Bank of Communications International has released a research report reiterating its positive outlook on GCL TECH (03800). The report highlights the company's significant competitive advantages in lithium battery materials, including lithium iron phosphate (LFP) and silicon-carbon anodes. It expresses confidence in the company's strategic transformation into a new energy materials platform, which would reduce its reliance on the photovoltaic sector alone. The LFP business is expected to contribute rapidly to profitability and become a new growth driver. Consequently, the bank maintains its target price of HK$1.19 and a "Buy" rating.
The key points from the report are as follows:
**Announcement of Strategic Transformation Plan** The company has announced its "Overall Strategic Transformation Plan," with the core strategic objective being a leapfrog transformation from a "champion in granular silicon" to a "global multi-product new energy materials platform." The business implementation path includes lithium iron phosphate, silicon-carbon anodes, and international expansion.
**Lithium Iron Phosphate (LFP)** GCL TECH aims to establish its physical iron-red process for LFP as a core growth engine. Currently, the mainstream LFP preparation method is the solid-phase iron phosphate process, projected to account for approximately 83% of production in 2025, with the iron-red method representing only about 5%. However, the iron-red process offers advantages of an extremely simplified flow, low energy consumption, and zero-emission green manufacturing attributes, giving it a cost advantage. This method has gained significant market recognition. Furthermore, the company's fourth-generation and higher products demonstrate advantages in key performance metrics such as compaction density, capacity, and voltage platform. These products have already been certified by major power and energy storage battery manufacturers in mainland China and have achieved batch adoption.
Previously, the GCL Group (the parent entity) had already commissioned 150,000 tons of annual capacity outside the listed company, with orders secured by leading customers like CATL. Its 2025 shipment volume is ranked within the industry's top ten, with favorable profitability. To meet rapidly growing demand, the listed company has invested in a 200,000-ton capacity facility in Leshan, which is currently completed and in the production debugging phase. This facility is expected to contribute to profits in the second half of the year. An additional 400,000 tons of capacity is under planning. The bank believes the iron-red LFP process may replicate the previous successful trajectory of granular silicon by leveraging its differentiated technology.
**Silicon-Carbon Anodes** Leveraging its position as the world's largest producer of silane gas, the company plans to implement technological upgrades and equipment repurposing for part of its granular silicon capacity at its Xuzhou and Leshan bases. Through chemical vapor deposition (CVD), it aims to achieve uniform deposition and coating of porous carbon, rapidly establishing a barrier to low-cost, large-scale mass production. The bank views the company's cost advantage as substantial and notes it can fully utilize idle silane gas capacity resulting from lower granular silicon utilization rates. However, the short-term profit contribution from this segment is expected to be limited until the large-scale adoption of solid-state batteries.
**International Expansion** Operating within a legal and compliant framework, the company plans to extend its differentiated, integrated industrial chain overseas through industrial capital cooperation and the establishment of overseas operating entities. The bank anticipates the company will establish granular silicon or perovskite production capacity overseas in the future to capture excess profits from such international operations.
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