On March 28, Lianhong Xinke released its annual report for 2024. In the context of macroeconomic fluctuations and industry adjustments, the company's operating income fell by 7.52% year-on-year to 6.268 billion yuan, and net profit attributable to shareholders dropped by 47.45% to 234 million yuan. However, the net profit excluding non-recurring gains and losses grew by 2% to 185 million yuan, demonstrating the resilience of its core business in adversity. As an emerging enterprise focusing on high polymer materials and special fine materials, Lianhong Xinke is accelerating its layout in new energy, biodegradable, and electronic materials sectors, attempting to seize opportunities in industrial upgrading.

Behind the Performance Pressure: Dual Breakthroughs in New Energy Materials and Biomaterials

Despite a decline in both revenue and profit, the annual report reveals breakthroughs for Lianhong Xinke in strategic emerging fields. The new energy materials sector is a highlight: the company is constructing a 200,000 tons/year EVA (the core material for photovoltaic encapsulation) and a 100,000 tons/year POE (next-generation photovoltaic packaging material) project, both scheduled to be put into production in 2025. The urgent demand for high value-added materials in the photovoltaic industry may make these two projects a future growth engine. Additionally, the advancement of lithium battery solvents and additives projects signifies the company's determination to extend upstream into the new energy vehicle industry chain.

The layout in the biodegradable materials sector is also rapid. The entire industrial chain technology for PLA (polylactic acid) has achieved a breakthrough in localization, with 100,000 tons of lactic acid and 40,000 tons of PLA facilities already in production, and new scenarios such as 3D printing are being explored; 50,000 tons.PPThe C (polypropylene carbonate) project, with its low-carbon model of "self-produced raw materials + carbon dioxide utilization," is expected to be implemented in 2025. As the global "plastic ban" expands, the demand for biomaterials continues to grow, and Lianhong Xinkai's technical accumulation and production capacity reserve may open up a hundred-billion-level market space for it.

High-value-added sectors accelerate breakthroughs: electronic special gases and specialty materials

In the field of electronic materials, Lianhong New Materials' 10,000-ton-per-year electronic special gas facility began operations in May 2024, with its products gaining certification from leading customers. As a key consumable in semiconductor manufacturing, the demand for domestic substitution of electronic special gases is urgent, and the company's move is expected to penetrate a high-barrier, high-profit niche market. Additionally, the 20,000-ton UHMWPE (ultra-high molecular weight polyethylene) facility, which uses a novel continuous process, has started mass production of high-end membrane materials, further solidifying its competitiveness in the lithium battery separator materials sector.

Future Strategy: Focus on Bio-based Materials and Low-carbon Technologies

Facing performance pressure, Lianhong New Materials has chosen to further invest in the biodegradable materials sector. The annual report clearly states that the company will increase investment in biodegradable and biobased materials, and promote the industrialization of novel materials such as bio-based sugar substitutes. This strategy not only aligns with the global trend towards decarbonization but also meets the goal set by China's 14th Five-Year Plan for the new materials industry to "breakthrough the large-scale preparation technology of biobased materials." Through collaboration with research institutions such as the Chinese Academy of Sciences, the company's innovations in catalysts and process technologies are expected to form differentiated advantages.

Challenges and opportunities coexist

The company is currently facing short-term pain: operating cash flow decreased by 32.18% year-over-year, reflecting the capital occupation due to new project investments; the cyclical fluctuations in downstream industries such as photovoltaics and lithium batteries may also affect the absorption of new production capacities. However, in the long term, the release of capacity in areas such as EVA, POE, and PLA, coupled with the increased output of high-value-added products like electronic special gases, could drive a turnaround in performance.

The 2024 annual report of Lianhong New Materials reveals a clear strategic path, prioritizing long-term positioning in sectors such as new energy, biodegradable materials, and electronic materials at the expense of short-term performance pressure. Against the backdrop of accelerating global energy transition and material revolution, its technological reserves and capacity layout, if successfully realized, could serve as a benchmark case for China's new materials industry to break through. Balancing the contradiction between R&D investment and profitability will be the key challenge in the next phase.