Zhejiang Hailiang: Its subsidiary, Gansu Hailiang, has deployed copper foil for solid-state batteries

When asked, "Hello, Secretary to the Board: Currently, the safety of solid-state batteries and their significantly reduced charging time have been recognized by the new energy market. The company's copper foil is a leading product in the industry. Does the Gansu plant produce copper foil for solid-state batteries? Does the company supply various types of copper foil products to top-tier enterprises in the solid-state battery sector?"

Zhejiang Hailiang stated on the investor interaction platform on June 25 that its subsidiary, Gansu Hailiang, has already deployed copper foil for solid-state batteries. The company has collaborated with multiple customers on the joint R&D, trial production, and sample delivery of new products such as nickel-plated copper foil, alloy foil, three-dimensional porous copper foil, double-sided rough copper foil, and surface-coated copper foil, including top-tier enterprises in the power battery and consumer battery sectors. Mass production is expected to be achieved in 2025. Relevant content has been disclosed in the 2024 annual report. Please refer to it for details. Information regarding the company's cooperation with specific customers or suppliers will be disclosed in relevant announcements in accordance with information disclosure standards. Please pay attention to the company's announcements published on designated media.

Zhejiang Hailiang announced on the evening of June 9 that as of the close of trading on May 30, 2025, the company had repurchased approximately 48.81 million shares through centralized bidding transactions, accounting for approximately 2.44% of the company's total share capital. The highest transaction price was 11.13 yuan per share, and the lowest was 8.74 yuan per share, with a total transaction amount of approximately 500 million yuan. The company's share repurchase amount had reached the lower limit of the total repurchase amount specified in the repurchase plan and had not exceeded the upper limit. The repurchase price had not exceeded the price specified in the repurchase plan, and the share repurchase plan had been fully implemented.

Zhejiang Hailiang disclosed the responses to the investor reception day activities in an announcement on May 23:

Question 1: Could you provide a detailed introduction to the US base?

Zhejiang Hailiang responded: The US base has been under construction since 2019. With the company's continuous efforts, the US factory is now in a stable ramp-up stage. Currently, the orders on hand in the US market are in good condition, and it is expected to further enhance management level and profitability in the future.

Question 2: Could you provide a detailed introduction to the copper foil products?

Zhejiang Hailiang responded: Copper foil, as a new product that the company is vigorously developing, has seen significant resource investment in recent years. In the past two years, the company's copper foil business faced a temporary pressure on profits, but it showed a positive trend of reducing losses in 2024. Production efficiency has gradually improved, cutting-edge products have been gradually deployed, and the overall profitability of the industry has also gradually improved. The management is confident in continuously improving the operating performance of the copper foil business. In addition, as the first copper foil factory in China to go global, Indonesia Hailiang will also become an international competitive force for Hailiang's copper foil business in the future.

Question Three, What progress has the company made in new product development?

Zhejiang Hailiang responded: Copper remains a foundational metal in new quality productive forces, with its strong thermal and electrical conductivity, as well as high strength, high conductivity, and corrosion resistance after alloying, it will be widely used in the new economy. The company is continuously engaged in R&D of new products, establishing a research headquarters and an R&D decision-making committee in 2025 to coordinate R&D activities. In the future, the company will also do a good job in information disclosure regarding new product development.

Question Four, How does the company's raw material procurement model work?

Zhejiang Hailiang responded: The company adopts a global procurement model for raw materials, possessing systematic management capabilities in global supply assurance, hedging, and exchange rate risk control.

Question Five, How is the implementation of the company's digital system progressing?

Zhejiang Hailiang responded: The company always regards digital transformation as a new engine for development, continuously consolidating the foundation of digital transformation, steadily advancing the reconstruction and upgrade of the ERP project group in batches, accelerating the global deployment of MES, and continuously promoting the deep integration of the digital economy and the real economy. The company's digital practices in production and manufacturing have been recognized by the industry, earning the honor of being a key provincial industrial internet platform. For more details, please refer to the company's announcements.

Question Six, Can you provide an update on the company's convertible bond situation?

