Zhejiang Huayou Cobalt Co., Ltd (603799.SS): BCG Matrix [Dec-2025 Updated]

Huayou's portfolio is increasingly polarized: high-growth "stars" - high‑nickel ternary cathodes, rapidly scaling nickel output in Indonesia, and new lithium salt capacity - are being fed by steady "cash cows" such as cobalt, precursors and copper, enabling aggressive CAPEX in Indonesia and Zimbabwe; meanwhile the company is selectively funding question‑mark bets (battery recycling, solid‑state materials, and overseas factories) while weeding out low‑margin precursors and legacy mines, a capital-allocation play that prioritizes high‑value, vertically integrated new‑energy assets and makes its future performance hinge on execution and geopolitical risk management.

Zhejiang Huayou Cobalt Co., Ltd (603799.SS) - BCG Matrix Analysis: Stars

Stars

The ternary cathode materials segment is a Star: high market growth and high relative market share driven by technological leadership in high-nickel chemistries and strategic global partnerships. Shipment volumes for ternary cathode materials reached 39,600 tons in H1 2025, up 17.68% year-on-year. Ultra-high nickel 9-series materials now represent over 60% of segment output, supporting higher ASPs and margin expansion. Huayou holds a 57% share of China's ternary cathode exports as of mid-2025, reflecting dominant export positioning. The segment is supported by a projected global battery materials market growth to $102.8 billion by 2033 and by long-term supply agreements with OEMs and battery makers including Tesla and LG Energy Solution.

The nickel products business functions as a second Star, fueled by massive capacity expansion and high-efficiency production in Indonesia. Nickel product shipments rose 83.91% to 139,410 tons in H1 2025, materially increasing group EBITDA contribution. The Indonesia Huafei project has exceeded planned production capacity; the Huayue smelter maintains high-volume, low-cost output with ongoing unit cost declines. Vertical integration via self-sufficiency in Mixed Hydroxide Precipitate (MHP) raw materials strengthens gross margins and mitigates feedstock volatility. Indonesian smelting capex has also secured approximately 7% of global cobalt supply as a byproduct, adding strategic resource value.

Lithium salt operations are rapidly scaling and constitute a third Star as part of an integrated new energy material supply chain. The Zimbabwe lithium project reached ignition of its lithium salt facilities in late 2025, marking commercial start-up. The company committed ~RMB 5 billion in new mining and processing investments over the three-year period ending 2025. With lithium payables for ternary black mass rising to 73-75%, lithium salt margins are positioned to improve as production ramps to meet electric vehicle demand (global EV sales recently exceeded 10 million units).

Key strategic drivers across these Star segments:

• Technology: leadership in high-nickel (9-series) cathode chemistry and process optimization.
• Scale: rapid capacity additions in Indonesia and new lithium facilities delivering step-change volumes.
• Integration: vertical control of feedstocks (MHP, lithium salts) improving margins and supply security.
• Commercial partnerships: long-term offtakes with Tesla, LG Energy Solution and other major manufacturers.
• Geographic diversification: export dominance from China and production base expansion in Indonesia and Zimbabwe.

Zhejiang Huayou Cobalt Co., Ltd (603799.SS) - BCG Matrix Analysis: Cash Cows

Cash Cows

The cobalt products segment remains a dominant market leader providing steady cash flow despite strategic shifts toward higher-margin integrated materials. Huayou maintains an estimated 18% global market share in cobalt production, supported by its extensive mining operations in the Democratic Republic of Congo (DRC). Shipment volumes for pure cobalt products dropped by 9.89% to 20,807 tons in H1 2025 compared with H1 2024, while realized average cobalt prices rebounded materially due to DRC export restrictions, driving significant margin expansion.

Key financial and operational outcomes for the cobalt products segment in H1 2025 include a net profit attributable to shareholders surge of 62.26% to 2.71 billion yuan, segment-level gross margins expanding by an estimated 8-12 percentage points year-over-year, and free cash flow generation sufficient to underwrite heavy upstream and downstream CAPEX programs.

The ternary precursor business continues to hold a substantial global market position while shifting toward high-margin specialized products. Huayou is a top-tier global player with a significant portion of its 325,000 tons annual capacity either in operation or under development. H1 2025 shipments for precursors fell slightly to 42,118 tons due to a strategic reduction in low-profit product lines; however, the segment remains critical to the battery materials value chain and to downstream offtake relationships.

Commercial highlights for ternary precursors include a binding three-and-half-year supply agreement with Tesla covering volumes through the end of 2025 and the mass production ramp of high-nickel NCM 8 and NCM 9 series precursors targeted at premium EV OEMs with elevated energy density requirements. These moves improve average selling prices (ASPs) and margin per ton while reducing exposure to commoditized grades.

The copper business provides reliable supplemental revenue and margins as a byproduct of the company's African mining operations. The green non-ferrous metal refining segment, which includes copper, contributed meaningfully to consolidated revenue reaching 37.197 billion yuan in H1 2025. Copper production benefits from long-standing infrastructure and high-ROI legacy assets in the DRC, allowing incremental production to add cash flow without large new capital requirements.

Operational characteristics of the copper/refining cash cow include low incremental CAPEX relative to new energy materials, consistent refining throughput utilization above peer-average rates in regional operations, and steady contribution to consolidated free cash flow that supports shareholder returns and upstream expansion.

Cash cow strategic implications for Huayou:

• Cobalt products deliver core cash generation that underwrites CAPEX for nickel and lithium upstream projects.
• Ternary precursors provide stable midstream cash flows with upward margin trajectory driven by high-nickel NCM adoption.
• Copper/refining operations offer low-CAPEX, steady free cash flow and dividend support via legacy DRC assets.
• Collective cash flow profile enables aggressive investment while preserving a dividend policy (20.20% payout in 2024).

