CATL-Backed VC Materials Leader Abandons IPO Plans, Acquired by Nichi-Chem

On June 29, 2026, Nichi-Chem (300214.SZ) announced a trading suspension, bringing attention to Shandong Yanyuan New Materials Co., Ltd. (hereafter “Yanyuan New Materials”), a leading VC (vinylene carbonate) materials company backed by CATL (Contemporary Amperex Technology Co., Ltd.). According to the announcement, Nichi-Chem is set to acquire management control of Yanyuan New Materials through a combination of stock issuance and cash compensation.

This acquisition marks a significant turning point in the field of lithium-ion battery electrolyte additives. As detailed in the original article published by TMTPost on June 30, 2026, Yanyuan New Materials has abandoned its solo IPO plans after four years of preparation and opted for securitization via M&A in the A-share market.

Background of Abandoning Solo IPO

Yanyuan New Materials is no unknown name—it has long been a leader in the lithium-ion battery electrolyte additive sector, maintaining its position as a core segment leader. The company has not only established a deep relationship with CATL, benefiting from its strategic support, but also enjoys backing from the Shandong Financial Investment Group, a local state-owned entity.

In terms of production capacity, information released by the Shandong New Energy Battery Manufacturing Promotion Association in April 2026 reported that Yanyuan New Materials successfully launched its core VC production line with an annual capacity of 30,000 tons. Plans are underway to gradually release an additional 70,000 tons of capacity, with total VC production expected to reach 120,000 tons by the end of 2026.

Despite strong relationships with top-tier clients and its prominent industry status, Yanyuan New Materials began its A-share IPO process in November 2022. After three and a half years and 14 rounds of supervisory guidance, the company has decided to shelve its solo IPO plans in favor of being acquired by a publicly listed company.

The 14th progress report from its supervisory body, Zhongtai Securities, covering the period from January to March 2026, highlighted two key areas requiring improvement. First, “compliance issues” related to procedural and property rights problems concerning Yanyuan New Materials’ production facilities and newly established subsidiaries remain unresolved. Second, revenue-related challenges stemmed from declining prices and gross margins for key products due to industry-wide impacts, along with asset impairments in newly launched projects.

While the industry began to recover in 2026, the supervisory body noted that “future profitability has room for improvement.” However, compliance issues remain a clear obstacle to the IPO process.

Industry Leader in Crisis

The VC electrolyte additive sector experienced a boom from 2021 to 2022, with prices peaking at over RMB 300,000 per ton. This profitability surge prompted a rush to expand production, leading to a complete reversal of market supply-demand dynamics between 2023 and 2024.

VC prices plummeted to a floor of RMB 40,000–60,000 per ton, causing widespread profitability challenges across the industry. While Yanyuan New Materials secured orders through long-term contracts with leading battery manufacturers and maintained stringent cost controls via its proprietary green continuous production process, it struggled against cyclical downward pressures across the industry.

In July 2024, Shandong Financial Investment Group announced plans to sell its stake in Yanyuan New Materials via the Shandong Property Rights Exchange Center. Financial data disclosed during this process revealed that the company had entered a downward phase. Despite maintaining stable operations in 2023 with annual revenue of RMB 1.34 billion and net profit of RMB 19.99 million, the industry downturn in 2024 led to a net loss of RMB 61.79 million in the first five months, despite revenue of RMB 590 million.

This cyclical hit has loosened Yanyuan New Materials’ grip on its long-standing leadership in the industry. According to a 2025 report by Huajing Industry Research Institute, Yanyuan New Materials remained the domestic leader in electrolyte additives. However, the “2026 White Paper on China’s Lithium-Ion Battery Electrolyte Additives Industry” published jointly by EVTank, Yiwei Economic Research Institute, and the China Battery Industry Research Institute revealed that the company faced significant setbacks in November 2025. Equipment failures in its core production line led to a complete production halt and suspension of product shipments. Coupled with industry-wide overcapacity and intensifying competition, Yanyuan New Materials fell to second place in market share, with Jiangsu Huasheng rising to the top.

