Ask AI · Why has Defang Nano’s cash flow shifted from positive to negative, and which links are blocking the funds?

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Standing at a crossroads.**

Author | beyond

Editor | Xiao Bai

Power battery cathode material manufacturer Defang Nano (300769.SZ, company), recently released an intriguing performance forecast for 2025.

In 2025, the company is still losing money, but the losses are smaller. The full-year net profit attributable to the parent is expected to be a loss of 760 million to 860 million yuan, compared to a huge loss of 1.34 billion yuan in 2024, representing a loss reduction of 36%-43%.

(Source: Company’s 2025 performance forecast)

At first glance, there are signs of a bottoming out and rebound. But if you flip to the other side of the financial report, you’ll find that this company’s “wallet” is getting tighter and tighter.

In the first three quarters of 2025, operating cash flow turned negative, with a net outflow of over 110k yuan. On one hand, losses narrowed; on the other, cash is “bleeding out.” Is Defang Nano doing okay?

(Source: MarketCap Wind APP)

Profit Recovery: Is it Genuine or “Cutting Costs and Tightening the Belt”?

First, let’s look at the good news. In the first three quarters of 2025, Defang Nano’s gross profit margin rose from -4.6% for the whole of 2024 to -0.4% in the first three quarters, still in loss but at least close to breakeven.

(Source: MarketCap Wind APP)

Three factors contributed to the reduced losses:

First, less asset impairment. In 2024, the company took a one-time asset impairment of 225.7k yuan; in 2025, this dropped to 133 million yuan.

Second, high-end products shipped. The fourth-generation high-pressure lithium iron phosphate (LFP) started mass sales, and more profitable products like manganese iron phosphate (LMFP) and lithium supplement agents also began contributing revenue.

Third, cost-cutting measures paid off. Sales, management, and R&D expenses were all slashed, with R&D expenses down 43% year-over-year.

But the process of profit recovery is not smooth. In Q1 2025, gross profit margin finally turned positive at 0.3%, but in Q2, it was pushed back to -4.74% by market prices, and in Q3, only through product upgrades did it rebound to 2.7%. This shows a truth: the company’s profit recovery is still fragile and largely depends on market conditions.

Cash Flow in Crisis: Why Are Profits Made, but Money Isn’t Visible?

The problem lies right here. In the first three quarters of 2025, net operating cash outflow was 1.04 billion yuan, whereas in the same period last year, it was a net inflow of 143 million yuan. Where did the money go?

One reason is inventory “blocking” the cash. Inventory turnover rate plummeted from 8.7 times to 5.5 times, meaning sales slowed, and funds are stuck in warehouses. Another reason is customer “holding” the cash. Accounts receivable turnover rate also declined, and money isn’t coming back.

Simply put, the company reports revenue on paper but isn’t receiving real cash. It’s like running a store where sales are good every day, but all customers buy on credit, and at the end of the month, your pockets are still empty.

Even more critically, the company is still spending heavily. In the first three quarters of 2025, net cash outflow from investing activities was nearly 1.4 billion yuan—completely invested in capacity expansion, especially the world’s largest 110k-ton manganese iron phosphate (MFP) project.

The company’s current financial situation resembles a “high-leverage runner.”

As of the end of Q3 2025, the asset-liability ratio was 62%, interest-bearing debt ratio was 34%, and the current ratio was 0.87—meaning the company faces significant debt repayment pressure, and current assets can’t cover current liabilities.

More importantly, the company’s operational efficiency has declined across the board. Inventory and accounts receivable turnover have slowed, and funds are tightly blocked in operational links. On one side, expansion requires spending; on the other, operational cash generation is difficult, increasing financial pressure. Behind this, there’s a triangle dilemma involving industry cycles, company expansion, and capital efficiency.

Key Focus: Cash Flow, New Products, Operational Efficiency

The story of Defang Nano is essentially about transformation.

Traditional business of lithium iron phosphate (LFP) remains the core, with 225.7k tons sold in 2025, accounting for about 9% market share, ranking third in the industry. But competitors like Hunan Yueneng (27%) and Wanrun New Energy (10%) make it nearly impossible to gain market share relying solely on traditional products.

The real highlight is manganese iron phosphate (LMFP)—which has 15%-20% higher energy density than LFP and is a strong contender for the next-generation mainstream cathode material. Defang Nano has invested heavily, building the world’s largest 110k-ton LMFP capacity, already supplying major domestic automakers in bulk.

Meanwhile, the company has also laid out 5,000-ton capacity for lithium supplement agents, which can enhance battery performance and have secured multiple exclusive contracts.

But the problem is that new business remains small and cannot support the large-scale capacity. In 2025, domestic LMFP shipments just exceeded 30k tons, far from enough to absorb the industry’s planned massive capacity. If downstream promotion doesn’t meet expectations, the invested money might just turn into depreciation and inventory.

Fortunately, Defang Nano is on a long-term upward track. The energy storage market is becoming a “second engine” for lithium battery growth, with global energy storage lithium battery shipments expected to reach 960 GWh in 2026, a year-on-year increase of over 40%. The pursuit of cost, safety, and lifespan in energy storage aligns perfectly with the advantages of lithium iron phosphate systems.

But industry dividends do not automatically translate into corporate benefits. Domestic LFP cathode material CR5 has reached 78%, and industry competition is fierce enough to even release cost indices (15.7k–16.4k yuan/ton). Meanwhile, the EU’s “New Battery Law” requires carbon footprint disclosures, and the US “Inflation Reduction Act” emphasizes local supply chains. These “green compliance” thresholds are becoming invisible barriers to exports.

Looking ahead, three key indicators will mainly reflect the company’s fundamentals:

First, whether operating cash flow can turn positive. This is the bottom line for the company’s survival. If cash flow improves in 2026, then there’s hope.

Second, whether new businesses can support revenue. If LMFP and lithium supplement agent revenues surpass 20% in the next one or two years, it indicates that the structural upgrade is truly taking effect.

Third, whether operational efficiency can rebound. If inventory and receivables turnover rates bottom out and then rebound, it shows funds are starting to “move.”

Defang Nano now stands at a crossroads. One side offers long-term opportunities through technological moat and capacity positioning; the other side presents immediate pressures from tight cash flow and high leverage.

Optimistically, cash flow improves, LMFP volume increases, and the energy storage boom supports the company’s new growth cycle. Pessimistically, cash flow breaks, new product promotion stalls, industry price wars intensify, and the days ahead will be very tough.

For investors, profit recovery is just the “face,” but cash flow is the “inside.” Only when operating cash flow truly turns positive can this company be considered to have truly emerged from the trough.

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