In China's new energy industry landscape, Gem Co.,Ltd. (002340.SZ) represents a unique and critical presence. This enterprise, driven by the mission to "eliminate pollution and recreate resources," began with processing electronic waste from "urban mining" and has now evolved into a global leader in new energy materials manufacturing and critical metal resource recycling. Following its Shenzhen Stock Exchange listing (A-shares) in 2010 and GDR (Global Depositary Receipt) issuance, Gem Co.,Ltd. has recently initiated another capital strategy upgrade, planning to issue H-shares on the Hong Kong Stock Exchange to establish an "A+H" dual capital platform.
From E-waste Processing to Global Giant
In the new energy industry chain, Gem Co.,Ltd. occupies an indispensable strategic position, with its business model and sector alignment tied to two major themes of the era: "carbon neutrality" and "resource security." The company's core competitiveness lies in its unique industrial model of "resource recycling-material remanufacturing" closed loop spanning both "urban mining" and "new energy materials" fields.
On the resource front, Gem Co.,Ltd. leads China's nickel, cobalt, and tungsten resource recycling sectors. Particularly against the backdrop of rapid global new energy vehicle development, lithium-ion battery and end-of-life vehicle recycling businesses have become the crown jewel of its "urban mining" operations. According to data, by recycling volume, Gem Co.,Ltd. ranks in the first tier domestically in third-party retired lithium-ion battery recycling, with processing volumes accounting for over 10% of China's total. Through its nationwide recycling network, the company transforms waste batteries into valuable resources, ensuring a stable supply of raw materials.
In materials manufacturing, Gem Co.,Ltd. leverages recycled critical metals to focus on producing core materials for ternary lithium batteries—ternary precursors and cobalt tetroxide. By shipment volume, the company ranks among the global leaders in both sectors. More critically, this vertically integrated capability of using recycled resources to support critical materials manufacturing has built Gem Co.,Ltd.'s barriers in cost control and supply chain security.
From another perspective, this Hong Kong listing represents Gem Co.,Ltd.'s inevitable choice to optimize capital structure and hedge risks under its globalization strategy backdrop. The company's continuous global expansion, particularly its nickel resource and ternary materials base construction in Indonesia and other locations, has brought massive capital expenditures, resulting in consistently negative and expanding investment activity cash flows. The new H-share financing channel will not only share capital pressure and alleviate insufficient A-share market valuation support for the company's internationalization strategy, but also help introduce international long-term capital with preferences for green economy and ESG investments, improving its balance sheet structure.
Therefore, industry insiders believe this Hong Kong listing application is not merely simple financing expansion, but rather a critical strategic move in Gem Co.,Ltd.'s globalization strategy.
"Retirement Wave" Approaching, Positioning in High-Nickel Track
Over the past few years, Gem Co.,Ltd. has maintained steady overall revenue growth, with total revenue growing from 29.392 billion yuan in 2022 to 33.199 billion yuan in 2024, representing a compound annual growth rate of approximately 6.3%. The company's revenue structure has changed significantly, with core business new energy materials' revenue share declining from 74.2% in 2022 to 60.0% in 2024, while critical metal resources (especially nickel products) revenue share surged from 16.9% to 30.4%.
However, despite steady revenue growth, the company's net profit exhibits strong volatility, with profit growth not proportional to revenue growth. The core issue lies in the business's heavy dependence on nickel, cobalt, and other commodity prices. These commodities experience dramatic price fluctuations influenced by uncontrollable factors such as global supply and demand and geopolitical situations. During downward commodity price cycles, the company may face the dual impact of inventory depreciation and compressed gross margins. For instance, in 2023, the company recorded impairment losses on non-financial assets of up to 830 million yuan, with the vast majority being inventory impairments, exposing its earnings sensitivity to external market factors.
Meanwhile, continuous massive capital expenditures have resulted in consistently negative and expanding investment activity cash flows, confirming the company's aggressive capital expenditure strategy with cash heavily invested in fixed asset construction. Overall, the company exhibits typical growth enterprise cash flow patterns, where operating activities generate cash far insufficient to cover massive investment needs, with gaps heavily dependent on external financing. The sustainability of this model depends on whether the company can continuously obtain reasonably-priced external funding and whether future investment projects can generate returns as scheduled.
Therefore, if future market demand falls short of expectations or intensified competition leads to insufficient capacity utilization, massive investments may fail to generate expected returns, potentially eroding profits through high depreciation and financial costs, further intensifying financial pressure.
However, optimistically, as the power battery "retirement wave" approaches, the industry is expected to welcome its first peak period. Based on power batteries' approximately 8-year service life, the industry anticipates the first peak period for power battery retirement from 2027 to 2030. According to Frost & Sullivan projections, global retired electric vehicle battery quantities will grow at a 52.1% compound annual growth rate (CAGR) from 2024 to 2030, providing Gem Co.,Ltd. with relatively high-certainty growth market space.
Simultaneously, electric vehicles' long-range requirements have driven high-nickel ternary precursor penetration rates, expected to increase from 35.2% in 2024 to 70.0% in 2030. Gem Co.,Ltd.'s positioning advantage in the high-nickel precursor field enables it to capitalize on this high-end, high-value growth trend.
Summary
Overall, Gem Co.,Ltd.'s unique resource closed-loop model and technical barriers in new materials, particularly against the backdrop of the "power battery retirement wave" and "resource security," provide long-term strategic investment value. However, the high debt structure and potential liquidity risks accompanying the company's "high growth, high investment" strategy, along with earnings' high sensitivity to commodity prices, constitute its primary financial challenges in the short to medium term.
This "A+H" listing represents Gem Co.,Ltd.'s capital strategy to balance global expansion with financial risks. While investors should recognize its sector prospects and technical advantages, they must also fully weigh the structural financial pressures undertaken under aggressive expansion, evaluating its long-term value and short-term risks from a more objective perspective.
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