Stock Analysis & Valuation Graphex Group Limited (6128.HK)

• Previous Close: HK$0.27
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	27.87	10417
Intrinsic value (DCF)	0.04	-85
Graham-Dodd Method		n/a
Graham Formula	8.35	3050

Strategic Investment Analysis

Company Overview

Graphex Group Limited is a Hong Kong-based industrial materials company specializing in the development, manufacturing, and marketing of graphene products with a strategic focus on China's rapidly growing electric vehicle and battery markets. The company operates through three distinct segments: graphene products manufacturing, landscape design services, and catering operations. Graphex's core business produces natural spherical graphite for lithium-ion battery anodes in electric vehicles, high-purity graphite for refractory materials and advanced coatings, and synthetic graphite products. Founded in 1981 and headquartered in Causeway Bay, Hong Kong, the company has positioned itself at the intersection of advanced materials and clean energy technology. As China continues to dominate global EV production and battery manufacturing, Graphex leverages its specialized graphite expertise to serve this critical supply chain. The company's diversified operations across industrial materials, design services, and catering provide multiple revenue streams while maintaining its primary focus on graphite products for energy storage applications.

Investment Summary

Graphex Group presents a high-risk investment proposition with significant exposure to China's EV battery supply chain but concerning financial metrics. The company reported a net loss of HKD 111.4 million on revenues of HKD 187.9 million, reflecting operational challenges and potentially intense competition. With negative operating cash flow of HKD 11.2 million and substantial total debt of HKD 236 million against cash reserves of only HKD 15.5 million, the company faces liquidity constraints. While positioned in the growing graphite anode market for lithium-ion batteries, Graphex's financial performance raises concerns about its competitive positioning and ability to capitalize on industry growth. Investors should carefully evaluate the company's path to profitability and debt management capabilities before considering investment.

Competitive Analysis

Graphex Group operates in a highly competitive graphite market where scale, technological capability, and customer relationships determine success. The company's competitive positioning is challenged by larger, more established players in the graphite anode space, particularly given its current financial losses and negative cash flow. Graphex's primary advantage lies in its specialized focus on spherical graphite for battery applications and its presence in China, the world's largest EV market. However, the company faces intense competition from both domestic Chinese producers and international materials companies with greater scale and resources. The graphite anode market is becoming increasingly competitive as battery manufacturers seek reliable, high-volume suppliers with consistent quality and competitive pricing. Graphex's relatively small market capitalization of approximately HKD 219 million suggests it may lack the scale to compete effectively with industry leaders. The company's diversified operations into landscape design and catering, while providing additional revenue streams, may also divert management attention and resources from its core graphite business. Success will depend on Graphex's ability to improve operational efficiency, secure long-term customer contracts, and potentially form strategic partnerships within the battery supply chain.

Major Competitors

• Ganfeng Lithium Group Co., Ltd. (002460.SZ): Ganfeng Lithium is a Chinese lithium industry leader with extensive vertical integration from lithium resources to battery materials. The company's strengths include massive scale, strong customer relationships with major battery manufacturers, and comprehensive lithium compound production capabilities. While primarily focused on lithium, Ganfeng's expansion into anode materials represents direct competition for Graphex. The company's weaknesses include exposure to lithium price volatility and high capital expenditure requirements for expansion projects.
• Ningbo Shanshan Co., Ltd. (600884.SS): Ningbo Shanshan is one of China's leading lithium-ion battery material suppliers with strong capabilities in anode materials. The company benefits from established relationships with major battery manufacturers, significant production scale, and technological expertise in graphite anode materials. Shanshan's weaknesses include intense competition in the anode materials sector and margin pressure from evolving battery technologies. Compared to Graphex, Shanshan operates at a much larger scale with more established market positioning.
• Meituan (3690.HK): While primarily a food delivery and services platform, Meituan competes with Graphex's catering segment through its extensive restaurant services and food delivery network. Meituan's strengths include massive user base, technological platform, and dominant market position in China's food delivery sector. The company's weaknesses include regulatory scrutiny and high operating costs. This competition affects only Graphex's diversified catering operations, not its core graphite business.
• Synalloy Corporation (SYNL): Synalloy operates in specialty chemicals and materials, including some graphite products for industrial applications. The company's strengths include diversified product portfolio and established customer relationships in industrial markets. Weaknesses include smaller scale compared to Chinese graphite producers and limited focus specifically on battery materials. Synalloy represents international competition in specialty graphite products but with less focus on the battery anode market than Graphex.