Summary
Shipments are already approaching last year's full-year volume.
Hunan Yuneng, which sold 1.1371 million tons of cathode materials throughout last year, achieved 98% of that sales volume in just nine months this year.
On October 29, Hunan Yuneng, a leading phosphate iron lithium (LFP) manufacturer, disclosed its Q3 2026 financial report. In the first three quarters, it achieved cathode material sales of 1.1157 million tons, up 42.14% year-on-year;
Operating revenue reached CNY 57.508 billion, up 147.60% year-on-year;
Net profit attributable to shareholders of the parent company was CNY 4.259 billion, up 560.12% year-on-year.
Compared to the net profit attributable to shareholders of the parent company of CNY 1.277 billion for the full year of 2025, Hunan Yuneng's earnings in the first three quarters of this year have already reached 3.33 times that of last year's full year.
With the growing demand for high-compaction LFP, Hunan Yuneng announced in July a processing fee increase of CNY 2,000 per ton across its entire product series, and subsequently launched a CNY 24 billion mining-chemical integration project in Guizhou and a CNY 2 billion LFP capacity expansion project in Xiangtan.
However, Hunan Yuneng's profitability in the third quarter showed signs of change: although single-quarter sales hit a new high, gross margin and per-ton profit declined.
Meanwhile, lithium carbonate prices fell below CNY 100,000 per ton again in October, posing new challenges to cathode material companies' profits in the fourth quarter.
01. High-end Products Account for Over 60%, Yet Single-Quarter Profit Declines
In terms of sales volume, Hunan Yuneng continues to accelerate its expansion.
In the first half of this year, the company sold 667,200 tons of cathode materials, and in the third quarter, sales further reached 448,500 tons, a quarter-on-quarter increase of approximately 22%.
If the fourth quarter maintains this level, annual sales could exceed 1.56 million tons, representing a year-on-year growth of about 38%.
Product premiumization is a key driver of this growth.
In 2025, Hunan Yuneng's sales of CN-5, YN-9, and higher-end series products reached 588,500 tons, accounting for about half of its total annual sales.
In the first half of this year, the company's high-end product sales reached 416,700 tons, with the proportion increasing further to 62.46%.
Currently, Hunan Yuneng's stably mass-produced high-compaction LFP products achieve a compaction density of approximately 2.6g/cm³ or above, covering applications such as 6C fast charging, high energy density, and long-cycle energy storage.
Its dedicated energy storage products can achieve a cycle life of over 12,000 cycles.
The energy storage market is contributing greater incremental growth.
In 2025, Hunan Yuneng's product sales in the energy storage sector accounted for about 45%, rising to 53% in the first half of this year;
Overseas sales during the same period reached 18,000 tons, marking the beginning of bulk supply to overseas bases of domestic battery companies.
However, the increase in high-end product sales did not prevent a quarter-on-quarter decline in third-quarter profits.
Financial reports show that Hunan Yuneng's net profit attributable to shareholders of the parent company was approximately CNY 1.554 billion in the second quarter, dropping to CNY 1.349 billion in the third quarter, a decrease of 13.2% quarter-on-quarter;
The overall gross margin in the third quarter was approximately 8.89%, down about 5 percentage points from the second quarter.
Roughly calculating based on the group's net profit attributable to shareholders and cathode material sales volume, Hunan Yuneng's net profit per ton in the first half was approximately CNY 4,361, falling to about CNY 3,008 in the third quarter, a drop of about 31%.
Raw material costs and procurement pricing mechanisms are key factors to observe regarding these changes in profitability.
In July this year, Hunan Yuneng proposed to customers an increase of CNY 2,000 per ton in processing fees for all series of LFP products, effective from August 1. The company explained that due to price hikes in raw materials such as sulfur, phosphoric acid, and ferrous sulfate, the price of iron phosphate rose from about CNY 10,000 per ton at the beginning of the year to CNY 15,000 per ton, continuously pushing up production costs.
On August 25, Hunan Yuneng stated clearly at its performance briefing that the implementation of this round of price adjustments has been smooth, and the company has maintained full-capacity operation.
This indicates that Hunan Yuneng has developed the ability to pass some cost pressures downstream, but the third-quarter financial report shows that gains from price increases were still affected by other operational factors.
02. Behind CNY 26 Billion Capacity Expansion, Leaders Begin Competing on Integrated Costs
Profit fluctuations have not changed Hunan Yuneng's pace of capacity expansion.
In the first half of this year, the company's annualized capacity reached 1.4 million tons. It expects effective capacity to exceed 1.5 million tons for the full year of 2026, with annualized capacity reaching over 1.8 million tons by year-end.
