Issue 145 | Deconstructing a Listed Company: Hunan Kemate Gas Co., Ltd.

Core Business Logic Hunan Kemate Gas is, in essence, a gas purification company that collects and processes waste gases emitted by petrochemical plants before reselling the refined products. Its profit model is straightforward: upstream refining and chemical enterprises emit waste gases such as carbon dioxide and hydrogen; Kemate Gas collects these exhaust streams, then compresses, purifies, and refines them into food-grade carbon dioxide, hydrogen, liquefied petroleum gas (LPG), and even higher-purity electronic specialty gases—ultimately selling them to beverage manufacturers, chemical plants, and semiconductor fabs. Raw material costs are virtually zero; sometimes, Kemate even receives processing fees from upstream clients—effectively acquiring feedstock at negative cost. Its revenue thus stems primarily from processing fees and freight charges, with electronic specialty gases adding an extra layer of technological premium. Kemate’s most important product is hydrogen, accounting for 36% of its total revenue. Hydrogen production begins by tapping into waste gas streams from upstream petrochemical plants. The gas is compressed, purified, and refined, then loaded into high-pressure tube trailers for delivery to B2B customers—including refineries, electronics manufacturers, and hydrogen refueling stations. Its second-largest product is food-grade liquid carbon dioxide, contributing 32% of total revenue. For CO₂, Kemate collects waste gas free-of-charge from major state-owned refiners like Sinopec and CNOOC—and occasionally earns additional processing fees. The collected gas is then compressed, purified, and refined to food-grade standards before being sold to Coca-Cola, Pepsi, breweries, and tobacco companies. The third category comprises fuel products, representing 26% of revenue. These include pentane and LPG mixtures sourced again from refinery off-gases. Kemate separates and lightly processes these components before selling them directly to local gas utilities and industrial kiln operators as fuel. Pricing tracks crude oil benchmarks, and Kemate’s margin derives mainly from blending and distribution services. Finally, specialty gases contribute only RMB 12 million in revenue. Here, Kemate purchases crude rare gases externally and further refines them via precision distillation into electronic-grade fluorine, hydrogen bromide, and deuterium—supplying semiconductor fabs for chip cleaning and etching processes. Volumes remain small, and products are still undergoing customer qualification. From a revenue-structure perspective, carbon dioxide and hydrogen have consistently been Kemate’s two largest income drivers. Over the past five years, their combined share has exceeded 60% of total revenue, with stable gross margins around 30%, generating reliable cash flow. Fuel products—such as pentane and LPG—while sizable in revenue contribution, exhibit significant price volatility tied to crude oil movements. Although electronic specialty gases have long been touted as a growth pillar, capacity has been built but adoption lagged due to extended customer certification timelines; revenues actually declined to just over RMB 10 million in 2024, failing to emerge as a new core driver. However, beginning in 2025, several Kemate products have entered the supply chains of leading wafer fabs—including SMIC and Yangtze Memory Technologies—though current bottlenecks lie in the pace of customer onboarding and order ramp-up. Within the industry value chain, Kemate occupies a middle position, squeezed between two powerful ends. Upstream, it depends entirely on petrochemical giants: whether—and how much—waste gas is supplied, and when, hinges on refinery schedules and maintenance cycles. Kemate must halt operations accordingly, and raw material pricing is contractually fixed. Downstream customers fall into two categories: beverage and brewing conglomerates, which sign three- to five-year contracts with annual price increases capped at 3%, leaving Kemate virtually no pricing power; and semiconductor fabs, which are relatively insensitive to electronic specialty gas prices but impose extremely stringent requirements on purity and consistency. Certification typically takes one to two years—but once approved, supply agreements often lock in for five years or more, delivering significantly higher pricing power and gross margins than traditional businesses. Competitors Kemate Gas’s core businesses span carbon dioxide recovery, hydrogen energy, electronic specialty gases, and industrial fuel gases.

Industrial Equipment Outperformance Map: Tracking the Air Separation Equipment Industry Chain — Fosda, Hangzhou Oxygen Plant Co., Ltd., and Sichuan Road & Bridge Equipment Co., Ltd.

Figure: Oxygen Price Figure: Nitrogen Price Figure: Argon Price According to China Fortune Securities, as of May 9, the utilization rate of blast furnace capacity among sampled steel enterprises stood at 92.1%, up 0.09 percentage points week-on-week. Electric arc furnace (EAF) capacity utilization among the same sample was 55.1%, down 0.38 percentage points week-on-week. Output across the five major steel product categories totaled 7.64 million tons, down 1.21% week-on-week. Daily average pig iron output reached 2.456 million tons, up 2,200 tons week-on-week and up 149,700 tons year-on-year. Figure: Daily Average Pig Iron Output and Blast Furnace Capacity Utilization Rate of Steel Enterprises Figure: Electric Arc Furnace Capacity Utilization Rate and Combined Output of Five Major Steel Product Categories Regarding industry leaders: In 2024, Fosda signed new contracts totaling approximately RMB 4 billion (inclusive of VAT), roughly flat year-on-year, and currently maintains a robust order backlog. In 2024, the company successfully entered multiple new overseas markets and established its first partnership with a top-tier European engineering firm. It achieved three milestone breakthroughs: securing its first overseas turnkey air separation unit (ASU) project; winning a 3-million-cubic-meter-per-day natural gas processing plant contract; and expanding its product portfolio into natural gas processing and hydrocarbon equipment—culminating in the development and successful application of China’s first domestically manufactured wound-tube heat exchanger in large-scale LNG facilities. Fosda also secured a landmark 60,000 Nm³/h ultra-large ASU package project along the Belt and Road Initiative route, achieved its first breakthrough in liquefied petroleum gas (LPG) package systems, and successfully launched its inaugural ‘quasi-BOT’ business model project overseas. Domestically, the company made significant progress in the petrochemical sector, winning orders for two 50,000 Nm³/h large-scale ASU packages. Additional orders included a 50,000 Nm³/h ASU for Hengyang, a 40,000 Nm³/h unit for Chifeng, and a 30,000 Nm³/h system for Qinzhou. Moreover, Fosda’s self-funded ‘Annual Production of 10 Sets of Large-Scale Modular Cryogenic Chemical Equipment—Green Intelligent Manufacturing Project’ has been completed and commissioned. The facility has obtained ISO 3834-3, German AD2000 HP0, and U.S. ASME certifications—significantly enhancing Fosda’s capabilities in delivering energy-efficient, large-scale, skid-mounted cryogenic equipment, especially meeting the demanding requirements of high-end overseas clients and strengthening its international competitiveness. (For the full report, see mvzxk.xetsl.com/s/2iNIZ...; add WeChat ID bgys2015 for access.) The air separation equipment industry has undergone the following developmental stages: I. Initial Stage (1950s–1970s) — In 1879, Dr. Carl von Linde founded Linde Refrigeration Machinery Manufacturing Company; in 1902, he built the world’s first low-temperature air separation device. China’s air separation equipment industry began with technology imitation: by the end of 1953, Harbin Oxygen Plant Factory’s predecessor—the Harbin No. 1 Machinery Factory—developed two 30 m³/h oxygen generators. Two years later, Hangzhou General Machinery Factory (the predecessor of Hangzhou Oxygen Plant Co., Ltd.) also developed a 30 m³/h oxygen generator—marking the birth of China’s air separation equipment industry. During this stage, air separation equipment suffered from multiple limitations, including low gas output and purity, high energy consumption, and poor reliability.

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