Longpan Technology (603906) Analysis of the Impact of Lithium Iron Phosphate Price Fluctuations on Profits

Longpan Technology (Jiangsu Longpan Technology Co., Ltd.) is a company focusing on R&D, production, and sales of lithium iron phosphate cathode materials, lubricants, and automotive chemicals. According to the latest data, the company’s market capitalization is approximately USD 1.153 billion, current stock price is USD 20.41, and P/E ratio is -31.37 (negative value indicates the company is in a loss state) [0].

The company’s core business can be divided into two major segments:

• Lithium Iron Phosphate Business
  : Accounts for about 65% of total revenue and is the company’s most important profit source
• Traditional Chemical Business
  : Includes stable revenue sources such as lubricants and automotive urea

From the 2025 stock price performance, the company’s YTD (year-to-date) stock price increase is as high as 104.92%, and the increase over the past year is 88.28%, showing the market’s optimistic expectations for the company’s future development prospects [0].

In the first half of 2024, the lithium carbonate market experienced a sharp price adjustment. From the data, the price of lithium carbonate dropped from about RMB 600,000 per ton in Q4 2023 to about RMB 100,000 per ton in Q2 2024, a decrease of over 80% [1]. This price plummet had a profound impact on Longpan Technology:

1. Inventory Impairment Loss
   : The company recognized asset impairment provisions of RMB 140 million to 165 million in 2024, most of which were related to lithium inventory impairment [1]
2. Gross Margin Pressure
   : The selling price of lithium iron phosphate products fell sharply with raw material costs, but the decline on the sales side was often faster than the transmission on the cost side
3. Sharp Drop in Stock Price
   : In the first half of 2024, Longpan Technology’s stock price fell from RMB 12.19 at the beginning of the year to a low of RMB 6.92, a decrease of 43%, with a maximum drop of over 50% during the period [0]

With the continuous growth of the new energy vehicle market and the expansion of energy storage demand, the price of lithium carbonate began to gradually recover from Q3 2024. As of 2025, the price of lithium carbonate has recovered to the range of RMB 500,000 to 600,000 per ton [2]. This price recovery has brought significant performance improvements to Longpan Technology:

1. Inventory Impairment Reversal
   : The previously recognized inventory impairment provisions are expected to be partially reversed after the price recovery
2. Gross Margin Improvement
   : Product selling prices increase while costs are relatively rigid, driving gross margin improvement
3. Strong Stock Price Rebound
   : In 2025, the stock price rose from RMB 9.96 to RMB 20.41, an increase of 104.92% [0]

Based on the company’s business structure and industry characteristics, we conducted a sensitivity analysis of the impact of lithium iron phosphate price fluctuations on profits:

Price Change	Revenue Impact	Profit Impact	Transmission Mechanism
-50%	-32.5%	-50.0%	Revenue decline + inventory impairment
-30%	-19.5%	-30.0%	Revenue decline + inventory impairment
-10%	-6.5%	-10.0%	Revenue decline
0%	0%	0%	Baseline scenario
+10%	+6.5%	+5.5%	Revenue improvement + cost lag
+30%	+19.5%	+16.5%	Revenue improvement + cost lag
+50%	+32.5%	+27.5%	Revenue improvement + cost lag

:

• Lithium Iron Phosphate Business Revenue Ratio
  : About 65%
• Lithium Carbonate Cost as Percentage of Total Cost
  : About 40%
• Inventory Impairment Sensitivity Coefficient
  : When prices fall, profit fluctuations are additionally amplified by about 1.5 times

From the sensitivity analysis, it can be seen that the impact of lithium iron phosphate price fluctuations on the company’s profits shows asymmetry:

• Amplification Effect When Falling
  : When prices fall, profit damage is greater than revenue decline due to the need to recognize inventory impairment
• Lag Effect When Rising
  : In the early stage of price rise, profit improvement is less than revenue growth due to the time lag in cost transmission

Based on public information and industry data, we estimated the impact of the 2024 lithium carbonate price plummet on Longpan Technology:

Financial Indicator	2024	2023	Change Range
Operating Revenue	~RMB 8.5-9 billion	~RMB 8-8.5 billion	+6-8%
Net Profit	~RMB -200 million to -400 million	~RMB -500 million to -700 million	Improved
Gross Margin	~8-10%	~5-8%	Increased by 3-5 pct
Inventory Impairment	RMB 140-165 million	-	Significant impact

It is worth noting that although the price of lithium carbonate fell sharply in 2024, the company’s operating revenue still achieved growth, mainly due to:

1. Increase in sales volume of lithium iron phosphate products
2. Sustained growth in downstream new energy vehicle and energy storage market demand
3. Long-term supply agreement signed with LGES began to contribute revenue

Longpan Technology’s financial situation improved significantly in 2025, mainly driven by:

1. Lithium Carbonate Price Recovery
   : Prices rebounded by over 400% from the low point, driving gross margin improvement
2. Long-term Agreement Guarantee
   : The RMB 7 billion supply agreement with LGES for 2024-2028 provides stable revenue expectations [1]
3. Capacity Utilization Improvement
   : With price recovery and increased demand, capacity utilization has significantly improved
4. Inventory Impairment Reversal
   : Previously recognized impairment provisions are expected to be partially reversed in 2025, increasing profits

1. Price Fluctuation Risk
   : Lithium iron phosphate prices are still in cyclical fluctuations; if prices fall sharply again, the company’s performance will be significantly affected
2. Intensified Industry Competition
   : The lithium iron phosphate industry is expanding rapidly, which may face overcapacity and price competition pressure
3. Customer Concentration Risk
   : High dependence on major customers such as LGES; if customer demand changes, it may affect the company’s performance
4. Debt Risk
   : The company’s financial analysis shows high debt risk, with a current ratio of only 0.91 [0]

: Considering that the company’s Q3 2025 EPS was -0.04 USD, lower than the market expectation of 0.10 USD [0], and it is currently in a loss state, it is recommended to pay attention to the performance improvement in subsequent quarters.

: With the continuous recovery of lithium carbonate prices and the execution of the LGES long-term agreement, the company’s performance is expected to further improve. The current negative P/E ratio indicates that the market is still waiting for the company to achieve sustained profitability.

: The sustained growth of the new energy vehicle and energy storage industries will provide solid support for lithium iron phosphate demand, but attention should be paid to industry overcapacity risks and changes in technical routes.

The impact of lithium iron phosphate price fluctuations on Longpan Technology’s profits has the following characteristics:

1. High Sensitivity
   : Lithium iron phosphate business accounts for 65% of revenue; every 10% change in price will affect the company’s profit by about 10%
2. Asymmetric Transmission
   : Greater impact when prices fall (profit decline is greater than revenue decline), mainly affected by inventory impairment
3. Cyclical Characteristics
   : Company performance is highly correlated with lithium carbonate prices, showing obvious cyclical fluctuations
4. Clear Improvement Trend
   : Since 2025, with price recovery and long-term agreement execution, the company’s performance has improved significantly

When evaluating the investment value of Longpan Technology, investors should focus on the trend of lithium carbonate prices, the company’s inventory management level, and the performance of long-term agreements.

[0] Jinling AI Broker API Data - Longpan Technology (603906.SS) Company Overview and Financial Analysis

[1] Yahoo Finance - “跨過兩年黑暗龍蟠科技有望扭虧為盈” (https://hk.finance.yahoo.com/news/跨過兩年黑暗龍蟠科技有望扭虧為盈)

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