Strongly bearish on GEM: its reported profits are severely inflated.

The company’s construction-in-progress balance stands at RMB 2.763 billion. Note that construction-in-progress is not subject to depreciation. Recall the recent sharp stock price decline of Han's Laser, triggered by revelations that its European construction-in-progress had long remained untransferred to fixed assets. If half of this amount—RMB 1.382 billion—should have been reclassified as fixed assets but was not: Given that machinery typically has a useful life of ~10 years and factory buildings ~30 years, using the midpoint of 20 years for calculation, the annual depreciation expense attributable to this misclassified amount would be RMB 138.2 million ÷ 20 = RMB 69 million. The company’s debt keeps rising. Like Kangmei Pharmaceutical, GEM fabricated paper profits that do not exist in reality—leading directly to mounting liabilities. Let’s examine GEM’s most recent annual figures: Source: Company announcements Short-term borrowings consist mainly of bank loans due within one year; long-term borrowings consist primarily of corporate bonds maturing beyond one year. As shown, short-term borrowings exceed RMB 7 billion—more than ten times the company’s full-year profit of RMB 730 million last year. Even more alarming: interest payments alone reached RMB 650 million last year, and are projected to approach RMB 700 million this year—effectively consuming an entire year’s (inflated) net profit. Another often-overlooked issue: Why is short-term borrowing nearly ten times long-term borrowing? We suspect banks are unwilling to extend long-term loans to GEM. Who knows GEM’s true condition better than the banks issuing its loans? If banks hesitate to lend long-term, shouldn’t we be even more cautious? From the above, GEM has inflated profits by at least RMB 490 million + RMB 69 million = RMB 559 million. As China’s undisputed leader in new-energy vehicle battery recycling, GEM shouldn’t be faring so poorly. Driven by curiosity, Brother Er continues digging. Low Return on Equity (ROE) The company reported an ROE of only 8.75% for 2018—a key metric famously championed by Warren Buffett.

[GEM] Turning scrap collection into a trillion-yuan industrial chain; the invisible ‘urban mine’ leader with a hidden multi-trillion-yuan valuation! A core investment target in the circular economy sector—detailed fundamental analysis, risk assessment, and investment logic for GEM.

The vast majority of the company’s revenue and profits derive from recycling and materials production within the NCM (nickel-cobalt-manganese) battery system. Yet lithium iron phosphate (LFP) batteries have become mainstream in the market. GEM’s strategic positioning in LFP battery recycling and LFP precursor materials lags significantly. Failure to rapidly close this gap may cause it to miss the largest opportunity in the next wave of battery recycling. A second impact stems from the company’s primary battery material supply being geared toward NCM batteries. The NCM precursor industry has already entered a severe state of overcapacity: domestic NCM precursor capacity reached 2.1 million tons in 2025, while annual output stood at only ~920,000 tons—yielding an industry-wide average utilization rate of just 43%, meaning over half of all capacity remains idle. Under such conditions, with the market further squeezed by LFP batteries, intensifying competition (‘involution’) appears inevitable. Finally, how does the company’s financial performance actually look? In 2025, GEM delivered a report card showing steady revenue growth and explosive profit growth. Yet upon reviewing its income statement, I noticed that revenue minus cost of goods sold showed almost no meaningful change. The surge in profits stemmed largely from recovery of non-recurring gains. For instance, changes in fair value of certain investments—essentially reflecting whether asset prices rose or fell. If the company holds stocks classified in profit-or-loss, a drop in their market price generates negative fair-value adjustments, dragging down current-period profit. Similarly, asset impairment losses vary annually. In reality, growth in core operating income falls far short of what the net profit growth rate suggests. Meanwhile, the company’s debt-to-asset ratio approaches 66%—the highest among the three industry giants: GEM, Zhongwei New Materials, and Huayou Cobalt. On the surface, Q1 performance lagged behind the other two firms—but what exactly transpired at those peers requires further research before conclusions can be drawn. So what happened at GEM? In 2025, the company’s biggest operational highlight was the completion of capacity ramp-up at its Indonesian nickel project, with shipments doubling year-on-year. However, in early 2026, heavy rainfall hit Indonesia, causing geological issues at the Qingmeibang industrial park’s tailings pond—triggering a one-month shutdown and rectification, directly impacting nickel output and profitability for the quarter. Beyond this, weak industry demand, depressed precursor processing fees, and rising costs of auxiliary materials like sulfur also weighed on profitability—not indicative of any fundamental deterioration in the company’s capabilities. On the balance sheet, interest-bearing debt exceeds RMB 30 billion, including ~RMB 5.4 billion in short-term borrowings and RMB 10.4 billion in non-current liabilities due within one year. Yet cash plus trading financial assets total only RMB 5.4 billion—sufficient to cover short-term borrowings alone. That leaves RMB 10.4 billion reliant on conversion of accounts receivable and inventory into cash—revealing substantial solvency pressure. The company heavily depends on bank loan rollovers and capital-market refinancing to roll over debt; any tightening in financing conditions would rapidly escalate liquidity stress. That said, operating cash flow remains robust: both 2024 and 2025 saw operating cash flow exceeding RMB 3 billion—far surpassing net profit—indicating strong cash-generating capability and likely sufficient capacity to service debt. Perhaps, absent the Indonesian plant incident early this year, GEM’s Q1 performance would have matched the high growth seen at its peers. Even as-is, its TTM P/E ratio stands at only 20x—reasonable for an industry with vast growth potential. Its P/B ratio—1.5x—is comparable to Huayou Cobalt and Zhongwei New Materials, and likewise not expensive.

Green Plains Reports Q2 2026 Net Income of $67.1M, Adjusted EBITDA of $93.3M

Aug 6, 2026

Green Plains Renewable Energy reported Q2 2026 net income of $67.1M, driven by Section 45Z tax credits and improved ethanol margins. The company maintained 88% plant utilization while cutting SG&A expenses by 21%.

TradingView

2026-04-10

Q4 Earnings Highs And Lows: Green Plains (NASDAQ:GPRE) Vs The Rest Of The Mixed or Offshore Upstream E&P Stocks

2026-04-12

GPRE Financials: Revenue Breakdown, Margins & Competitor Comparison

2026-04-13

Q4 Earnings Highs And Lows: Green Plains (NASDAQ:GPRE) vs The Rest Of The Mixed or Offshore Upstream E&P Stocks

2026-04-16

Is It Too Late to Consider Green Plains (GPRE) After a 343% One-Year Surge?

2026-04-20

Green Plains (GPRE) Stock Rises Today