“Science and Technology Innovation Board Daily”, April 20 (Reporter Wu Xuguang) On April 19, Fangyuan Co., Ltd. issued an announcement stating that the company held a board meeting on April 18 to review and pass the “Proposal to End the Issuance of A Shares to Specific Targets in 2023".

According to reports, Fangyuan Co., Ltd. issued a fixed increase plan on June 27, 2023, showing that the total capital raised by issuing shares to specific targets will not exceed 1,886 billion yuan, which is intended to be used for battery-grade lithium carbonate production and comprehensive utilization projects for waste lithium iron phosphate batteries (Phase I) to supplement working capital.

Since it was first announced to issue shares to specific targets to raise capital, it has been 10 months. Why did Fangyuan Co., Ltd. announce the termination of this matter?

In response, Fangyuan Co., Ltd. stated that considering factors such as changes in the external market environment, fund-raising project plans, and the company's own actual situation, the company decided to stop issuing A-shares to specific targets in 2023.

In response to issues such as the company's lithium battery recycling business plan, the “Science and Technology Innovation Board Daily” reporter called the director's office of Fangyuan Co., Ltd., and its staff said that the company will continue to carry out fund-raising projects related to this sale. By the end of 2023, the relevant projects have obtained construction land use rights and completed project filing, and subsequent funding sources will proceed in an orderly manner with own or self-funded funds.

“The price of battery-grade lithium carbonate experienced a round of downward channels in 2023, which had a negative impact on lithium battery recycling projects.” Zhang Xiang, a visiting professor at the Yellow River Institute of Science and Technology, said in an interview with the “Science and Technology Innovation Board Daily” reporter that the principle of lithium battery recycling is to separate valuable resources such as cobalt, nickel, lithium, copper, etc. from waste lithium batteries by pretreating, decomposing, separating and purifying waste lithium batteries. If the prices of raw materials such as upstream nickel, cobalt, and lithium plummet, downstream lithium battery recycling companies would lose profits or even lose money in product sales.

Zhang Xiang further stated that in the long run, as the global NEV penetration rate increases, the market demand growth rate will likely slow down, affecting NEV production and sales, and at the same time adversely affecting the development of lithium battery recycling and other related industry chain companies.

Faced with adverse effects such as a sharp drop in the price of lithium resources, the director and secretary of Fangyuan Co., Ltd. said that the company will avoid risks through futures hedging.

On April 19, the company issued an announcement stating that in order to reduce the risk posed by fluctuations in raw material and product prices to the company's production and operation, it plans to carry out futures hedging business based on its own business conditions, carry out standardized futures contract transactions, use the futures market hedging safe haven mechanism to control the risk exposure of raw materials and product price fluctuations, and enhance the company's ability to withstand the risk of price fluctuations.

Furthermore, it is worth noting that the supervisory authorities are continuously optimizing refinancing supervision, which has also led to the recent “stranded” increase in many listed companies.

On November 8, 2023, the Shanghai and Shenzhen Stock Exchange announced arrangements to optimize the supervision of refinancing. By setting up “five red lines”, it made stricter and tighter arrangements on the pace and scale of refinancing for listed companies. Examples include strict restrictions on refinancing of listed companies in bankruptcy or bankruptcy situations; strict control of financing intervals for companies with continuous losses; and strict control of requirements relating to the main investment of capital raised in refinancing into the main business, etc.

Although Fangyuan Co., Ltd. did not clarify the relevant reason in the announcement, looking at its fixed increase investment project, failure to meet the regulatory “red line” of “investment in the main business” should be one of the reasons why the company terminated the fixed increase.

According to public information, Fangyuan Co., Ltd. is a leading domestic manufacturer of lithium battery NCA cathode material precursors, mainly engaged in R&D, production and sales of lithium battery ternary cathode material precursors, nickel battery cathode materials, lithium salt, sulfate, etc. Fangyuan Co., Ltd. is planning to increase investment in lithium iron phosphate, not its main ternary lithium battery technology route.

It is worth mentioning that Fangyuan shares, whose fixed increase in capital raising has been terminated, are still under great pressure on their performance.

On the evening of April 18, Fangyuan Co., Ltd. released its annual results report stating that in 2023, the company achieved operating income of about 2.102 billion yuan, a year-on-year decrease of 28.37%; realized a net profit loss of about 455 million yuan, which changed from profit to loss over the same period last year.

Regarding changes in performance, the company said that the prices of metals such as nickel, cobalt, and lithium continued to fall during the reporting period, leading to a decline in sales prices and order volume of the company's products, and also led to a sharp increase in preparation for falling inventory prices during the reporting period. Furthermore, factors such as an increase in fixed expenses such as depreciation of fixed assets after the company's fund-raising projects were completed and put into operation led to an increase in unit costs and a decrease in gross margin during the reporting period, which combined led to a decline in the company's net profit.

The company's director and secretary told the “Science and Technology Innovation Board Daily” reporter that in order to reverse the unfavorable situation, Fangyuan Co., Ltd. will flexibly adjust its business strategy, strengthen sales team building, increase product promotion efforts, maintain good cooperative relationships with original customers, and not lose original customers due to fluctuations in order volume; at the same time, maintain cooperation with original customers to avoid loss of original customers, etc.

Regarding the trend of the ternary materials market, which is the main business of the company in 2024, the aforementioned staff said that the company continues to be optimistic about the development prospects of the entire industry, but the growth rate may have declined year-on-year.