Executive Summary / Key Takeaways

• Graphex Group Limited ($GRFXY) is strategically positioning itself as a critical supplier of graphite anode materials for the burgeoning electric vehicle (EV) and renewable energy sectors, underpinned by proprietary technology in natural spherical graphite and graphene-related products.
• The company is undergoing a significant production capacity expansion, aiming to increase its anode material output from 10,000 tonnes per annum (tpa) to 60,000 tpa by the end of 2025, with further plans to exceed 150,000 tpa by 2030, signaling aggressive growth ambitions in a high-demand market.
• A key strategic initiative involves the separation of its U.S. graphite processing arm, Graphex Technologies LLC, into a standalone entity, with an anticipated stock consideration of US$100 million to US$200 million for existing shareholders, aimed at creating independent production ecosystems.
• Despite a recent NYSE American delisting and a history of net losses, Graphex's balance sheet is deemed "adequate with slight risk," supported by recent capital raising activities like a Rights Offering and a Letter of Intent for RMB400 million in project financing.
• Investors should closely monitor the execution of its ambitious capacity expansion, the successful completion of the U.S. spin-off, and the company's ability to translate its technological advantages into sustained profitability amidst intense competition and a volatile market.

Graphex's Foundation and Strategic Pivot in the Energy Transition

Graphex Group Limited ($GRFXY), listed on the OTC Expert Market and HKSE (6128), stands at a pivotal juncture, aiming to capitalize on the global energy transition. The company's core business revolves around the development and production of advanced graphite and graphene materials, essential components for lithium-ion batteries that power electric vehicles (EVs) and renewable energy storage solutions. This strategic focus places Graphex at the heart of an industry experiencing exponential growth, driven by increasing environmental mandates and consumer adoption of cleaner technologies.

Graphex's journey reflects a dynamic evolution, marked by significant strategic shifts. Its operational history, dating back to at least 2015, shows an early period of substantial acquisition activities between 2017 and 2019, which dramatically reshaped its asset structure. Goodwill and intangible assets surged from $7.09 million in 2017 to $875.84 million by 2019, indicating a concerted effort to expand its operational footprint and technological capabilities. This period of aggressive expansion coincided with the company's highest reported revenues, peaking at $391.04 million in 2021. However, despite revenue growth, the company consistently reported net losses during these years, highlighting the capital-intensive nature of its expansion and the challenges of achieving profitability in a rapidly evolving market.

The broader industry landscape, characterized by robust consumer demand for EVs and significant investments in AI and clean energy infrastructure, provides a fertile ground for Graphex's specialized offerings. The company's strategic initiatives, including global expansion and the creation of separate, domestic end-to-end production ecosystems, are directly aligned with these macro trends, particularly the increasing demand for graphite materials in lithium battery production.

Technological Edge: Powering the Future of Batteries

Graphex's competitive differentiation is rooted in its extensive commercial experience and proprietary technology in the deep processing of graphite and the production of battery-grade graphite anode material. The company focuses on refining natural spherical graphite, synthetic graphite, and graphene-related products, which are crucial for enhancing the performance and longevity of lithium-ion batteries. This technological expertise is not merely theoretical; Graphex holds patents across various domains, including products, production methods, machinery design, and environmental protection, underscoring its commitment to innovation.

The tangible benefits of Graphex's specialized graphite anode material are critical for EV and renewable energy applications. While specific quantitative performance metrics such as "superior energy yield" or "lower degradation rates" were not detailed, the company's position among "top suppliers of specialized graphite anode material" suggests its products offer competitive advantages in terms of purity, consistency, and performance required by demanding battery manufacturers. These qualities are essential for achieving higher energy density, faster charging capabilities, and extended battery life in EVs, directly contributing to their market appeal and adoption.

Graphex's R&D efforts are implicitly focused on maintaining and advancing this technological edge. The strategic intent behind its continuous development in graphite and graphene technologies is to ensure its materials remain at the forefront of battery innovation, thereby contributing to its competitive moat. For investors, this technological differentiation translates into the potential for sustained demand, premium pricing, and improved margins as the EV and renewable energy markets mature. The ability to supply high-quality, specialized anode material directly impacts the performance and cost-effectiveness of the end-product, making Graphex a critical link in the value chain.

Competitive Arena: Graphex's Position Among Rivals

Graphex Group operates in a highly competitive and capital-intensive industry, vying for market share against both specialized graphite producers and broader battery material suppliers. Its position as a multinational technology company focused on graphite anode material places it in direct competition with players like NOVONIX Limited (NVX), Syrah Resources (SYR), and GrafTech International (EAF).

