"Star Daily" September 24th news (Reporter Wu Xuguang) On the evening of September 23rd, Guangdong Jiayuan Technology announced that, combined with a comprehensive evaluation of the company's production and operation management situation, the company signed a "Termination Agreement of Investment Intent for Jiayuan Technology's Annual 0.05 million tons high-end copper foil construction project" with the Meixian District People's Government of Meizhou City. Jiayuan Technology mentioned that the construction of this project fully considers the production capacity switch between printed circuit board copper foil and lithium electric copper foil.

Regarding the reasons for the adjustment of the above project, a reporter from "Star Daily" interviewed the staff of the company's securities department today (September 24th), who stated that the main reason is still considering the overcapacity of the entire copper foil industry and a temporary mismatch between supply and demand in the market.

Regarding the construction status and impact of the project, the aforementioned staff from the company's securities department stated that the "Jiayuan Technology's Annual 0.05 million tons high-end copper foil construction project" has only completed the preliminary environmental assessment work, the project construction site has not yet been approved. The company decided to terminate the project at this time, which will not result in excessive waste of early-stage investment funds.

"This is a self-adjustment of the market." Zhang Xiang, Secretary-General of the International Association of Intelligent Transport Technology, told a reporter from "Star Daily." Along with the increasing competition in the lithium battery industry chain, upstream and downstream companies are starting to rationally evaluate the market supply-demand relationship and their own development positioning. Future investments will become more rational and cautious.

Economist Song Qinghui added that the suspension of some lithium battery industry chain projects is also related to the financial constraints of related industry chain enterprises.

Guangdong Jiayuan Technology mainly engages in the research, manufacturing, and sales of high-performance electrolytic copper foils, which are mainly used in the lithium-ion battery, copper-clad laminate, and printed circuit board industries, and ultimately applied in new energy vehicle power batteries, energy storage batteries, 3C digital electronic products, and other fields.

Among them, lithium electric copper foil is the main material for the negative electrode material of lithium-ion batteries, accounting for about 5%-10% of the overall cost of lithium batteries. In recent years, affected by factors such as the rise in copper prices and intensified market competition, copper foil companies have been under continuous performance pressure, leading to a situation of losses.

In the first half of 2024, Guangdong Jiayuan Technology increased revenue without increasing profits, with an operating income of 2.423 billion yuan, a year-on-year growth of 16.62%; a net loss of 0.105 billion yuan, a year-on-year decrease of 595.15%; the net cash flow from operating activities of the company decreased by 297.26% to -0.863 billion yuan compared to the same period last year.

Regarding the main reasons for the performance changes, the company stated that it was mainly affected by factors such as intensified market competition, decreased processing fees, changes in supply and demand relationships, fluctuations in raw material prices, changes in the overall economic situation, and industry cycle, resulting in a significant decrease in the company's gross margin.

Haitong Securities research report mentioned that the copper foil industry has now entered the cost support stage, with enterprise profits under pressure. With the gradual clearance of production capacity and improvement in supply and demand relationships, overall production capacity clearance may continue until 2025.

In fact, to guide the healthy and orderly development of the lithium battery industry chain, the Ministry of Industry and Information Technology issued the "Lithium Battery Industry Standard Conditions" and "Lithium Battery Industry Standard Announcement Management Measures" on May 8th this year. This aims to guide companies to reduce manufacturing projects focused solely on expanding production capacity, strengthen technological innovation, improve product quality, and reduce production costs.

Song Qinghui stated that policy guidance and regulation will further promote the industry towards high-quality development, avoid disorderly competition, and the competitiveness and profitability of enterprises are expected to improve in the future.

On September 4th, Chairman Liao Pingyuan of Guangdong Jiayuan Technology also stated at the company's semi-annual earnings conference that with the decrease in copper foil processing fees, the clearing of production capacity by various copper foil manufacturers is the future trend, and the market share of lithium battery copper foils will concentrate towards leading enterprises.

In terms of production and sales volume, in the first half of 2024, the company achieved a copper foil production volume of approximately 0.024 million tons, an increase of 0.12% compared to the same period last year, and achieved a sales volume of approximately 0.025 million tons, an increase of 0.68% compared to the same period last year.

Regarding production capacity utilization rate, the aforementioned securities department personnel stated that currently, lithium battery copper foil processing fees are still at a low level, but high value-added product prices still have room for increase. The company will gradually increase the proportion of high value-added products. Since the second quarter of this year, the company's production capacity utilization rate has been running at a high level of around 85%-90%.

Regarding the current changes in downstream customer product demand in the market, the securities department staff mentioned that overall, downstream customers are continuously moving towards a trend of lighter and more high-end demand for the company's copper foil products, transitioning from the previous 4μm copper foil products to 5μm and 6μm copper foil products. The company will continuously update its technology and iterate its products based on downstream market and customer demand.

It should be pointed out that, according to the company's latest announcement, guangdong jiayuan technology still has situations where some of the IPO funds raising projects and convertible bond raising projects are delayed and adjusted.

On September 5, the company announced that, based on the actual situation, the internal investment structure of the 2021 company's convertible bond fundraising project "Copper Foil Surface Treatment and Smart Project" will be adjusted. The equipment planned for purchase after the adjustment will be allocated to the subsidiary jiangxi jiayuan for use, and the expected production date of the project will be extended from the original June 2024 to December 2026; At the same time, the expected production date of the company's 2021 IPO project "Jiangxi Jiayuan 0.02 million tons project" will be extended from September 2024 to December 2026.

As for the reasons for the delay of the above-mentioned projects, the company stated that the delay in the Copper Foil Surface Treatment and Smart Project is mainly due to the fact that the copper foil surface treatment system to be purchased after this internal investment structure adjustment is an imported equipment that is in high demand, thus resulting in a longer delivery period. Starting from the beginning of 2023, the copper foil industry market competition intensified, processing fees decreased, leading to insufficient product demand.

"After terminating the construction project for an annual output of 0.05 million tons of high-end copper foil in Meizhou, the company's important task next is to develop the above-mentioned fundraising projects well," added the guangdong jiayuan technology securities department staff.