Fuxiang Shares Expects Net Profit of 350-430M Yuan in First Three Quarters, Reversing Losses on Lithium Battery Additive Boom

Strong Q3 Performance Caps a Remarkable Turnaround

On September 18, Fuxiang Co., Ltd. (300497.SZ) released its performance forecast for the first three quarters of 2026, projecting net profit attributable to shareholders of between RMB 350 million and RMB 430 million, representing a year-on-year increase of 658% to 785%.

In the first half of 2026, Fuxiang reported revenue of RMB 888 million, up 72.59% year-on-year, and net profit attributable to shareholders of RMB 177 million, compared to a loss of RMB 6.91 million in the same period last year. Based on these figures, Q3 quarter-on-quarter growth is estimated at 50% to 119%, indicating continued volume expansion.

This turnaround comes after four consecutive years of losses from 2022 to 2025:

• 2022: Loss of RMB 141 million
• 2023: Loss of RMB 201 million
• 2024: Loss of RMB 272 million
• 2025: Loss of RMB 55.03 million

Total cumulative losses over four years: approximately RMB 670 million.

The question now is whether this recovery is driven by luck or fundamental strength.

Lithium Battery Additives: Rising Prices and Volumes

Fuxiang operates three main business segments: pharmaceutical manufacturing, lithium battery additives, and microbial protein. In 2021, its subsidiary Weifang Aotong Pharmaceutical (now Fuxiang Shandong) obtained environmental approval for a lithium battery additive project, leveraging fluorination technology from pharmaceutical synthesis to transition from active pharmaceutical ingredients to electrolyte additives.

According to the company's announcement, the key driver behind the Q1–Q3 performance reversal was the simultaneous increase in both price and volume of new energy lithium battery electrolyte additives.

Historical Context: Losses from New Energy Operations

From 2022 to 2024, Fuxiang's revenue remained relatively stable, but net profits were consistently negative. The core reason was the drag on overall gross margins from the early-stage lithium battery additive business.

Gross margins for the lithium battery additive segment during this period:

| Year | Gross Margin | |------|-------------| | 2022 | -31.93% | | 2023 | -6.96% | | 2024 | -8.39% |

The cumulative losses from the new energy business significantly eroded the profit contributions from the pharmaceutical segment.

2026 Half-Year Breakdown

In the first half of 2026:

• Lithium-ion battery materials: Revenue of RMB 445 million, up 266% year-on-year, with a gross margin of 52.52%
• Pharmaceutical manufacturing: Revenue of RMB 437 million, up 12% year-on-year, with a gross margin of 20.87%

Nearly all incremental growth came from lithium battery additives.

Core Products and Capacity

Fuxiang's lithium battery additive business focuses on two core products: VC (vinylene carbonate) and FEC (fluoroethylene carbonate). The company completed a VC capacity upgrade in June 2026, increasing annual capacity from 8,000 tons to 10,000 tons. FEC capacity stands at approximately 4,000 tons per year.

In the first half of 2026, the company sold 5,904.89 tons of electrolyte additives, with a capacity utilization rate of 98.41%.

Customer Base and Market Access

Fuxiang has established stable合作关系 with Tinci Materials and Capchem. Its VC products have passed BYD's certification and are being supplied to the company. The company has also obtained certification from Korean customers, granting access to the South Korean market.

Industry Price Recovery

Between 2023 and 2024, VC prices fell to RMB 45,000–50,000 per ton, causing industry-wide losses and forcing many small and medium manufacturers to exit, completing a capacity shakeout.

According to data, starting in Q4 2025, VC prices rebounded from a trough of RMB 110,000 per ton to RMB 220,000 per ton. FEC prices recovered in tandem.

As of September 20, 2026:

• VC price: RMB 235,000 per ton
• FEC price: RMB 84,000 per ton

This price recovery directly reversed losses in the new energy business.

