Lithium battery giant CATL (300750.SZ/03750.HK) is facing increasing demand for high-density lithium iron phosphate cathode materials. Locking orders with upstream companies is no longer enough to eliminate uncertainty, so the giant has simply invested in acquiring a controlling stake in its suppliers.
On the evening of September 29, Fulin Precision (300432.SZ), a leading lithium iron phosphate company, announced that the company and CATL plan to jointly increase capital and expand shares of its subsidiary Jiangxi Shenghua New Materials Co., Ltd. (hereinafter referred to as "Jiangxi Shenghua"). Fulin Precision plans to increase capital by RMB 1,000,000,000 and subscribe to Jiangxi Shenghua's newly added registered capital of RMB 813,008,130. CATL plans to increase capital by RMB 2,563,380,110 and subscribe to Jiangxi Shenghua's newly added registered capital of RMB 208,404,8870.
Following the completion of this transaction, CATL will hold a 51.0000% stake in Jiangxi Shenghua, while Fulin Precision will hold a 47.4096% stake. Preliminary estimates suggest this transaction constitutes a major asset reorganization under the "Administrative Measures for Major Asset Restructuring of Listed Companies."
Notably, this is CATL's second investment in Jiangxi Shenghua within six months. In March of this year, Jiangxi Shenghua introduced CATL as a strategic investor through a capital increase and share expansion. Following the capital increase, CATL held an 18.74% stake in Jiangxi Shenghua. This was CATL's first investment in Jiangxi Shenghua, with a 400 million yuan stake, bringing its total investment to nearly 2.963 billion yuan.
As of the end of June this year, Jiangxi Shenghua had total assets of 7.002 billion yuan and net assets of 1.189 billion yuan. Its revenue in the first half of this year was 3.958 billion yuan, with a net profit of 63.7814 million yuan.
Fulin Precision's stock price hit its daily limit shortly after opening on September 30th, closing at 22.22 yuan. Over the past five trading days, the company's stock price has risen nearly 40%. As of the close of trading on September 30th, CATL's A-shares closed at 402 yuan, up 1.17%, and its Hong Kong-listed shares closed at HK$566.5, up 3.56%.
CATL has long clearly demonstrated its emphasis on Jiangxi Shenghua.
In August 2024, CATL and Fulin Precision reached a business cooperation agreement, stipulating that CATL will pay a certain amount of advance payment to Jiangxi Shenghua to support the latter's 75,000 tons/year production capacity construction at its Jiangxi base. At the same time, CATL promised to purchase at least 140,000 tons of lithium iron phosphate products from Jiangxi Shenghua each year from 2025 to 2027.
In June of this year, Jiangxi Shenghua and CATL revised their previously agreed business cooperation agreement. The main terms of the agreement stipulate that CATL will pay Jiangxi Shenghua a one-time advance payment of 500 million yuan before May 31st to support the construction of a 160,000-ton/year production capacity at its Jiangxi base and a 200,000-ton/year capacity at its Sichuan Phase III. Under the original agreement, CATL only supported the construction of 75,000-ton/year lithium iron phosphate production capacity at its Jiangxi base.
In terms of quantity, the original agreement stipulated that Jiangxi Shenghua would provide CATL with its promised supply capacity from 2025 to 2027, reserving this capacity for CATL. Given Jiangxi Shenghua's comprehensive product offerings, CATL pledged to purchase at least 140,000 tons of lithium iron phosphate production capacity from Jiangxi Shenghua annually from 2025 to 2027.
After the revision, Jiangxi Shenghua promised that 100% of its production capacity from 2025 to 2029 would be used first to produce materials that meet CATL's requirements (the production capacity situation is subject to the latest signed PSW); CATL promised that in each year from 2025 to 2029, the procurement volume would not be less than 80% of Jiangxi Shenghua's promised production capacity, and Jiangxi Shenghua should increase and expand its production capacity in advance as required by CATL.
In September this year, Fulin Precision disclosed again that Jiangxi Shenghua and CATL signed an "Advance Payment Agreement", stipulating that CATL will pay a total of RMB 1.5 billion in advance payment to Jiangxi Shenghua to lock in the lithium iron phosphate supply promised by Jiangxi Shenghua to CATL, and support Jiangxi Shenghua's layout of more competitive raw material construction.
Pengpai News reporters found that CATL's "preference" for Jiangxi Shenghua precisely reflects the changes in demand for lithium battery positive electrode materials.
Jiangxi Shenghua is the main developer of Fulin Jinggong's lithium battery cathode materials business. It's worth noting that the company currently boasts a production capacity of 300,000 tons of high-density lithium iron phosphate cathode materials. This high-density lithium iron phosphate cathode material, also known as fourth-generation lithium iron phosphate, is a key tool for improving battery fast-charging performance while maintaining high energy density, and is becoming a hotbed of technological competition among industry chain companies.
Given the expected explosive growth in demand for large-capacity iron-lithium battery cells in the power fast charging and energy storage markets at home and abroad, CATL's latest move is not difficult to understand.
Fulin Precision's 2025 semi-annual report noted that the industry adoption of high-density and high-rate lithium iron phosphate (LFP) materials accelerated in the first half of the year. High-density LFP materials, while offering improved battery fast-charging performance and high energy density, further expanded their share of the cathode material market. In the first half of 2025, the company's shipments continued to increase, with LFP sales revenue increasing significantly compared to the same period last year.
In addition to Fulin Precision, CATL has also signed long-term contracts with leading lithium iron phosphate companies Longpan Technology (603906.SH) and Vanrun New Energy (688275.SH) this year. Based on projected quantities and market prices, the total sales value of the former contract exceeds RMB 6 billion, while the latter's order value exceeds RMB 40 billion.
For Fulin Precision, despite losing its controlling stake in Jiangxi Shenghua, the company stated in the announcement that it and CATL plan to jointly increase capital and expand shares in its subsidiary Jiangxi Shenghua. This is a further deepening of the company's comprehensive strategic cooperative relationship with CATL at the equity and capital cooperation levels, which will help accelerate Jiangxi Shenghua's progress in the research and development and production of high-quality lithium iron phosphate products, international expansion, supply chain upgrades, and energy storage market development, and enhance Jiangxi Shenghua's capital strength and overall competitiveness.
After years of accumulation and continuous iteration, Jiangxi Shenghua's high-density lithium iron phosphate products possess technical and performance advantages. This joint capital increase in Jiangxi Shenghua will further leverage strategic shareholder resources and optimize the equity structure. The incremental cash will be used to develop Jiangxi Shenghua's core business, further enhancing its profitability and strengthening its competitive advantage.
