Shares of Guangdong Jiayuan Technology Co.,Ltd. (688388.SH) closed at 26.95 yuan on September 11, down 2.36%, with total trading volume reaching 820 million yuan and a turnover rate of 4.68%. The company's dynamic price-to-earnings ratio stood at 44.18 times, while its static P/E ratio was exceptionally high at 311.87 times, with the intraday low touching 25.80 yuan. Just a day earlier, on September 10, the stock saw net main capital outflows of 4.23 million yuan, closing at 27.60 yuan.

These consecutive days of capital outflows paint a picture of persistent selling pressure, which stands in stark contrast to the company's headline financial performance. According to its 2026 semi-annual report, Guangdong Jiayuan Technology Co.,Ltd. achieved operating revenue of 7.513 billion yuan in the first half of the year, a year-on-year increase of 89.57%. Net profit attributable to shareholders surged 940% to 382 million yuan, while non-GAAP net profit jumped 1,652.99% to 182 million yuan.

Despite this earnings explosion, the secondary market has remained notably cold toward the stock. The share price has fallen 1.47% year-to-date and dropped a staggering 41.31% over the past 60 trading days. The number of shareholders ballooned from 23,900 at the end of March to 45,300 by June 30, a surge of 89.66%, while average shareholding per account declined by 23.64%. Among the top ten circulating shareholders, Hong Kong Securities Clearing Company Ltd. increased its holdings by 8.05 million shares, the Oriental New Energy Vehicle Themed Fund made a new entry, while several other funds chose to exit.

The Earnings Quality Question: Half of the Profit Surge Comes from Non-Recurring Items

Diving into the semi-annual report reveals a critical discrepancy: while attributable net profit was 382 million yuan, non-GAAP net profit was only 182 million yuan, leaving a gap of 201 million yuan. The company's non-recurring gains and losses totaled 201 million yuan during the period, with gains from fair value changes and disposal of financial assets/liabilities held by non-financial enterprises reaching 181 million yuan. Government subsidies amounted to 10.32 million yuan, and other non-recurring items contributed 46.33 million yuan.

This breakdown indicates that a significant portion of the company's profit surge stems from investment income and fair value fluctuations rather than organic growth from its core operations. The single-quarter performance deserves even closer scrutiny. According to industry analyst Gao Chengyuan, president of the Liaoyuan Influence Research Institute, the Q2 attributable net profit of 262 million yuan contrasts sharply with the non-GAAP profit of just 73 million yuan, which represents a 33% sequential decline from Q1's 109 million yuan.

The primary culprit eroding profits is one-time copper losses. Gao explained that copper prices surged significantly in the first half of the year, creating a timing mismatch for copper foil companies between raw material procurement and product delivery. This gap meant raw material costs exceeded contracted lock-in prices, generating "copper losses." Q2 gross margin came in at 5.29%, under pressure both sequentially and year-over-year, though ex-copper losses and credit impairment, per-ton operating profit remained broadly stable sequentially.

Yuan Shuai, deputy director of the investment department at the China Urban Development Research Institute, also provided analysis from a cost structure perspective. He noted that copper price fluctuations directly affect the industry-wide cost base, and a company's ability to manage copper losses during production determines its cost competitiveness under identical raw material conditions. The lag in processing fee adjustments creates temporal mismatches between corporate earnings and market price movements, allowing companies to temporarily benefit from lower raw material costs during rapid price upswings, thereby amplifying current profit performance.

Regarding the industry's reasonable per-ton profit benchmark, Gao estimated that leading companies should be in the 5,000-8,000 yuan per ton range after recovery. With non-GAAP net profit of 182 million yuan corresponding to approximately 45,000 tons of shipments, Guangdong Jiayuan Technology Co.,Ltd. generates about 4,000 yuan per ton in non-GAAP profit, placing it in the upper-middle tier of the industry. However, the sustainability of copper loss disruptions warrants close monitoring.

Notably, while attributable net profit surged 940% year-on-year, basic earnings per share came in at 0.58 yuan, up 866.67% from the adjusted 0.06 yuan in the prior-year period — a growth rate below the profit increase. This divergence stems from significant share structure expansion during the reporting period: convertible bonds converted into 29,419,654 shares, and a capital reserve conversion of 4.5 shares per 10 held, totaling 204,233,517 additional shares. Total share capital expanded from 426 million to 660 million shares, creating a dilution effect on per-share earnings.