Zhejiang Hailiang responded: As of March 31, 2025, the remaining amount of "Hailiang Convertible Bond" was 2.702 billion yuan, with 27,023,682 bonds outstanding. The company currently operates normally, with a stable cash flow and good credit standing, demonstrating a strong repayment capacity. The company continues to improve management and operations, safeguarding the interests of a broad base of investors.

Question Seven, Does the company have any response to the risks associated with aluminum as a substitute for copper?

Zhejiang Hailiang responded: The company has always had a keen awareness of the trend towards using aluminum as a substitute for copper and has laid out aluminum semis production sites early on. Currently, besides focusing on the air conditioning sector where aluminum replaces copper, the aluminum pipe & tube and aluminum extrusion products from these bases also provide aluminum heat dissipation materials for NEVs. In the future, the company will continue to monitor market changes, making efforts in product, process, and equipment dimensions, continuously increasing R&D investment in the aluminum processing field, promoting product iteration and upgrading, process optimization and innovation, and intelligent equipment transformation.

Zhejiang Hailiang previously disclosed in its Q1 2025 report: In the first quarter of this year, the company achieved a total operating revenue of 20.531 billion yuan, down 6.05% YoY; net profit attributable to shareholders was 345 million yuan, up 9.46% YoY. For the reasons behind the decline in operating revenue, Zhejiang Hailiang's Q1 report shows: The main reason is that in the first quarter of this year, the company's main business income increased compared to the same period last year, while other business income decreased.

In addition, Zhejiang Hailiang's 2024 annual report states: In 2024, the company achieved record-breaking operating results: it sold 1.0105 million mt of copper and copper alloy and other non-ferrous metal processing materials; the company's operating revenue reached 87.387 billion yuan, up 15.61% YoY; among which, the main business income was 62.22 billion yuan, up 26.80% YoY.

Zhejiang Hailiang's 2024 annual report shows: In 2024, the company mainly engaged in the R&D, production, and sales of products such as copper pipe & tube, copper billet, copper foil, copper pipe fittings, conductor materials, and aluminum extrusion. The company's products are widely used in industries including air conditioning and refrigeration for household appliances, traditional and NEVs, building water pipes, seawater desalination, shipbuilding, nuclear power facilities, equipment manufacturing, electronic communications, transportation, hardware machinery, power, and printed circuit boards. The company adopts a "produce based on sales" business model and a "raw material price + processing fee" pricing model, strictly implementing a net inventory management system to effectively avoid the risk of raw material price fluctuations, thereby achieving a profit model of "earning processing fees." The company has 23 production sites globally, with domestic bases mainly located in provinces and cities such as Zhejiang, Shanghai, Anhui, Guangdong, Sichuan, Chongqing, Gansu, and Shandong, and overseas bases primarily distributed in countries like the US, Germany, France, Italy, Spain, Vietnam, Thailand, Indonesia, and Morocco. The company has accumulated a large number of high-quality and stable customers both domestically and overseas, establishing long-term and stable business relationships with nearly ten thousand customers in over 130 countries or regions, and has formed strategic partnerships with many influential enterprises in upstream and downstream related industries. With advanced R&D concepts and manufacturing process technologies such as continuous casting and rolling and extrusion, the company's products hold a significant position in the global copper and aluminum processing market. At the same time, the company actively conducts R&D on copper semis for emerging fields such as NEVs, ESS batteries, and AI data centers, strongly promoting technological innovation and efficient development. As of March 31, 2025, the company's capacity situation is as follows:

Under the corporate vision of "becoming a global leader in green intelligent manufacturing in the non-ferrous industry" and the corporate mission of "adding color to material development and splendor to social progress," Zhejiang Hailiang outlined its main work plan for 2025 in its 2024 annual report as follows:

