On November 3, Gem Co.,Ltd. announced plans to sell 100% of its equity in Jiangxi Gem Cycle Materials Co., Ltd. ("Jiangxi Gem"), a wholly-owned subsidiary engaged in electronic waste recycling and plastic regeneration, to Henan Cycle Group for 960 million yuan.
Despite reporting revenue and profit growth in the first three quarters of the year, Gem Co.,Ltd.'s adjusted net profit (excluding non-recurring gains such as asset disposals and government subsidies) remained flat year-on-year.
The market's primary concern, however, lies in the company's mounting debt. By the end of Q3, Gem Co.,Ltd.'s interest-bearing liabilities had surged to over 30 billion yuan, far exceeding its cash reserves of 4.75 billion yuan.
This heavy debt burden stems from a persistent cash flow deficit. Since its IPO in 2010, Gem Co.,Ltd.'s capital expenditures have consistently exceeded operating cash flow—a trend that predates its listing.
To raise funds, the company recently sold three unprofitable recycling subsidiaries to Henan Cycle for a combined 922 million yuan, with most of the proceeds tied to debt repayment.
Yet, asset sales alone cannot bridge the long-standing funding gap or resolve its deepening debt crisis.
**Asset Sales and Financial Strain** The 960 million yuan sale of Jiangxi Gem includes 280 million yuan in equity transfer and 682 million yuan in debt repayment. Jiangxi Gem reported a net loss of 26.8 million yuan in 2024 and 10.69 million yuan in the first nine months of 2025.
In Q1-Q3 2025, Gem Co.,Ltd. posted revenue of 27.5 billion yuan (+10.55% YoY) and net profit of 1.11 billion yuan (+22.66% YoY). However, after excluding 288 million yuan in non-recurring gains, core profit growth slowed to 8.21%.
**Debt Spiral and Cash Flow Challenges** The company's interest-bearing liabilities have ballooned since 2022, reaching 30.1 billion yuan by Q3 2025, while cash assets stagnated.
Gem Co.,Ltd., which recycles metals (nickel, cobalt, lithium, tungsten) and waste materials (batteries, electronics, vehicles, plastics), has struggled with negative cash flow for years. Post-2021, capital expenditures surged, exacerbating the imbalance.
**Desperate Measures** In December 2024, Gem Co.,Ltd. sold stakes in three subsidiaries—Henan Gem Cycle (100%), Shanxi Hongyang Seagull (90%), and Inner Mongolia Xinchuang (100%)—for 922 million yuan, predominantly as debt settlements.
Despite these efforts, piecemeal asset disposals offer no sustainable solution to the company's structural financial woes.
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