GEM (SZ002340) Gross Margin Analysis Report for Recycling Business

Based on the latest financial data and public information, I have systematically organized the gross margin status of GEM’s recycling business for you [0][1][2]:

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Period	Overall Gross Margin	YoY Change
2021	17.2%	-
2022	14.5%	-2.7pp
2023	13.3%	-1.2pp
2024	14.0%	+0.7pp
H1 2025	14.2%	+0.2pp

The company’s overall gross margin has remained in the

range over the past decade, reaching in H1 2025, a slight increase from the full-year 2024 level [1].

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According to GEM’s 2025 Half-Year Report, the gross margins of the company’s major business segments show significant differentiation [2]:

Business Segment	Operating Revenue (RMB 10,000)	Proportion	Gross Margin	YoY Change in Gross Margin
Critical Metal Resource Recycling	646,731	36.83%	36.83%	+2.56pp
Power Lithium Battery Recycling	86,697	4.93%	4.93%	+0.54pp
New Energy Battery Materials	1,022,646	58.24%	58.24%	+0.56pp

1. New Energy Battery Materials
   business has the highest gross margin at 58.24%, serving as the company’s core profit driver
2. Critical Metal Resource Recycling
   business has a gross margin of 36.83%, delivering outstanding performance
3. Power Lithium Battery Recycling
   business has the lowest gross margin at only 4.93%, with profitability needing improvement

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Business Type	H1 2024 Gross Margin	H1 2023 Gross Margin	YoY Change
New Energy Battery Materials	16.72%	14.88%	+1.84pp
Nickel Resource Products	30.16%	-	Maintained above 30%
Comprehensive Utilization of Waste Resources	6.07%	5.53%	+0.54pp

The company’s promotion of the

has achieved results; through process optimization and extreme cost reduction measures, the costs of core businesses have steadily decreased [1].

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Business Segment	Gross Profit Contribution (RMB 100 million)	Proportion
Battery Materials	35.38	82.8%
Cobalt, Nickel, Tungsten Powder & Cemented Carbides	3.19	7.5%
E-Waste	2.71	6.3%

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1. Nickel Resource Business
   : Through the hydrometallurgical production line for low-grade laterite nickel ore in Indonesia, the MHP smelting cost has been reduced to approximately USD 8,000 per ton of nickel, with the gross margin stably staying
   above 30%
   ; the ultimate target is USD 7,000 per ton of nickel [1]

2. Cobalt Recycling Business
   : 8,987 tons were shipped in H1 2024, with revenue growing 124.57% YoY, and the gross margin was approximately
   13.86%
   [1]

3. Power Battery Recycling
   : 16,300 tons (1.84 GWh) were recycled in H1 2024, growing 36.72% YoY, but the gross margin remains at a low level [1]

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• High-Gross-Margin Businesses
  : New Energy Battery Materials (58.24%) and Critical Metal Resource Recycling (36.83%) are the company’s main profit drivers
• Low-Gross-Margin Business
  : The power lithium battery recycling business has a gross margin of only 4.93%; progress in cost reduction and efficiency improvement needs attention
• Improvement Trend
  : The company’s Gross Margin Enhancement Program has achieved remarkable results, with gross margins of all business segments improving in 2024-2025
• Industry Position
  : As a leader in the ternary precursor and recycling industries, the company has competitive advantages in technology, processes, and cost control

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[0] Investing.com - GEM (002340) Financial Data (https://cn.investing.com/equities/green-hitech-a)

[1] Debon Securities - Initiation Coverage Report on GEM (002340.SZ) (https://pdf.dfcfw.com/pdf/H3_AP202311211611738812_1.pdf)

[2] GEM Co., Ltd. 2024 Half-Year Report (https://pdf.dfcfw.com/pdf/H2_AN202408291639558339_1.pdf)