Gross margin continues to decline, Shenzhen Capchem is going to Hong Kong for a second listing, is the materials leader also looking for a safety margin?

During the most frenzied years of the lithium battery industry, electrolyte was seen as a business with "extremely strong certainty": demand followed the expansion of new energy vehicles, the technological roadmap was relatively stable, and leading companies quickly widened the gap with their scale and first-mover advantages. Capchem was one of the most typical beneficiaries of this cycle.

But as the industry entered 2024, this certainty began to change. The core contradiction of the battery industry chain started shifting from "whether it exists" to "whether it's good or expensive," from capacity expansion to efficiency and performance competition.

At the same time, more high-end manufacturing material segments such as fluorine chemicals and semiconductor chemicals were pushed to the forefront, also exposing them to fiercer competition.

Against this backdrop, Capchem, which has been listed domestically for many years, chose to submit a listing application to the Hong Kong Stock Exchange. This move is unusual. For a mature materials company, "re-listing" often signals a shift in industry judgment—either to lay the groundwork for the next round of global competition or to find a new capital pivot before the cycle turns.

The question is, as industry growth slows and gross margins continue to decline, is a "platform-type materials company" like Capchem truly ready for the next phase?

When Electrolyte Is No Longer the Star, Capchem’s True Cards Begin to Show

From a revenue structure perspective, Capchem remains a typical lithium battery materials company. Battery chemicals are still its most important business segment and the core engine driving its rapid expansion in recent years.

Global battery electrolyte market revenue grew from RMB 7.3 billion in 2020 to RMB 33.1 billion in 2024, with a compound annual growth rate (CAGR) of nearly 46%. The growth in the Chinese market was even more aggressive, with a four-year CAGR of nearly 60%.

But the problem lies here. High-speed growth does not equate to high-quality growth. As industry capacity is released in bulk, electrolytes are gradually transitioning from "technology-driven products" to "scale-competitive products." Downstream battery manufacturers are becoming increasingly concentrated, strengthening their price negotiation power and significantly compressing the profit elasticity of single products.

Capchem was not unaware of this. Unlike many companies that bet solely on electrolytes, it vertically integrated core raw materials such as solutes, solvents, and additives early on, giving it an advantage in cost control and delivery stability. More crucially, the company did not put all its chips on the electrolyte curve.

What truly deserves attention is Capchem’s layout in organic fluorine chemicals and electronic information chemicals. These two businesses were not "sexy" for a long time, but with the rise of AI computing power, semiconductor manufacturing, and advanced industrial demand, their strategic value is being repriced.

Take organic fluorine chemicals as an example. HFPO and its downstream products are becoming key materials in high-end manufacturing. The global organic fluorine chemicals market reached RMB 158.5 billion in 2024 and is expected to exceed RMB 300 billion by 2029.

Compared to electrolytes, this market has higher technological barriers, stronger product differentiation, and is more conducive to leading companies establishing long-term pricing power. Capchem’s production and sales scale in this field already ranks among the top domestically, with product coverage breadth rarely seen among domestic manufacturers.

In the electronic information chemicals sector, Capchem’s "old business" has instead become a stabilizer.

Capacitor chemicals have ranked first in global market share for many consecutive years, providing the company with relatively stable cash flow. The semiconductor chemicals business has entered the stable supply chain of leading domestic IC manufacturers and holds a leading position in niche areas such as cooling fluids. Compared to the volatile cyclicality of new energy materials, this segment aligns more closely with the long-term expansion logic of manufacturing.

From this perspective, Capchem is not "betting on trends" in a single track but attempting to build a chemical materials platform spanning batteries, semiconductors, and advanced manufacturing. It resembles a materials infrastructure company more than a pure new energy concept stock.

Growth Remains, but the "Good Days" for the Materials Industry Are Over

The problem now is that capital markets won’t just listen to "long-term stories."

From financial data, Capchem’s revenue remains high, but changes in profitability have sent a clear signal. From 2023 to the first three quarters of 2025, the company’s gross margin declined from 28.4% to 23.7%, with a clear downward trend. This is not an isolated case but a common phenomenon in the materials industry.

The logic behind this is not complicated. On one hand, downstream customer concentration continues to rise, with leading effects in areas like power batteries and semiconductor manufacturing becoming more pronounced, squeezing material suppliers’ room in price negotiations.

On the other hand, capacity expansion driven by earlier high prosperity is now being realized en masse, shifting industry competition from "technological leadership" to "cost and scale battles." Meanwhile, R&D investment in new materials has not decreased but instead shown rigid growth.

This means materials companies are facing a triple squeeze: falling prices, rigid costs, and rising R&D investment. The era of "natural growth" driven by industry 红利 is coming to an end.

Against this backdrop, Capchem’s choice to list in Hong Kong is clearly not just about raising funds. The pricing logic for materials companies in the Hong Kong market differs significantly from that in the A-share market.

Compared to sentiment-driven A-shares, Hong Kong pays more attention to globalization capabilities, the counter-cyclical nature of business structures, and long-term profit quality. For a materials company that has already diversified its business layout, this is both an opportunity and pressure.

On one hand, Hong Kong helps Capchem connect with international capital, providing more direct financial support for its global capacity layout and overseas customer expansion. On the other hand, the Hong Kong market scrutinizes gross margin trends and capital return efficiency more strictly. If it cannot prove its profit resilience during the industry slowdown, the "platform story" may instead be seen as a valuation burden.

In other words, Capchem now stands at a 微妙 time: long-term industry space remains, but short-term 红利 has clearly receded. What capital markets care about more is not how many tracks it covers but whether it can defend profits in an environment of intensifying competition and price pressure.

Conclusion

Capchem is not an exception. The challenges it faces are becoming a collective 课题 for China’s materials industry. When the next phase of competition arrives, the gap between companies will no longer be reflected in "who expands faster" but in who can maintain stable returns amid complex business structures.

This is also the real background behind Capchem’s second attempt to list in Hong Kong—not to tell a newer story but to recalibrate its capital coordinates before the cycle 拐点。

Materials remain an indispensable foundation for industrial upgrading, but capital markets have started asking: Without the 掩护 of high-speed growth, who can still stand firm?