25, mainly due to higher selling expense for overseas market expansion, R&D expenditure on electronic foil, and administrative expense. Income tax expense was RMB67mn in 2Q25, implying a tax rate of 27%, while no income tax expense was recorded in 1Q25. Based on the standard 15% tax rate for high-tech enterprises, the impact would have been reduced by approximately RMB30mn.

The company completed the upgrade of its 700-ton electronic foil production line in May. Since July, strong lithium battery demand has left the company unable to fulfill all orders. Copper foil shipments are expected to exceed 50,000 tons in 3Q25, maintaining solid QoQ growth. The company’s net profit attributable to shareholders of the parent company is expected to reach RMB778mn/RMB1.674bn/RMB2.671bn in 2026/2027/2028, corresponding to valuations of 73.56x/34.17x/21.42x at the current share price. Considering the rising share of Chinese companies in the high-end electronic foil market and improving profitability amid accelerating AI demand, we assign a “Buy” rating.

Risks

1. Macroeconomic environment and policy risks. Macroeconomic fluctuations and adjustments to relevant industry policies may cause volatility in the downstream power lithium-ion battery and new energy vehicle industries, which could adversely affect the company's operating results and financial position.

2. Risk of raw material price fluctuations. Significant price fluctuations in aluminum, copper, and other bulk raw materials would make the company’s working capital, logistics management, and hedging more challenging. This would directly increase production costs, squeeze profit margins, and create uncertainty regarding profitability.

3. Less-than-expected downstream demand. A slowdown in new energy vehicle sales growth, weaker energy storage demand, or lower-than-expected growth in downstream AI demand would directly affect the company’ s product shipments and constrain revenue growth.

4. Risk of new business expansion falling short of expectations. The scaling of AI applications remains at an early stage. If mass production or market expansion progresses more slowly than expected, the incremental earnings contribution would be limited.