The report also revealed that sales to the company's top five customers accounted for 83.42% of total revenue. In its risk disclosure, the company acknowledged that if major clients terminate cooperation or reduce demand without the company's ability to promptly secure new customers, its operations could be adversely affected. This customer concentration risk is closely tied to its deep integration with leading battery manufacturers such as CATL and other top-tier players.

Yuan Shuai commented that Guangdong Jiayuan Technology Co.,Ltd. has led the industry in profit recovery, leveraging its technical expertise in premium products and customer relationships to capture the profit elasticity from processing fee increases ahead of peers. However, he emphasized that the market's focus on non-GAAP earnings, quarterly operational performance, gross margins, and operating cash flow reflects a fundamental question: whether this high growth stems from sustainable industry cycle improvements or is merely supported by non-recurring items, accounting adjustments, or temporary pricing advantages.

Who's Exiting and Who's Entering: The Story Behind Capital Flows

Beyond dissecting the quality of earnings, capital flow patterns offer another window into investor sentiment. Shareholder count changes serve as one of the most direct market sentiment indicators. As of June 30, shareholders stood at 45,300, an 89.66% increase from 23,900 at the end of March, with average shareholding down 23.64%. This trend toward fragmented share ownership was reflected in recent capital flows — on September 10, the stock rose 2.01% intraday, yet main capital saw net outflows of 4.23 million yuan; on September 11, the order book ratio stood at -47.57%, indicating significantly stronger selling pressure than buying.

Gao Chengyuan analyzed this phenomenon: "Rising share prices alongside declining shareholder concentration suggests a wave of retail investors flooding in at elevated levels, with chips dispersing from concentrated to fragmented ownership. The northbound capital increase of 8.05 million shares and the new entry of the Oriental New Energy Vehicle Themed Fund indicate institutional divergence — some institutions remain bullish on long-term fundamentals and are adding positions, while others are exiting. Fragmented chips combined with institutional rebalancing typically signal increased short-term price volatility without stable main capital support."

Yuan Shuai offered a more granular view on the chip structure: "The rapid increase in shareholder accounts directly reflects a swift transition of chips from institutional to retail investors. This dispersion corresponds to significant institutional rebalancing — some long-term holders have chosen to take profits and exit at the earnings announcement, while others betting on further industry recovery are entering against the trend. Northbound capital has also been consistently accumulating, revealing major disagreement among different capital types about the company's future value."

He further explained: "Such dramatic shifts in investor structure will directly amplify short-term price volatility, significantly increasing the intensity of long-short battles. The chip dispersion process is essentially a rapid upward shift in market cost basis. Future price direction will no longer be determined by a handful of institutions but will be driven by consensus changes among a broader set of market participants."

When contacted about the divergence between stock price and earnings, the company's board secretary responded: "Secondary market pricing is determined by the market; good earnings don't necessarily mean the stock price will reflect them immediately." When pressed about how the company views market skepticism, the board secretary indicated media inquiries should be submitted via email. In its financial report, the company mentioned implementing multiple measures to stabilize its stock price, including distributing a cash dividend of 0.45 yuan per 10 shares (tax inclusive), totaling 20.42 million yuan, alongside the capital reserve conversion of 4.5 shares per 10 held. Additionally, in early April 2026, the company completed the market-based conversion of its convertible bonds and remaining principal repayment, achieving both debt reduction and lower financial expenses.

Cycle Reversal or Tactical Bounce: What Lies Ahead for the Lithium Copper Foil Industry?

The disconnect between share price and earnings ultimately points to a more fundamental question: is the lithium battery copper foil industry experiencing a genuine cycle reversal or merely a tactical rebound? Gao Chengyuan offered a definitive view: "This copper foil uptrend represents a cycle reversal, not a tactical rebound." He cited three core supporting factors. First, demand is surging from two fronts — energy storage cell production continues to exceed expectations, and demand for high-end copper foil used in AI servers has skyrocketed 260% year-on-year to 24,000 tons in 2026. Second, on the supply side, following capacity clearing between 2023-2025, expansion has turned more rational, with leading players' capacity largely locked in by major customers. Third, processing fees have risen across the board with sustainability — as of end-June 2026, average processing fees for 4.5μm lithium battery copper foil reached 27,000 yuan per ton (up 1,000 yuan from the start of the year), while 6μm averaged 21,000 yuan per ton (up 2,000 yuan).

