Kemate Gas (002549.SZ): The 'Song of Ice and Fire' Behind Its Stock Price Surge

National Expansion: Starting in 2006, the company established subsidiaries in cities including Anqing and Huizhou, adding 230,000 tons/year of liquid carbon dioxide production capacity and expanding into other industrial gases such as hydrogen and combustible gases. Shareholding Reform: In 2007, the company completed its transformation into a joint-stock company and listed on the SME Board of the Shenzhen Stock Exchange in February 2011, raising RMB 510 million to accelerate capacity expansion and business diversification. Capital Operations: Following its IPO, the company executed multiple bonus share issuances and capital reserve conversions (e.g., a 5-for-10 bonus issue in October 2011), increasing its registered capital from RMB 80 million to RMB 567 million by 2015. 3. Diversification and Transformation Phase (2012–2018): Entry into High-End Gases Product Line Expansion: Introduced new products including liquid oxygen, liquid nitrogen, and liquefied petroleum gas; in 2018, established Yueyang Kemate Electronic Specialty Gases Co., Ltd., formally entering the electronic specialty gases sector. Technological Breakthroughs: After 2018, through independent R&D and joint ventures, the company mastered high-purity refining technologies for electronic specialty gases, breaking the monopoly previously held by international giants such as Germany’s Linde and France’s Air Liquide. Market Exploration: Targeted sectors including semiconductors, healthcare (e.g., excimer laser gases), and new energy, gradually achieving domestic substitution. 4. High-End Breakthrough Phase (2019–2024): Rise of Electronic Specialty Gases and Internationalization Explosion in Electronic Specialty Gases: The Yueyang electronic specialty gases project commenced operations in 2020; in 2021, revenue from electronic specialty gases surged 698% year-on-year, with gross margins reaching 84.67%. International Certification Milestone: In 2023, a subsidiary passed certification by Cymer, a subsidiary of ASML, becoming a qualified supplier of photolithography gases—a clear validation of its technological capabilities on the global stage. Capital Reinforcement: In 2022, the company raised RMB 1 billion via a private placement, funding the Yizhang Specialty Gases Project and the Fujian High-Purity Hydrogen Peroxide Project, further strengthening its positioning in electronic specialty gases and new energy. III. Financial Reality: Widening Losses—Where Did the Money Go? Q1 Earnings Shock Impacts Full-Year Results: Nearly RMB 76 million in losses: Although Q1 2024 revenue rose modestly by 2.56%, net profit plunged to a loss of RMB 75.59 million—a staggering 747% YoY increase in losses! The primary driver was RMB 87.4 million in expenses recognized due to termination of the equity incentive plan. Even excluding this one-off item, underlying operational pressure remains evident. According to the company’s 2024 annual earnings forecast, full-year attributable net profit is expected to range between a loss of RMB 43.8 million and RMB 54 million. Beyond the impact of terminating the equity incentive plan, falling raw material prices for rare gases also contributed to the shortfall. IV. Shareholder Actions: Simultaneous Share Reductions and Public Appeals for 'Rational Investment' Major Shareholder Quietly Exits: From end-2024 to Q1 2025, major shareholder Hunan Caixin reduced holdings by 2.35 million shares (0.338% of total shares). Company Warnings vs. Market Frenzy: Amid sharp stock price volatility, the company repeatedly issued risk warnings emphasizing 'cyclical industry fluctuations' and 'declining product prices'. Yet market sentiment remained exuberant—almost enacting the script: 'The more you clarify, the more we buy.' V. Industry Challenges: Struggling Amid a Cyclical Downturn Plummeting Rare-Gas Prices: The company’s core products—including carbon dioxide and industrial gases—are highly sensitive to raw material price volatility.

[Concise Summary] Hangzhou Oxygen Plant Co., Ltd. Analysis & Valuation Report — Medium (Good) Company at a Reasonable Price

4. Financial Strategy: Balancing Efficiency and Effectiveness The company pursues a financially conservative yet expansion-oriented strategy: High Capital Expenditure: Free cash flow for the first three quarters of 2025 stood at -RMB 1.075 billion, indicating an active investment phase. Significant Cash Flow Improvement: Operating net cash flow for the first three quarters of 2025 reached RMB 1.947 billion, up 140.03% year-on-year. Controllable Leverage: As of the first three quarters of 2025, the company’s debt-to-asset ratio stood at 56.28%, within the industry’s mid-range. 5. Business Model Clarity Assessment Hangzhou Oxygen Plant’s business model is transparent and straightforward: Integrated Value Chain: Full coverage across equipment manufacturing and gas operations. Clear Revenue Streams: Steady cash flows from pipeline gas + high-margin flexibility from retail gas + high-technology barriers in equipment sales. Well-Defined Growth Pathway: Stable traditional businesses complemented by high-growth opportunities in emerging sectors. 6. Working Capital and Business Model Assessment Based on financial performance and operational characteristics: Sustained Capital Investment Required: Gas business expansion necessitates building new air separation units; equipment R&D demands continuous investment. Strong Return on Investment: Newly commissioned projects generate stable long-term cash flows post-commissioning. Business Model Classification: Category b—business scale and profitability can be expanded through ongoing investment in operating capital. By launching new gas projects and scaling equipment production capacity, the company effectively grows both its business size and profit potential. 7. Business Clarity Score: 8.3 II. Operational Stability Hangzhou Oxygen Plant’s operational stability must be assessed holistically across development lifecycle, internal risks, and external environment. 1. Corporate Development Stage and Industry Position Current Development Stage: Transitioning from growth phase toward maturity. ・Revenue Growth: Compound annual growth rate (CAGR) of 10.87% over the past six years confirms continued expansion. ・Industry Scale: China’s industrial gas market grew from RMB 121.1 billion in 2017 to RMB 179.8 billion in 2021 (CAGR: 10%), projected to reach RMB 284.2 billion by 2026. ・Relative Performance: The company’s growth aligns closely with industry trends but achieves outperformance via market share gains. 2. Cyclical Nature and Operational Stability Verification Five-Year Profit Volatility Analysis: ・Attributable net profit increased from RMB 635 million in 2019 to RMB 922 million in 2024 (CAGR: 7.74%). ・In 2024, net profit declined 24.15% YoY, primarily due to macroeconomic headwinds and depressed liquid gas pricing. ・A marked recovery occurred in 2025, with net profit up 12.14% YoY for the first three quarters. Cyclical Stock Verification: The company indeed exhibits cyclical traits—especially in its retail gas segment, where pricing fluctuates visibly with economic cycles. However, long-term contracts for pipeline gas provide stable cash flows that effectively smooth out cyclical volatility. 3. Internal Operational Risk Review 4. External Environmental Risk Review 5. Comprehensive Operational Stability Score: 7.5 III. Pricing Power and Types of Pricing Power Hangzhou Oxygen Plant holds strong pricing power in the industrial gas sector, underpinned by its technological advantages, economies of scale, and vertical integration. 1. Strength of Pricing Power Key sources of pricing advantage include: ・Technical Barriers: Domestic leadership in large-scale air separation equipment technology; >60% market share for units rated at 60,000 Nm³/h and above. ・Brand Strength: 'Hangyang' is a China Famous Trademark, enjoying high brand recognition in the air separation equipment domain. ・Economies of Scale: World’s largest producer of air separation equipment; leading position in gas operations nationwide. ・High Customer Switching Costs: Gas customers face significant costs—including pipeline reconstruction and production shutdowns—to switch suppliers.