Copper foil industry momentum in the first half of this year has driven a sharp uptick in operating performance at Anhui Tongguan Copper Foil Group Co.,Ltd. (301217.SZ). Thanks to higher product processing fees and cost-reduction initiatives, net profit growth hit triple digits. However, this strong growth is built on a low comparison base from the same period in 2025, and a quarter-by-quarter breakdown reveals that second-quarter net profit was nearly flat sequentially.

Beneath the impressive figures, multiple operational concerns remain for the company. Operating cash flow diverged sharply from net profit in the latest period, marking the fourth consecutive semi-annual report with negative cash flow. Additionally, the manufacturing segment's gross margin of 8.63% in the first half relies heavily on growth from PCB copper foil, while lithium battery copper foil posted a meager 3.77% margin and copper magnet wire products sank into losses, dragging down overall profitability. Several IPO-funded projects have also underperformed cumulative expectations, adding further uncertainty to earnings quality.

Where the Numbers Stand

Anhui Tongguan Copper Foil Group Co.,Ltd. is primarily engaged in the R&D, manufacturing, and sale of various high-precision electronic copper foils. During the first half of this year, the industry's recovery continued, with the lithium battery copper foil segment broadly rebounding and high-end PCB copper foil seeing supply fall short of demand, driving both volume and price increases. The company expanded its share of high-value-added products and adjusted processing fees upward at appropriate times, directly boosting overall profitability.

In terms of financial results, first-half revenue reached RMB 4.021 billion, up 34.16% year-on-year. Net profit attributable to shareholders surged 514.75% to RMB 215 million, while non-GAAP net profit soared 754.21% to RMB 207 million. Beyond industry tailwinds, cost reductions also lifted margins. Selling, administrative, and financial expenses grew 17.54%, 23.45%, and 12.55%, respectively, all below the revenue growth rate.

Since its listing in January 2022, profitability has not followed a smooth upward trajectory. From 2022 to 2024, revenue expanded from RMB 3.875 billion to RMB 6.689 billion, roughly 1.73 times, yet net profit shrank from RMB 265 million to RMB 62.65 million, with annual declines of 27.86%, 93.51%, and 1008.97% across those years. The company even recorded a loss in 2024. In the first half of 2025, revenue rose 44.8% to RMB 2.997 billion with net profit of RMB 34.954 million, up 159.47%, but still far below the RMB 192 million recorded in the same period of 2022.

Breaking down by quarter, first-quarter revenue and net profit were RMB 1.842 billion and RMB 106 million, while second-quarter figures came in at RMB 2.179 billion and RMB 109 million, representing sequential growth of just 18.33% and 2.05%, respectively. Revenue continues to climb, but profit growth has nearly stalled.

Cash Flow Drain Continues

More concerning than the profit trajectory is the persistent negative operating cash flow. In the first half, operating cash flow was negative RMB 285 million, though it improved year-on-year due to shorter customer payment terms and better sales collections. This marks the fourth consecutive semi-annual report with negative operating cash flow, following negative RMB 672 million, RMB 352 million, and RMB 458 million in the corresponding periods of 2023, 2024, and 2025, respectively. The discrepancy arises because some bank acceptance bills are discounted or endorsed without meeting derecognition criteria, requiring classification as financing cash inflows, while endorsed bill collections are not reflected in operating cash flow.

Structural Profit Imbalance

The company's main products, electronic copper foils, are categorized into PCB copper foil and lithium battery copper foil by application, with additional production of copper magnet wire products including paper-wrapped, enameled, and transposed conductors. Total annual production capacity stands at 80,000 tonnes, with 36,228 tonnes produced in the first half. High-frequency and high-speed substrate copper foil, which is in tight supply, now accounts for over 50% of total PCB copper foil output. RTF and HVLP copper foils are among the high-end PCB products introduced in recent years.

PCB copper foil is the primary growth driver. First-half revenue reached RMB 2.507 billion, up 47.16% year-on-year, representing 62.34% of total revenue. Lithium battery copper foil, the second-largest revenue source, generated RMB 1.374 billion, up 20.87%, while copper magnet wire products fell 42.6% to RMB 76.493 million. Overall manufacturing gross margin improved 5.23 percentage points to 8.63%. PCB copper foil achieved an 11.6% gross margin, up 6.04 percentage points, whereas lithium battery copper foil rose 3.53 points to just 3.77%, and copper magnet wire products fell 3.86 points to negative 1.34%. This indicates that overall profitability is being dragged down by low-margin products, with nearly all improvement stemming from PCB copper foil.

Two major IPO-funded projects—the 10,000-tonne electronic copper foil project in Tongling and the 15,000-tonne project—failed to meet expected economic returns, with cumulative losses of RMB 21.172 million and RMB 19.446 million, respectively, as of the first half. Intense competition in lithium battery copper foil, low unit processing fee income, extended downstream inventory destocking, and weaker-than-expected demand recovery were cited as primary reasons. Another project, the 20,000-tonne high-precision ultra-thin energy storage copper foil facility (Phase II), reached its intended usable state in September 2023 but showed cumulative losses of RMB 33.522 million due to fierce competition in HTE copper foil, lower-than-expected processing fees, and a relatively low proportion of high-end PCB copper foil output.

The company's earnings model is anchored to a "copper price plus processing fee" pricing mechanism. Copper raw materials account for roughly 80% of costs and are fully passed through to product prices with market fluctuations, meaning copper price changes have limited impact on actual profitability. Ultimately, the pricing power for processing fees depends on downstream customers' own profitability levels.