NOVONIX, for instance, emphasizes synthetic graphite and integrated battery solutions, focusing heavily on innovation. Graphex, with its natural spherical graphite expertise, offers a different value proposition, potentially providing greater efficiency in certain EV battery applications due to established use cases. While NOVONIX might exhibit faster innovation cycles in specialized battery tech, Graphex's diversified business model, which includes landscape architecture design and catering, could offer more stable cash flow generation across segments.

Syrah Resources, another direct competitor, specializes in natural graphite mining and processing. Both Graphex and Syrah supply natural graphite for Li-ion batteries, creating a direct overlap. Graphex's high-purity graphite for anodes may offer qualitative advantages in specific applications, such as refractory materials or coatings, while Syrah focuses on volume production. Graphex's diversification could provide a more resilient market position compared to Syrah's reliance on mining operations, which can introduce higher operational risks.

GrafTech International, focused on graphite electrodes for industrial applications, including batteries, represents another facet of the competition. Graphex's natural graphite products may offer benefits in EV applications, such as easier integration into anodes, compared to GrafTech's broader industrial focus. GrafTech's large-scale production capabilities are a strength, while Graphex's focus on graphene innovation and diversified operations could lead to stronger overall financial health through varied revenue sources.

Indirect competitors include companies developing alternative battery chemistries, such as solid-state batteries, which could reduce demand for traditional graphite anodes if they become substantially cheaper or easier to implement. Additionally, companies like MYR Group (MYRG), involved in electrical contracting services and EV charging infrastructure, indirectly impact the market by enabling faster adoption of battery technologies, potentially intensifying competition for Graphex.

Graphex's competitive advantages stem from its proprietary technology in graphene production, its diversified business model, and established supply chains. Its focus on natural spherical graphite for Li-ion batteries provides tangible benefits, potentially leading to superior performance in EV applications and fostering stronger customer loyalty. This technological edge helps Graphex counter the innovation focus of companies like NOVONIX and potentially mitigate the supply chain dependencies that could affect Syrah Resources. However, Graphex's diversified structure could dilute its focus compared to more specialized rivals, and potential supply chain dependencies remain a vulnerability, impacting costs and margins. High capital requirements, regulatory hurdles, and the need for technological expertise act as significant barriers to entry, protecting Graphex's market position against new entrants.

Financial Performance: A Trajectory of Transformation

Graphex Group's financial performance over the past few years reflects a company in a state of significant transformation, marked by both strategic investments and operational challenges. The company reported unaudited interim consolidated financial results for the six months ended June 30, 2025, with actual revenue of HK$76.83 million and an EPS of -1.25, representing an 18.04% year-over-year decline in revenue but a 62.98% year-over-year improvement in EPS.

Looking at annual trends, Graphex experienced a notable decline in revenue from $291.93 million in 2023 to $187.85 million in 2024. Concurrently, net income remained negative, with a loss of -$113.17 million in 2023 and -$111.44 million in 2024. Despite the revenue contraction, there were some signs of operational improvement; the gross profit ratio increased slightly from 0.33 in 2023 to 0.36 in 2024, and the operating income improved from -$110.49 million to -$80.08 million over the same period.

The company's TTM (Trailing Twelve Months) financial ratios further illustrate its current state. Graphex recorded a gross profit margin of 36.36%, an operating profit margin of -60.23%, and a net profit margin of -59.32%. The EBITDA margin stood at -29.82%. These figures indicate significant challenges in achieving consistent profitability, likely due to substantial operating expenses and the costs associated with its strategic expansion and R&D efforts.

Cash flow generation has also been a concern, with annual operating cash flow at -$5.31 million and annual free cash flow at -$5.46 million, highlighting the need for external financing to support operations and growth.

Liquidity and Capital Strategy

Graphex's balance sheet is characterized as "adequate with slight risk," reflecting a mixed picture of its financial health. As of December 31, 2024, the company held $15.45 million in cash and cash equivalents. Total current assets stood at $262.40 million against total current liabilities of $367.01 million, resulting in a current ratio of 0.71 and a quick ratio of 0.70. These ratios suggest some short-term liquidity pressures, indicating that current assets may not fully cover current obligations.

The company's debt profile includes $135.23 million in short-term debt and $100.75 million in long-term debt as of 2024, leading to a total debt of $235.98 million. The debt-to-equity ratio was 0.84, indicating a moderate reliance on debt financing relative to equity.

