Shares of the leading lithium iron phosphate company Hunan Yuneng New Energy Battery Material Co.,Ltd. (SZ:301358) opened lower and continued to decline today. By the midday break, the stock was trading at 75.2 yuan per share, a drop of 9.09%, with its market capitalization at 63.3 billion yuan.

The move follows an announcement last night from Hunan Yuneng, stating that its shareholder holding more than 5% of shares, Contemporary Amperex Technology Co.,Ltd. (SZ:300750), plans to reduce its stake. The plan involves selling up to 25.3002 million shares, representing 3% of the company's total equity, via block trades and centralized bidding within three months starting 15 trading days after the disclosure. Based on Hunan Yuneng's closing price of 82.72 yuan per share yesterday, if CATL sells the full amount, the proceeds could exceed 2 billion yuan.

It is worth noting that CATL and Hunan Yuneng have a long-standing collaborative history. As a key downstream customer, CATL participated in Hunan Yuneng's capital increase as early as December 2020 at a low cost of approximately 3.34 yuan per share and committed to a 36-month lock-up period during the IPO. This portion of shares was just released from lock-up this past February. Excluding dividends, CATL's current unrealized gain on this investment exceeds 23 times.

Regarding the reason for the sale, Hunan Yuneng's announcement clearly stated it is due to CATL's "normal investment arrangements and fund management needs," emphasizing that it "will not impact the business cooperation between the two parties."

CATL is not the only shareholder recently opting to sell, as Hunan Yuneng is experiencing a wave of shareholder disposals. On the evening of the 3rd, another major shareholder holding over 5%, Shanghai Jinsheng New Material Technology Co., Ltd., also announced a plan to sell up to 2.5% of the total shares. Earlier, in April, shareholder Hunan Yufu Venture Capital Management Partnership had disclosed a reduction plan and sold 2.7236 million shares via centralized bidding between May 22nd and 28th, reducing its stake below the critical 5% threshold. That plan is still ongoing.

Despite the frequent shareholder sales, Hunan Yuneng's performance and stock price this year have been notably strong. The company's Q1 2026 report showed revenue of 14.965 billion yuan, a year-on-year increase of 121.31%, and net profit attributable to shareholders of 1.356 billion yuan, surging by 1337.77% year-on-year. In the secondary market, Hunan Yuneng's stock has risen approximately 28% year-to-date, significantly outperforming the broader market.

Challenges behind strong performance

However, behind the impressive results, Hunan Yuneng faces challenges from intensifying industry competition. As a core supplier of lithium iron phosphate to CATL, its order share is being eroded by competitors such as Ronbay Technology Co., Ltd. and Fulin Precision Industrial Co., Ltd.. In January 2026, Ronbay and Fulin almost simultaneously announced they had reached in-depth strategic cooperation agreements with CATL. According to the agreements, from 2026 to 2031, Ronbay will supply 3.05 million tons of lithium iron phosphate to CATL, with a total contract value exceeding 120 billion yuan, averaging about 500,000 tons annually. From 2026 to 2028, Fulin will supply no less than 3 million tons in total, averaging over 1 million tons per year.

Key timing for Hong Kong listing

It is noteworthy that CATL's share sale coincides with a critical window as Hunan Yuneng plans its Hong Kong listing. According to a company announcement on the evening of May 21st, to advance its global strategic layout and establish an international capital operation platform, Hunan Yuneng intends to plan the issuance of overseas listed foreign shares (H-shares) and apply for listing on The Stock Exchange of Hong Kong Limited.