Peer Companies Confirm the Trend

Washeng Lithium (688353.SH)

In the first half of 2026:

• Revenue: RMB 792 million, up 126.51% year-on-year
• Net profit attributable to shareholders: RMB 223 million, compared to a loss of approximately RMB 63 million in the same period last year
• Comprehensive gross margin: surged from -2.07% to 52.55%
• VC product revenue: RMB 582 million, accounting for 73.39% of total revenue, with a gross margin of 65.62%

Estimates suggest Washeng Lithium's full cost for VC is approximately RMB 55,000 per ton. At current selling prices above RMB 200,000 per ton, gross profit per ton exceeds RMB 140,000.

Yongtai Technology (002326.SZ)

The company expects net profit attributable to shareholders of between RMB 265 million and RMB 330 million for the first half of 2026, up 350.68% to 461.22% year-on-year. The company cited "simultaneous year-on-year increases in both sales volume and prices of core lithium battery material products including lithium hexafluorophosphate, LiFSI, VC, and electrolytes."

Yongtai Technology originally had VC capacity of 10,000 tons per year. A new 5,000-ton production line, commissioned at the end of 2025, is steadily ramping up, further amplifying the volume-price synergy.

The Core Logic Behind VC Price Increases

Market Context

Lithium battery electrolyte additives are one of the four key materials for lithium-ion batteries. VC and FEC are the most widely used film-forming additives, particularly essential in high-energy-density batteries such as high-nickel ternary and silicon-carbon anode batteries.

According to CIConsulting, the global lithium battery electrolyte additive market is expected to grow from 135,400 tons in 2025 to 391,500 tons by 2030, representing a compound annual growth rate of 23.66%.

Demand-Side Drivers

Driver 1: New National Safety Standards for Power Batteries

A mandatory national standard implemented in July 2026 requires power batteries to not catch fire or explode within two hours of thermal runaway. Thermal runaway is fundamentally caused by electrolyte decomposition and heat release following anode rupture. Increasing VC content is the most direct method to strengthen the SEI (solid electrolyte interphase) film.

To meet these standards, battery manufacturers are forced to increase VC usage. Industry sources indicate that VC content in ternary batteries has increased by 0.5 to 1 percentage point, while content in LFP (lithium iron phosphate) batteries has increased to more than three times previous levels.

Driver 2: Surge in Energy Storage Batteries

Energy storage batteries require significantly higher VC content than power batteries:

• Power batteries: VC content typically does not exceed 3%
• Energy storage batteries: VC content generally exceeds 3%, with some large-format cells requiring over 10% during secondary electrolyte injection

In July 2026, energy storage cell production accounted for 42.89% of total lithium battery production. According to Haike New Energy, China's VC demand in 2026 is expected to grow 51% year-on-year to 93,200 tons.

Combined Effect: Global VC demand in 2026 is projected to reach 98,000 to 120,000 tons, representing year-on-year growth of 47% to 60%, significantly outpacing the overall lithium battery industry growth rate of 31%.

Supply-Side Constraints

As of the end of 2026, China's nominal VC capacity stands at approximately 192,000 tons, but effective supply is only about 115,000 tons. The gap of 77,000 tons largely consists of newly built production lines still undergoing commissioning and ramp-up, or awaiting customer certification.

VC is a hazardous fine chemical product. The production process uses raw materials such as chlorine gas and triethylamine, which are flammable and toxic, subjecting facilities to stringent environmental approvals. The timeline from project approval to stable production typically ranges from 18 months to 3 years, with new production lines requiring approximately 3 months of ramp-up after commissioning.

Additionally, VC production lines cannot operate at full capacity. Running at maximum output reduces the margin for process adjustments, increasing the risk of equipment malfunctions or safety incidents. A safety margin must be maintained for capacity utilization.

Inventory Tightness

Industry average capacity utilization was low in 2025, leading to continuous inventory depletion. Research data shows that VC industry inventory has fallen to less than 5 days, with electrolyte companies holding only enough raw material inventory to support one week of production. Spot market supply is tight.

Major downstream customers have begun securing supply through long-term contracts:

• CATL has bypassed electrolyte manufacturers to directly "lock in" orders with VC producers, signing a three-year supply agreement with Yongtai Technology for approximately 90,000 tons of VC
• BYD has made a strategic investment in Xianghe New Energy, a subsidiary of Washeng Lithium, acquiring a 15% stake

Outlook

VC supply is expected to remain tight through 2026. According to a research report from CSC Financial, new capacity additions are concentrated in Q4 2026, meaning short-term supply will remain constrained. Industry analysts believe VC supply tightness may persist until the first half of 2027.