1. Actively invest in innovation and accelerate new product R&D

Facing the rapidly evolving technological development trends in copper processing products, to overcome the limitations of the traditional R&D structure in resource integration, decision-making efficiency, and achievement transformation, the company adjusted its organizational structure in 2025, setting up a central R&D institute to oversee R&D matters, and established a R&D decision-making committee as the strategic decision-making core of the company's R&D innovation system, coordinating and allocating the company's core resources and promoting R&D innovation efforts. The company will comprehensively promote and ensure the implementation of new products through strategic analysis, project screening, team cultivation, process supervision, and resource coordination. In terms of R&D approaches, the company will combine independent R&D with school-enterprise cooperation, and collaborate with customers to drive joint R&D efforts. For traditional copper processing products, the company will focus on product innovation and iteration in the following areas: First, continuously optimizing the production process of precision copper pipes and tubes to enhance the mechanical properties of the products and meet the demand for high-performance copper pipes and tubes in equipment such as air conditioners and heat pumps. Meanwhile, by adopting low-carbon intelligent manufacturing technologies, the company will reduce production costs and introduce more competitive green products. Second, developing high-performance copper alloy pipes and tubes for applications in marine engineering, ship fittings, and other fields. Third, improving the profitability of copper billets by focusing on the development of extruded copper billets and high-value-added copper billets characterized by lead-free and high-precision properties for use in high-end electronic components and connectors. In the field of aluminum processing products, the company will continue to monitor market changes and strengthen R&D investment in aluminum processing from three dimensions: product, process, and equipment. It will drive product iteration and upgrading, process optimization and innovation, and equipment intelligent transformation. Meanwhile, the company will closely seize market opportunities in the aluminum materials sector of the new energy field. Leveraging its technological advantages and market insights, it will further expand the market share of products such as micro-channel aluminum flat tubes and enhance the company's market competitiveness and industry influence in the aluminum sector for new energy applications. Copper foil products will be deployed in projects in line with the three major strategies of "low-carbon, differentiation, and internationalization" to support the implementation of the copper foil strategy. First, the low-carbon strategy. The company will continue to focus on R&D layouts in advanced energy-saving and carbon-reduction technologies such as secondary copper purification to promote the "dual carbon" goals. Based on its fruitful achievements in green and low-carbon technologies, Gansu Hailiang is leading the formulation of national energy consumption standards for electrolytic copper foil and has been selected as a relevant product for the national carbon footprint pilot certification program. Second, the differentiation strategy. Building on conventional lithium battery copper foil products, the company will actively invest in R&D reserves for technologies in areas such as lithium battery composite current collector materials, silicon carbon anodes, solid-state batteries, and the low-altitude economy. In terms of standard copper foil, the company has achieved breakthrough progress in high-end standard copper foil such as RTF and HVLP, and will continue to research and improve in the future. Third, the internationalization strategy. As a high-value-added product, copper foil can overcome freight cost barriers associated with long-distance transportation, making global supply from certain bases possible. Based on new requirements such as ultra-long warranty periods and ultra-performance stability required for global supply, the company will conduct basic research on key issues such as the oxidation prevention mechanism of copper foil end/surface, the relationship between microstructure and mechanical properties, internal stress testing of copper foil using X-rays, and the wrinkling mechanism of wide-width copper foil. This will enhance theoretical understanding of copper foil and facilitate the smooth implementation of the copper foil internationalization strategy. In terms of heat dissipation copper semis, the company will leverage its research foundation in heat dissipation materials to continuously develop copper semis products tailored for the heat dissipation needs of the new economy. On one hand, it will continue to enhance the high thermal conductivity of copper semis while optimizing their mechanical properties to ensure stability under complex operating conditions. On the other hand, it will focus on R&D of compatibility technologies with coolants to improve heat exchange efficiency and breakthrough precision processing and forming technologies. Additionally, in line with sustainable development trends, the company will advance the R&D of low-carbon footprint technologies to reduce energy consumption in material production and application, achieving green manufacturing and providing efficient and reliable copper semis solutions for heat dissipation in emerging scenarios of the new economy, such as artificial intelligence and humanoid robots.

2. Promote efficiency improvement and lead the healthy development of the industry; 3. Adhere to digital and intelligent transformation to enhance the company's operational efficiency; 4. Rationally allocate resources and leverage the advantages of global layout; 5. Persist in efficiency improvement to consolidate the company's leading position in the industry; 6. Inherit management knowledge and achieve the development of experience inheritance; 7. Strengthen talent cultivation and improve the construction of the reserve talent pool.