Given the uncertain pace of IPO reviews, unresolved compliance issues, and the industry’s recovery at rock-bottom prices, accepting acquisition by a publicly listed company appears to be a pragmatic exit strategy and a channel for securitization. Founders and early investors can gain liquidity through stock exchanges, while CATL can maintain its upstream supply of key additives as a “major shareholder of a listed company,” avoiding the time costs associated with a solo IPO.

Strategic Intent of the Acquirer

The acquirer, Nichi-Chem, has over 20 years of experience in PVC plastic modifiers, holding a leading domestic market share in ACR and ACM products. However, the company has faced challenges in recent years. Despite hitting a record high revenue of RMB 3.74 billion in 2025, gross margin declines in ACM products and deferred tax adjustments led to a net loss of RMB 29.71 million, marking two consecutive years of deficits. In the first quarter of 2026, revenue fell slightly by 2% year-on-year, but the company narrowly broke even with a net profit of RMB 2.07 million, signaling a critical phase of recovery for its core business.

In this context, Nichi-Chem urgently needs to develop a second growth trajectory to sustain profitability. While it attempted to enter the computing power rental sector in 2024, contributions to overall performance have remained limited.

This logic underpins Nichi-Chem’s move to acquire management control of Yanyuan New Materials. By betting on the recovery cycle of new energy materials and the localization trends in the supply chain, Nichi-Chem aims to integrate into the supply chain ecosystem of CATL and BYD via Yanyuan New Materials. Its business model would shift from “selling plastic modifiers” to “supplying the lifeblood of batteries,” recalibrating its valuation metrics for the medium to long term.

However, another reality remains: Despite its position as the global VC leader with strategic CATL backing and state-owned capital support from Shandong Financial Investment Group, Yanyuan New Materials continues to face revenue challenges. While product prices showed slight recovery in the first quarter of 2026, depreciation and financial costs stemming from its heavy-asset production expansion still await resolution. This suggests that in the short term, Yanyuan New Materials is unlikely to make a significant contribution to Nichi-Chem’s net profits post-acquisition and may even negatively impact consolidated financial statements during the transition phase.

Risks and Uncertainties

Nichi-Chem’s cross-sector acquisition should be viewed more as an entry ticket into the new energy materials sector and a gateway to the CATL ecosystem, rather than an immediate profit-generating move. Achieving performance gains ultimately depends on sustained industry restructuring and price recovery in the VC sector.

As electrolyte additives transition from “windfall profits” to “cost competition,” this cross-sector partnership raises the question of whether it will serve as a stepping stone for Nichi-Chem’s recovery or merely an adventurous gamble to mask the struggles of its core business. The finalization of the deal and future market trends will provide the answers.

Editorial Opinion

In the short term, Nichi-Chem’s consolidated financial statements are likely to deteriorate due to Yanyuan New Materials’ losses. The key lies in whether the VC industry will see a strong recovery in late 2026. If production capacity expansion to 120,000 tons exceeds demand, prolonged price competition remains a risk. Furthermore, unresolved compliance issues are conditions for deal completion, adding uncertainty to the transaction.

From a long-term perspective, CATL’s evolving supply chain strategy warrants attention. While Yanyuan New Materials’ integration under a listed company may weaken its position as an independent material supplier, this shift aligns with the accelerated localization of China’s battery industry. Nichi-Chem’s attempt to transition from plastic modifiers to battery materials could become a model case for cross-sector industrial capital entering the supply chain.

The core question for the editorial team remains: Is the VC industry’s recovery truly sustainable? Prolonged oversupply poses risks to price recovery from the current floor of RMB 40,000–60,000 per ton. Meanwhile, slowing growth in the electric vehicle market could undermine the demand expansion necessary for sustained recovery.

References

• TMTPost: “After Four Years of IPO Preparation, VC Materials Leader Yanyuan New Materials Seeks Acquisition, with CATL as Second Shareholder” https://www.tmtpost.com/8047351.html — Published June 30, 2026