2027 is a critical observation window:

• Yongtai Technology: Plans to reach total VC capacity of 80,000 tons per year by end of 2027
• Washeng Lithium: Advancing a 60,000-ton-per-year VC project as a single integrated investment
• Shandong Genyuan: Expected to reach total capacity of 120,000 tons by end of 2026

If these capacities come online as scheduled, the supply landscape could shift from tight balance to oversupply.

However, VC capacity expansion has historically been unreliable. Safety incidents, environmental reviews, and customer certification issues at any stage can delay effective supply. In 2025, safety accidents at several VC factories in Shandong province triggered industry-wide safety rectifications, serving as a cautionary precedent.

Fuxiang's Position and Risks

Fuxiang's current capacity utilization rate of 98.41% leaves almost no buffer to absorb demand fluctuations. In July 2026, the company announced a private placement plan to raise up to RMB 700 million, with RMB 374 million allocated to a 20,000-ton-per-year FEC project expected to commence production in October 2027.

High operational leverage also means high volatility. Given the strong cyclical nature of the lithium battery additive industry, if industry capacity expands too rapidly in the future, the company's performance could face renewed pressure.

Pharmaceutical Manufacturing: Gradual Recovery

Pharmaceutical manufacturing is Fuxiang's traditional core business.

Revenue from this segment declined from RMB 1.43 billion in 2021 to RMB 814 million in 2025, driven by shrinking downstream demand and price pressure.

Key products such as sulbactam and tazobactam serve as raw materials for combination antibiotic preparations like piperacillin-tazobactam and cefoperazone-sulbactam. These preparations are key targets for China's volume-based procurement (VBP) program. As VBP drove down finished drug prices, the pressure cascaded upstream to active pharmaceutical ingredients (APIs) and intermediates, suppressing selling prices.

The key intermediate 4-AA in the penem series traded at historically low prices between 2023 and 2025, compressing margins at every stage from raw materials to APIs.

Meanwhile, costs were under upward pressure. The core raw material 6-APA for sulbactam and tazobactam remained at elevated levels from 2022 to 2024, only falling to RMB 180 per kilogram in January 2026.

Gross margins in pharmaceutical manufacturing declined from approximately 30% in 2021 to 14.33% in 2024, before recovering slightly to 17.81% in 2025.

The company also recorded asset impairment charges for several consecutive years, further depressing current-period profits. It was not until the first half of 2026, with the decline in 6-APA prices, that the pharmaceutical manufacturing gross margin recovered to 20.87%. However, revenue grew only 12% year-on-year, indicating a slow recovery.

Microbial Protein: High Potential, Early Stage

Microbial protein represents Fuxiang's most visionary but also most time-intensive opportunity.

The global alternative protein market continues to expand. Microbial protein is considered one of the most promising directions due to its advantages: no dependence on arable land, short production cycles, and low resource consumption.

The company's subsidiary, Weiran Protein, focuses on a Fusarium venenatum strain (Venafii Fusarium). The technology has been certified by the China National Light Industry Council as reaching internationally advanced levels. In November 2025, Weiran Protein officially received approval from the National Health Commission as a new food ingredient, becoming China's first approved filamentous fungal protein. To date, Weiran Protein has gained market access in nearly 30 countries worldwide.

Fuxiang has built an annual production line capable of producing 1,200 tons of Weiran protein, making it the first company in China to achieve thousand-ton-scale industrialization of filamentous fungal protein. The company has launched more than 20 end products, including protein burgers, protein konjac noodles, protein bars, and protein beverages.

A project to produce 20,000 tons of Weiran protein and 50,000 tons of amino acid water-soluble fertilizer annually is under development, with a target completion date of end-2026.

However, microbial protein remains an emerging category that requires market education, and the revenue contribution from this business is currently very limited.

Conclusion

Fuxiang's 2026 story is one of a company that lost money for four consecutive years climbing out of a deep hole. How far its growth trajectory can extend will depend on the cyclical dynamics of the new energy industry, the pace of capacity expansion, and the commercial validation of its new businesses.