Tianci Materials accelerates senior executives' share reductions before Hong Kong listing | IPO Watch

Is AI Question · Is Tianci Materials’ Senior Management Selling Off Hidden Concerns About Going Public?

Electrolyte leader Tianci Materials (002709.SZ) shortly after disclosing its annual report, also released its prospectus for listing in Hong Kong.

Tianci Materials’ main business is lithium-ion battery materials, along with other chemicals and products. As the prices of raw materials like lithium carbonate doubled within a year, Tianci Materials may face significant cost pressures by 2026.

In recent years, Tianci Materials’ net profit and stock price have fluctuated greatly. In 2025, the company’s net profit surged by 180% to 1.36B yuan, but this figure still remains less than a quarter of the peak in 2022.

Shortly after the March 10 annual report disclosure, several senior executives sold off company shares.

“The recent year’s audit report indicates there are uncertainties regarding the company’s ability to continue as a going concern,” the company stated in its 2025 annual report.

Potential Cost Pressures

Tianci Materials’ main business involves the research, production, and sales of fine chemical new materials, with key products including lithium-ion battery materials, daily chemical materials, and specialty chemicals.

The annual report states that the downstream applications of lithium battery materials include lithium-ion batteries used in power, energy storage, and consumer electronics. The development of the new energy vehicle industry is the main driver for the growth of lithium-ion batteries and their upstream materials. As wind and solar power stations, grid energy storage, and home energy storage expand, demand has accelerated in recent years, making it a significant market for lithium battery demand. The downstream markets for daily chemical materials and specialty chemicals include consumer chemical markets and specific industrial sectors.

However, the overall outlook for the electric vehicle market, which has driven Tianci Materials’ performance growth, is not optimistic—according to the latest statistics released by the China Passenger Car Association on April 3, retail sales in the first quarter totaled 4.24M units, down 17% year-on-year. Among these, new energy vehicles declined even more, with retail sales of 1.844 million units, down 24% year-on-year.

Tianci Materials states that by 2026, China’s electrolyte industry will undergo accelerated deep adjustments and differentiation amid supply-demand imbalances, while global expansion enters a substantive new phase. Industry competition remains fierce. Looking ahead, as the global new energy vehicle market further expands, energy storage industry scales grow, and emerging fields like low-altitude economy, electric ships, and humanoid robots develop, demand in the battery industry is expected to grow steadily, driving continuous increases in electrolyte shipments.

The annual report notes that raw material costs constitute a large proportion of the company’s production costs. Fluctuations in overall raw material prices significantly impact production costs, and sustained large swings in key raw material prices will cause cost volatility and affect profitability. For example, lithium-ion battery materials’ prices decreased by 8.39% in the first half of 2025 compared to the previous year, mainly due to market price drops; in the second half, prices rose by 3.67%, mainly due to market increases. Daily chemical materials increased by 26.85% in the first half and 12.73% in the second half, mainly due to rising raw material prices.

The prospectus states that the company’s suppliers mainly produce key raw materials for lithium-ion batteries (including lithium carbonate, solvents, and some additives) and chemical manufacturing. Most raw materials are sourced domestically, supporting overall supply chain stability and resilience. Although the company purchases some lithium externally, its internal lithium recycling business allows recovery from retired and discarded lithium batteries, reducing reliance on external suppliers and enhancing sustainability. Some major raw materials, like lithium carbonate, are commodities. During the historical period, the company engaged in commodity hedging activities to effectively manage risks from raw material price swings and improve operational stability. Additionally, to further mitigate raw material price volatility, support stable production costs, and optimize capital use, the board has authorized the company to conduct commodity futures hedging transactions.

The prospectus shows that lithium carbonate prices between 2020 and September 2025 peaked at 590k yuan per ton and dipped to 40k yuan per ton. In recent years, prices have remained low and volatile. In the second half of 2025, lithium carbonate prices began to rise again, mainly because after 2-3 years of low prices, lithium mining companies’ willingness to expand capacity decreased, and production growth could not keep pace with demand.

Public information indicates that in less than a year, the main futures contract for lithium carbonate rose from below 60k yuan/ton to around 160k yuan/ton, roughly doubling over the year, fueling investor concerns about Tianci Materials’ rising costs due to raw material price increases.

Unsteady Performance, Executives Accelerate Selling

The company’s performance instability over recent years also raises concerns.

In 2025, the company’s core product, electrolyte, sold over 720k tons, a 44% increase year-on-year. During the reporting period, revenue reached 16.65 billion yuan, up 33%; net profit attributable to shareholders was 1.84M yuan, up 181.43%; and net profit excluding non-recurring gains and losses was 1.36 billion yuan, up 256.32%.

However, reviewing past years, the 2025 net profit of 590k yuan is less than a quarter of the 40k yuan in 2022, with profits in 2023 and 2024 declining by about 70% each year.

The Hong Kong IPO prospectus explains that the profit fluctuations are mainly due to a decrease in revenue from 60k yuan in 2023 to 478 million yuan in 2024, primarily caused by an 18.7% drop in sales of lithium-ion battery materials. This decline aligns with the broader market trend of falling prices for electrolytes and core components, including lithium carbonate, reflecting industry overcapacity and intensified competition. This supply-demand imbalance and fierce price competition persisted throughout 2023 and 2024.

The company’s lithium-ion battery material customers are mainly battery manufacturers, automakers, and consumer electronics producers. Its daily chemical and specialty chemical customers are primarily personal care and household product manufacturers.

Just as Tianci Materials prepares for Hong Kong listing, a large-scale sell-off by senior management and directors has sparked investor concern—at the end of March, the company announced that on March 27, 2026, Vice Chairman Xu Sanshan, Director and Vice General Manager and CFO Gu Bing, and Vice General Manager Shi Litao received notices of share reduction. Between February 11 and March 27, these three sold a total of 673k shares, at prices between 41 and 51 yuan, representing 0.0331% of total share capital.

All three senior executives stated that “their sales are based on personal financial needs” and that “the company’s directors and senior management remain confident in the company’s future prospects.” The shares sold came from holdings before the company’s IPO, shares obtained through equity incentive plans, and additional shares bought on the secondary market. The announcement states that this share reduction will not change the company’s control, nor will it impact ongoing operations, corporate governance, or sustainability. The company’s fundamentals remain unchanged.

The last major sell-off by executives and directors was by Chairman Xu Jinfu and others from November 2020 to February 2021, with prices between 75 and 112 yuan. At that time, Tianci Materials’ stock price briefly surpassed 170 yuan in November 2021, but over the following three years, the stock has fallen by 80%.

(This article is from Yicai)