Zhejiang Huayou Cobalt Co., Ltd (603799.SS) - BCG Matrix Analysis: Question Marks

Question Marks - Battery recycling, Solid-state materials, International manufacturing

Battery recycling (urban mining) is positioned as a high-growth yet capital-intensive segment. Global recycled cobalt market CAGR is projected at 12.7% (2025-2033), reaching >$5.0 billion by 2033. In 2024 Huayou's recycling operations contributed to an estimated reduction of 80,000 tons of CO2e. Market concentration is significant: Huayou + GEM Co. hold an estimated combined 35-40% share of recycled cobalt volumes in 2024. Current collection and processing infrastructure is incomplete - estimated additional capex required to build global collection/processing networks: $500-900 million over 2025-2028 depending on scope. Profitability breakeven for new regions is forecasted 3-6 years post-commissioning under base-case pricing (recycled cobalt price assumed $25-30/kg in 2026 equivalent).

Solid-state battery materials are early-stage commercial bets with high R&D intensity and uncertain commercialization timing. Huayou's strategic collaborations with Farasis and Weilan New Energy target large cylindrical and solid-state cell chemistries. Target R&D spend is set to rise to ~7% of revenue by 2025 (company guidance), up from approximately 4.2% in 2023. Current revenue from solid-state-specific materials is estimated at <3% of total company revenue (2024). Key sensitivity: mass-market adoption of solid-state electrolytes and compatible cathode/anode formulations; timeline scenarios range from optimistic commercialization 2027-2029 to conservative 2030+.

International manufacturing expansion (Europe / North America) is necessary to comply with evolving regulatory regimes (battery recycling mandates, local content rules) but carries elevated geopolitical, regulatory, and cost risks. Huayou's shift from "domestic manufacturing" toward "international manufacturing" includes partnership agreements in Germany focused on battery reuse and refining. Estimated incremental capex for establishing localized production/refining hubs in Europe: €200-€400 million per major site (including permitting, plant build, and initial working capital). Competitors like Umicore and BASF are scaling local capacity; Huayou's relative market share in these regions is currently <10% but targeted to rise to 15-20% within 4-6 years if projects proceed on schedule. Projected ROI is variable; base-case IRR range 6-12% after stabilization, downside risk to IRR if feedstock logistics or permit timelines slip.

• Strategic options: pursue joint ventures to share capex and regulatory burden (target JV equity 30-50% for recycling/refining sites).
• Scale R&D partnerships and milestone-based funding with Farasis/Weilan to limit upfront R&D spend and de-risk commercialization timelines.
• Prioritize recycling collection network investment in EU hubs where mandates provide predictable feedstock flows and potential subsidies; phase rollouts to manage cashflow.
• Implement staged capital deployment with go/no-go triggers tied to permit approvals, offtake contracts, and technology demonstration targets.

Zhejiang Huayou Cobalt Co., Ltd (603799.SS) - BCG Matrix Analysis: Dogs

Dogs

Low-margin precursor products have been deliberately deprioritized to optimize Huayou's overall profit structure and resource allocation. During the first half of 2025 the company cut shipments of these low-profit precursors, contributing to a slight decline in total precursor volumes versus H1 2024. Intense price competition, limited product differentiation and unit gross margins below the corporate target have driven the decision to shift capacity toward high-nickel series, supporting the group's reported 13.5% consolidated gross margin target.

Key metrics for low-margin precursor lines (H1 2025 vs H1 2024):

Actions and implications for precursors:

• Capacity shift: increased allocation to high-nickel precursor lines and cathode feedstocks.
• Inventory strategy: intentional destocking of low-margin SKUs to improve working capital efficiency.
• Price competitiveness: selective exit from price-driven contracts; focus on differentiated, higher-margin formulations.

Legacy small-scale mining assets in high-risk or low-yield areas are being phased out in favor of mega-projects (Indonesia, Zimbabwe) to strengthen 'resource guarantee.' Older mines carry higher unit costs, weaker ESG profiles and lower recoveries than third-generation HPAL facilities. Asset impairment testing at 2024 year-end resulted in a total profit reduction of RMB 494 million, including RMB 313 million for inventory impairment, reflecting the write-down of underperforming upstream exposures.

Upstream legacy asset indicators:

Operational shifts regarding mining portfolio:

• Divestment/closure of small-scale low-yield mines to reallocate CAPEX toward Indonesia HPAL and Zimbabwe mega-projects.
• Focus on large-scale, mechanized operations to reduce unit cash costs and improve ESG compliance.
• Concentration of management bandwidth on '15th Five-Year Plan' priorities, reducing oversight of legacy sites.

Traditional cobalt chemicals for non-battery industrial applications now occupy the Dog quadrant as global demand pivots to batteries. Over 60% of global cobalt consumption is used in battery manufacturing, leaving industrial and chemical applications with shrinking demand and limited pricing power. These legacy chemical lines are susceptible to substitution by cheaper alternatives, have low market growth rates and receive minimal incremental investment from Huayou, which is channeling capital to EV supply-chain segments that generated 23.78% revenue growth in 2025.

Traditional chemical segment snapshot (2024-2025):

Strategic measures applied to traditional chemicals:

• Run-to-exhaust approach: maintain production where cash-positive but avoid expansionary CAPEX.
• Selective commercialization: target specialized non-battery niches with technical differentiation where feasible.
• Consolidation: merge overlapping SKUs and rationalize product portfolio to reduce overhead.