However, Yuan Shuai believes the current price increases more closely resemble a temporary tight balance driven by both supply and demand dynamics. Whether this evolves into a full industry cycle reversal depends on the match between new capacity release pace and downstream demand absorption, as well as whether upstream core raw material volatility again disrupts the industry's profit distribution logic. Regarding whether oversupply could return in 2027, Gao identified two key variables: the release pace of high-end capacity (HVLP and ultra-thin copper foil) and the industrialization progress of composite copper foil. While the tight balance in ordinary lithium battery copper foil may ease with capacity recovery, the supply-demand gap in high-end electronic circuit copper foil is unlikely to close in the near term.

On technology substitution, the two experts offered differing perspectives. Gao noted that composite copper foil has reached an industrialization tipping point, with policy support written into the 15th Five-Year Plan outline. However, he cautioned: "A 20% penetration rate is a medium-term target, not current reality — composite copper foil still faces challenges including high internal resistance and low cycle life. Its initial penetration will occur in consumer and energy storage mid-to-low-end scenarios, while replacing mainstream power battery applications will take time." Yuan Shuai believes that composite copper foil and new copper foil products supporting solid-state batteries have begun transitioning from laboratory stages to small-batch commercial supply, but penetration rate increases will be gradual. He considers market predictions of rapidly reaching high penetration levels overly optimistic.

Regarding the company's second growth curve, Guangdong Jiayuan Technology Co.,Ltd. has entered the high-end PCB market through the acquisition of Jiangmen Xinyu, invested in Endaton to expand into optical module business, and advanced R&D in AI-specific copper foil. Gao analyzed: "HVLP copper foil currently commands processing fees 2-4 times higher than RTF. Global AI server-specific high-end copper foil demand of 24,000 tons in 2026 is projected to double to 50,000 tons by 2027, creating a significant supply-demand gap. The tightness in high-end electronic circuit copper foil far exceeds that of ordinary lithium battery copper foil, forming the core support for the second growth curve. However, risks exist: PCB and copper foil customer structures and technical systems differ considerably, and acquisition integration takes time. Meanwhile, lithium battery copper foil still accounts for 87.39% of revenue, meaning the second curve won't meaningfully change the revenue structure in the short term."

Yuan Shuai argued that copper foil companies extending into high-end electronic materials have industrial synergy foundations — years of accumulated copper materials R&D and precision manufacturing capabilities can be directly leveraged for new product development, rather than representing an out-of-expertise expansion. Some high-end niche categories have long-standing supply gaps with more stable downstream demand growth.

On valuation, Gao was direct: "The 41.31% decline over 60 days primarily reflects market consensus that current processing fee levels are already fully priced into valuations, leaving limited upside. A dynamic P/E of 23.26 times and price-to-book ratio of 2.13 times places the stock in a reasonable range within the copper foil sector." Gao's cited 23.26 times dynamic P/E corresponded to the share price at the time of his interview. As of the September 11 close, the dynamic P/E had already risen to 44.18 times with static P/E at 311.87 times, indicating clearly elevated valuation levels since the interview.

Gao further elaborated: "The market's 'lack of enthusiasm' reflects a deeper logic: processing fees have recovered from the bottom to current levels, completing the 'from losses to profits' pricing. Further upside requires stronger evidence of supply-demand gaps. Meanwhile, the 'capacity clearing' narrative for ordinary lithium battery copper foil is already fully recognized. True valuation premiums should come from high-end product volume growth (HVLP, carrier copper foil), not from a cyclical rebound in ordinary lithium battery copper foil." Yuan Shuai concurred: "The market's choice to vote with its feet despite strong earnings growth doesn't fully deny the authenticity of these results — rather, it reflects widespread skepticism about sustainability. Concerns focus on several areas: how long current processing fee highs can persist before new capacity floods the market and pressures fees downward; whether next year's industry-wide capacity additions will again disrupt the current supply-demand balance; and expectations of technology substitution from new routes, prompting many funds to seek safe haven in advance."