The renewable energy sector, once the darling of investors and markets alike, is now experiencing a marked turnaround after years of adjustmentAccording to data from the China Nonferrous Metals Industry Association's Silicon Industry Branch, rising demand is pushing the prices of silicon materials and silicon wafers upward due to supply shortagesIn the lithium battery segment, reports have emerged of price increases, specifically from a significant player in the field where lithium iron phosphate prices have risen between 500 to 1500 yuan for different materials.

Recent market analysis from various institutions indicates that the lithium iron phosphate (LFP) sector is on the cusp of a bullish reversalParticularly concerning high-density lithium iron phosphate, the expected supply-demand imbalance could lead to further price hikes, enhancing the profitability of related publicly traded companies.

The announcement of price increases for lithium iron phosphate is significant

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A major manufacturer revealed that certain grades of lithium iron phosphate targeted for energy storage and dynamic applications have seen price hikes ranging from 500 to 1500 yuanThe biggest increase was noted for the 265 grade, reflecting a keen interest from various manufacturers and suppliers.

According to Guojin Securities, the overall outlook for the lithium iron phosphate industry appears optimisticSpecifically, the supply-demand dynamics for high-pressure lithium iron phosphate are tightening, leading to improved prices and profit margins per tonData from Baichuan Yingfu shows price disparities between regional suppliers; notably, Jiangxi Shenghua's high-density products reversed a 500 yuan price gap at the beginning of January into a 2500 yuan advantage by December, illustrating a significant market shift.

On another front, market information indicates that as of December 2024, Fulian Precision's high-density lithium iron phosphate products have opened a 2500 yuan price gap compared to competitors

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The industry has undergone multiple rounds of price adjustments since the fourth quarter of 2024, with processing fees for high-density products reaching increases of between 1000 to 3000 yuanIn January 2025, BYD's auction for high-density lithium iron phosphate indicated a maximum price increase of 1500 yuan, highlighting variances across different suppliersGuojin Securities believes that conventional lithium iron phosphate is expected to see a recovery in supply-demand dynamics, allowing overall industry profitability to rebound while market share increasingly favors lower-cost producers.

Moreover, China International Capital Corporation has indicated that processing fees for lithium iron phosphate are likely to recover, implying a potential turnaround in the fundamental aspects of the industryCurrent data reveals that major lithium iron phosphate manufacturers in first and second-tier markets are enjoying robust order volumes, supporting price increases

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Besides Hunan Yuno and Fulian Precision, most lithium iron phosphate manufacturers are operating below cash cost levels, indicating a strong collective inclination to maintain price levelsThis institution projects an improvement in supply-demand conditions and a continuous trend of product iteration within the sector, optimistic about a rebound in profitability.

Performance forecasts from leading companies also reflect a nearing industry bottomHunan Yuno, for instance, issued a profit warning indicating an expected net profit of 560 million to 660 million yuan for 2024, which translates to a year-on-year drop of 58.24% to 64.57%. However, the median net profit for the fourth quarter of 2024 is projected to rise to 120 million yuan, showing a 207% increase year-on-year and 18% quarter-on-quarterThese developments indicate that the company is actively negotiating with clients regarding the prices of lithium iron phosphate cathode materials, with some confirming the hikes during recent discussions.

Fulian Precision's performance outlook also paints a similar picture, expecting a net profit of 370 million to 450 million yuan for 2024, and a normalized net profit of 290 million to 370 million yuan—which signals significant recovery from previous losses

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The company attributes its success to the differentiated performance metrics of its lithium iron phosphate products and a substantial increase in shipping figures, leading to notable revenue growth and improved profitabilityA spokesperson pointed out that the pricing for lithium iron phosphate cathode materials remains consistent with market conditions, without significant fluctuations.

Institutional outlooks are increasingly optimistic regarding the performance of lithium phosphate concept stocks for 2025. Data indicates that a consensus among three or more institutions predicts a net profit growth rate exceeding 20% for 14 lithium iron phosphate concept stocksCompanies such as Ganfeng Lithium, Deyi Nano, Fulian Precision, and Hunan Yuno are anticipated to achieve net profit growth rates surpassing 100%.

The valuation of lithium iron phosphate concept stocks appears relatively low based on projected net profits for 2025. For instance, the forward price-to-earnings ratio for Hengdian East Magnet is below 10x, while eight companies, including Xiamen Tungsten, have P/E ratios below 20x