To support its capital-intensive growth initiatives, Graphex has actively pursued capital raising. It successfully completed a Rights Offering, demonstrating its ability to secure funding. Furthermore, the company secured a Letter of Intent (LOI) from a major Chinese bank for RMB400 million (US$56.5 million) in project financing, specifically earmarked for the first expansion phase in Qingdao, Shandong, PRC. This financing is crucial for de-risking its ambitious production capacity build-out.

Outlook and Strategic Initiatives: Scaling for Demand

Graphex Group is embarking on an aggressive expansion strategy designed to meet the escalating demand for graphite anode materials in the EV and renewable energy sectors. The company's current maximum annual production capacity for anode material is 10,000 tpa, all processed in China. A significant expansion is underway, with the first phase in Qingdao, Shandong, PRC, expected to complete in Q3 2024, which will increase capacity by 200% to 30,000 tpa. A second expansion phase is projected to be completed by the end of 2025, further boosting capacity by an additional 30,000 tpa to reach a total of 60,000 tpa. Looking further ahead, Graphex aims to achieve over 100,000 tpa before 2030 and 150,000 tpa or more by 2030. This substantial increase in production capacity is expected to unlock significant growth, driven by the increasing global demand for lithium battery components.

A pivotal strategic initiative is the separation of Graphex's U.S. graphite processing arm, Graphex Technologies LLC, into a standalone U.S. company. This move is seen as a validation of Graphex's long-standing strategy to expand operations globally and create separate, domestic end-to-end production ecosystems. The separation involves an anticipated stock consideration of US$100 million to US$200 million from a business combination transaction with a NASDAQ-listed SPAC, which will be distributed to all Graphex Group shareholders. This strategy aims to enhance market adaptability and potentially unlock value by creating focused entities for different geographical markets.

While comprehensive analyst forecasts are currently unavailable for $GRFXY, CoinCodex anticipates the stock to trade between $0.907762 and $0.96 in 2025, with an average annualized price of $0.930864. These projections, though limited, suggest a degree of market expectation for future price movements.

Risks and Challenges: A Dynamic Landscape

Investing in Graphex Group comes with a distinct set of risks and challenges that warrant careful consideration. A significant recent event was the delisting of its American Depositary Shares (ADSs) from NYSE American as of May 14, 2025, due to the company's failure to timely file its Form 20-F for the year ended December 31, 2023. The ADSs now trade on the OTC Expert Market, which is a "significantly more limited market than the NYSE" and "will likely result in a less liquid market for existing and potential holders of the ADS and could depress the trading price." This reduced liquidity and potential price depression are material concerns for investors.

The company also faced challenges in completing its financial audit by a PCAOB registered audit firm by May 15, 2025. While Graphex has since engaged SFAI MALAYSIA PLT as its new independent auditor and anticipates completing the audits and Form 20-F filings by approximately June 30, 2025, the delay highlights compliance and governance risks. The assurance that there are "no disagreements with this audit firm with respect to the financial statements" is a positive, but the initial delay underscores potential operational hurdles.

Shareholders have experienced substantial dilution in the past year, and the company's share price has been "highly volatile... over the past 3 months compared to the US market." This volatility, coupled with a relatively small market capitalization of $217 million, indicates a higher-risk investment profile. Furthermore, the company has consistently reported net losses for several years, raising questions about its path to sustainable profitability despite revenue growth in earlier periods. The success of its ambitious expansion plans and the U.S. spin-off are critical for reversing this trend and generating positive returns.

Conclusion

Graphex Group Limited stands at a critical juncture, poised to leverage its technological expertise in graphite and graphene materials to meet the surging demand from the EV and renewable energy sectors. The company's aggressive capacity expansion plans, aiming for 60,000 tpa by the end of 2025 and over 150,000 tpa by 2030, underscore a clear strategic vision to become a dominant player in the battery anode material supply chain. This growth trajectory, coupled with the strategic separation of its U.S. operations, reflects a proactive approach to global market opportunities and the creation of resilient, localized production ecosystems.

While Graphex's proprietary technology and diversified business model provide a competitive edge against rivals like NOVONIX and Syrah Resources, its financial performance has been characterized by consistent net losses and recent revenue declines. The recent delisting from NYSE American and the associated liquidity concerns on the OTC Expert Market present tangible risks that investors must weigh carefully. The successful execution of its expansion projects, the realization of value from the U.S. spin-off, and the ability to translate increased capacity into sustained profitability will be paramount. For discerning investors, Graphex represents a high-growth opportunity in a vital industry, but one that comes with significant operational and market risks requiring close monitoring of its strategic execution and financial turnaround.