Building on existing capacity, Hunan Yuneng is further extending upstream.
In July, the company announced plans to invest approximately CNY 24 billion to build a mining-chemical integrated new energy battery material circular industry project in Weng'an, Guizhou. The plan includes an annual output of 800,000 tons of LFP and 1 million tons of iron phosphate, along with businesses such as phosphate ore mining, beneficiation, sulfuric acid, iron source, lithium carbonate processing, and battery recycling.
The construction period for this project is estimated at five years, with an initial investment of CNY 5 billion to CNY 8 billion planned within 18 months after formal commencement.
In September, the environmental impact assessment for the first batch of production lines—400,000 tons of LFP and 550,000 tons of iron phosphate—was initiated, alongside the simultaneous advancement of a supporting project converting 650,000 tons of phosphogypsum into 300,000 tons of sulfuric acid through resource utilization decomposition.
On October 19, the company announced another investment of no more than CNY 2 billion to build the sixth-phase LFP project of Hunan Yuneng, with a planned construction period of 12 months.
Overseas, in September, Hunan Yuneng raised the planning for its Spanish cathode material project from 50,000 tons to 70,000 tons, increasing the investment amount from CNY 982 million to CNY 1.65 billion. The project is currently under construction.
While the aforementioned expansion projects require distinguishing between planned, under-construction, and actual commissioned capacity, the strategic direction is clear: expanding the supply of high-end LFP while further controlling upstream costs for phosphorus sources, iron sources, and precursors.
Meanwhile, Fulin Precision reported operating revenue of CNY 18.323 billion for the first three quarters, up 101.70% year-on-year; net profit attributable to shareholders was CNY 645 million, up 98.36% year-on-year.
Among these, the net profit attributable to shareholders in the third quarter was CNY 363 million, a quarter-on-quarter increase of approximately 359%, showing a divergence in profitability compared to Hunan Yuneng.
Fulin Precision is accelerating the capacity release at its De'a base of 350,000 tons and the construction of a 500,000-ton high-end energy storage LFP project in Inner Mongolia.
In terms of process, some of Hunan Yuneng's high-compaction products use a secondary sintering route for iron phosphate, whereas Fulin Precision focuses on a primary sintering process using ferrous oxalate, reducing repeated sintering steps.
Centered on this process, Fulin Precision advanced several integrated projects this year, including 500,000 tons of ferrous oxalate and 200,000 tons of lithium dihydrogen phosphate in Guizhou, along with a supporting 100,000-ton thermal phosphoric acid project, attempting to further reduce precursor procurement and manufacturing costs.
The two technical routes differ in cost structures regarding sintering energy consumption, raw material procurement, precursor manufacturing, and equipment investment.
As high-compaction products gradually become mainstream offerings for leading companies, the importance of production costs and stable yield rates is rising.
03. Lithium Carbonate Falls Below CNY 100,000, Industry Profits Face Tests in Fourth Quarter
Entering October, the lithium carbonate market experienced another rapid downturn.
Data shows that on October 29, the morning mid-price for battery-grade lithium carbonate was CNY 96,900 per ton, a decrease of about 19% from the price of approximately CNY 120,000 per ton at the end of September.
For cathode material companies, falling lithium carbonate prices typically lead to lower product sales prices, and the time lag between inventory costs and sales settlements may also erode profits.
Hunan Yuneng previously revealed that its inventory turnover cycle is about one month, meaning fluctuations in lithium carbonate prices generally reflect in the following month.
As of the end of September, the company's inventory balance reached CNY 7.698 billion, an increase of 112.14% compared to the end of 2025, driven by both business scale expansion and raw material price increases.
Fulin Precision had already recognized approximately CNY 405 million in asset impairment losses in the first three quarters, mainly due to inventory write-downs for cathode materials; Hunan Yuneng's asset impairment loss for the same period was about CNY 27.69 million.
With raw material prices declining again, inventory management, customer lithium supply arrangements, procurement pricing mechanisms, and the actual cost advantages of new integrated capacities among leading companies will jointly influence fourth-quarter profits.
For Hunan Yuneng, having ranked first globally in phosphate cathode material sales volume for six consecutive years has established significant scale advantages.
The net profit of CNY 4.259 billion in the first three quarters also demonstrates the profitability brought by high-end products and scaled manufacturing.
But as peers begin to catch up through new processes and upstream integration, competition among LFP leaders is delving deeper into processing fees, raw material self-supply rates, and unit manufacturing costs.