Photovoltaic Business "Volume Increases, Prices Drop" Drag Profit Performance Hengdian Dongmai: Will Increase Lithium Battery Capacity Layout at the Appropriate Time | Financial Report Analysis

Ask AI · How does the photovoltaic industry’s “internal competition” affect Hengdian Dongci’s profit margin?

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Caixin Media March 27 (Reporter Wang Bin) In the context of global photovoltaic industry overcapacity and intensifying price competition, Hengdian Dongci (002056.SZ), a long-established leader in magnetic materials, achieved rapid growth in 2025 revenue, but profit pressure was clearly evident.

In an evening announcement released today, the company said that last year it achieved operating revenue of 22.59B yuan, up 21.70%; the net profit attributable to shareholders of listed companies was 1.85B yuan, up slightly 1.34% year over year—net profit growth lagged far behind revenue growth. What’s worth noting is that in 2025, the company’s overseas revenue reached 11.33B yuan, up 40.20% year over year, accounting for 50.17% of total revenue.

Regarding the reasons for changes in performance, Hengdian Dongci said in its annual report that during the reporting period, the company accelerated its international expansion. Its magnet materials business achieved relatively high-speed shipment growth across multiple application areas for AI servers and new energy vehicles; its photovoltaic business achieved relatively high-speed growth in shipment volumes while maintaining profitability; its lithium battery business maintained a relatively good momentum in market expansion, but the company’s provision for asset impairment losses had some impact on this period’s performance.

According to the announcement, in 2025 the total amount of assets disposed of for write-off and various provisioned asset impairment losses was 299 million yuan, accounting for 16.14% of the net profit attributable to shareholders of listed companies for 2025, as audited.

In recent years, Hengdian Dongci has adhered to a “magnetic materials + new energy” dual-engine strategy, but the three business segments have shown divergence in a complex market environment. Among them, photovoltaic products remain the company’s largest source of revenue. Last year, the full-year revenue was 14.31B yuan, up 29.27%, and its share of total revenue increased to 63.36%. However, the gross margin of this business was only 15.25%, down 3.49 percentage points from the previous year, showing a “higher revenue but not higher profits” characteristic.

Hengdian Dongci explained that the industry’s “internal competition” is severe, presenting a trend of “volume up, price down.” Last year, photovoltaic product shipment volume was 24.9GW, up 45% year over year, but falling selling prices eroded profit margins. Through a differentiated product strategy (such as all-black, lightweight, and offshore photovoltaic modules) and global capacity planning, the company improved market share and revenue during the industry downturn cycle, becoming the most important driver of the company’s revenue growth.

In addition, the company’s magnetic materials business achieved revenue of 4B yuan, up 5.03%, and gross margin edged up 0.82 percentage points to 28.14%; the devices business revenue was 996M yuan, up rapidly 29.99% year over year. As disclosed, last year the company shipped 218k tons of magnetic materials. Structural optimization drove both a higher average selling price per ton and an increase in gross margin, and the shipment volume of components such as copper strip inductors achieved a doubling.

In its annual report, Hengdian Dongci cited statistical data from the China Electronics Industry Association for Electronic Components (CIEG) stating that in 2025, China’s total output of magnetic materials was about 1.62 million tons. Of this, production of permanent ferrite magnets, soft magnets, rare-earth permanent magnets, and other categories was 0.75 million tons, 0.60 million tons, and 0.27 million tons, respectively. Among them, permanent ferrite magnets achieved positive year-over-year growth; soft magnet ferrite magnets achieved about 7% year-over-year growth; and rare-earth permanent magnets, affected by export controls, saw a year-over-year decline of around 10%.

Last year, the company’s lithium battery business revenue was 218k yuan, up 12.69% year over year; gross margin was 15.38%, up 2.72 percentage points year over year. Shipments were 622 million cells. In the electric two-wheeler, smart home, and electric tool fields, the company’s market share continued to rise.

According to the annual report, as of the end of 2025 the company had annual production capacity of 300k tons of magnetic materials, with magnetic materials shipment volume ranking first in the industry. Photovoltaics had total production capacity of 23GW of cells and 21GW of modules annually. Lithium batteries had annual production capacity of 8GWh, with products including ternary cylindrical cells in models 18650 and 21700. In 2026, the company plans to seek further breakthroughs in new materials and new devices in its magnetic materials and device business, deepen differentiated advantages in its photovoltaic business, and appropriately increase its lithium battery capacity layout.

(Caixin Media reporter Wang Bin)