A research report published by Hualong Securities on May 25, commenting on Zhejiang Hailiang, stated: "With both internal and external strengths, it is undoubtedly a global leader in copper processing." For over 20 years, the company has been committed to the production and sales of high-quality copper processing products, covering multiple categories such as copper pipe & tube, copper billet, and copper foil. Currently, it has 23 production sites globally and is the world's largest and most internationally competitive manufacturer of copper pipe & tube and copper billet. As of the end of March 2025, the company had a total capacity of 1.4805 million mt, including 920,000 mt of copper pipe & tube capacity and 380,000 mt of copper billet capacity, which are its core businesses. Copper pipe & tube and copper billet serve as the anchor for future growth, with strong growth certainty. With the upward trend in copper prices, both volume and price are expected to rise. Copper foil is expected to stabilize at the bottom. Scale is king, and turnover takes precedence, with gross margin and turnover rate expected to continuously improve. By investing in Jinlong and forming a strong alliance, the company is expected to benefit from new quality productive forces and export directions. In 2024, the average price of SHFE copper increased significantly compared to 2023, while the company's capacity expanded steadily. In 2024, the company's main copper processing business saw an overall increase in both volume and price, leading to revenue growth. However, as processing fees remained largely stable, the increase in selling prices mainly came from the rise in copper prices, which temporarily lowered the company's gross margin. With the company's scale expansion, cost reduction, and price increases passed on to the downstream, the gross margin is expected to gradually recover from 2025 to 2027. Meanwhile, the asset impairments, exchange losses, and centralized transfer of construction in progress to fixed assets that affected the company's net profit attributable to shareholders in 2024 were all one-time impacts, and the company's performance is expected to improve in 2025. Risk warnings: fluctuations in raw material prices; changes in tariff policies of major economies; geopolitical risks; copper foil profitability improvement falling short of expectations; uncertainties in cooperation matters; and risks in data citation.

A research report titled "The World's Largest Copper Pipe & Tube Leader, with Strong Supply Guarantee Capabilities Radiating the Global Supply Chain System" by Soochow Securities, commenting on Zhejiang Hailiang, points out: As the world's largest and most internationally competitive copper pipe & tube and bar manufacturing enterprise, it is actively deploying a global supply chain. The supply in the copper processing industry is steadily increasing, with outstanding demand from downstream home appliances and new energy sectors. The copper pipe & tube business has significant scale advantages and is actively going global, with the gross profit per mt of copper foil expected to hit bottom and rebound: 1) The copper pipe & tube business has obvious scale advantages, with sufficient capacity to guarantee the company's global supply chain supply capabilities: The company's core product, copper pipe & tube, contributed over half of the company's revenue and over 80% of the gross profit in 2024, with a gross profit margin of 4.9% and a capacity of 920,000 mt, leading globally. 2) Actively going global to drive business growth, with the US and Indian markets poised for takeoff: The company continues to accelerate the construction of overseas manufacturing bases. In 2024, overseas revenue from the copper processing industry contributed 41% to the company's total revenue, with gross profit contribution close to 47%, and the overseas gross profit margin was 3 percentage points higher than that in China. In 2024, the company had a copper pipe & tube capacity of 30,000 mt in the US market, and with the renewal of US infrastructure, the demand for copper pipe & tube is expected to continue growing. In the Indian market, the company obtained BIS qualification certification at the beginning of 2025 and successfully supplied to India. With the acceleration of India's urbanization process, copper pipe & tube is expected to maintain a good growth trend. 3) The lithium battery copper foil business is seizing the development opportunities in the new energy sector, with the gross profit per mt expected to hit bottom and rebound. In 2024, the company's copper foil sales revenue was 2.86 billion yuan, up 289% YoY, with sales volume up 264% YoY, and a significant reduction in gross profit losses. In January 2025, Hailiang Indonesia produced the first copper foil line overseas by a Chinese enterprise. Meanwhile, in 2024, the company had initiated the Morocco project, which includes 25,000 mt of lithium battery copper foil, aiming to cover the European, US, Middle Eastern, and African markets. Risk warnings: Intensified market competition, decline in gross profit per mt; weaker-than-expected downstream demand; geopolitical risks.