(Yicai Global) April 25 -- Shares of Yuneng New Energy Battery Material slid after China's largest supplier of lithium iron phosphate-based cathode materials reported a 72 percent decline in first-quarter profit due to falling product prices. The firm also announced a CNY8 billion (USD1.2 billion) plan to increase output.

Yuneng’s [SHE: 301358] closed 8.2 percent lower at CNY39.76 (USD5.80) after falling to the lowest point since its listing on the Shenzhen Stock Exchange's ChiNext in February. The shares are nearly 40 percent down from the intraday peak of the first day of trading but remain about 67 percent higher than the initial public offering price of CNY23.77.

Yuneng's net profit dropped by 72 percent to CNY281 million (USD40.6 million) in the first quarter from a year ago as prices of lithium carbonate, a raw material, slumped greatly while the company had to use its expensive inventory that was accumulated last year. Revenue more than doubled to CNY13.2 billion (USD1.9 billion) during the first quarter. 

The company will expand its plant in Anning, Yunnan province, to produce lithium manganese phosphate-based cathode material, which can be used to make batteries with a higher energy density and better safety in comparison to products that contain lithium iron phosphate.

The new production lines will also make intermediate products such as iron phosphate and lithium carbonate, it said, without disclosing the planned capacity. Construction will take 48 months to finish.

Mass production of the emerging cathode material can enrich the company's portfolio and meet the differentiated needs of downstream battery customers while consolidating the firm's competitive advantage, it said. 

Since 2020, Yuneng has ranked first in China in shipments of lithium iron phosphate-based cathode material. It shipped 323,900 metric tons of the material in 2022, making up 29 percent of China's total, according to the firm's 2022 earnings report.

Contemporary Amperex Technology, the world's largest battery manufacturer, is the main client of Yuneng and also the latter's third-biggest shareholder with a nearly 8 percent stake, according to the first-quarter report. BYD is the seventh-largest shareholder, holding almost 4 percent of the shares. 

Editor: Emmi Laine, Xiao Yi