Jiujiang Defu Technology Co., Limited. (referred to as Defu Technology, 301511.SZ) has seen its share price swing wildly, while pre-IPO shareholders have been cashing out at elevated levels and gradually stepping away. Recently, the company's second-largest shareholder, Gansu Tuozhen Equity Investment Fund Partnership (referred to as Gansu Tuozhen), completed a round of share reduction, offloading approximately 18.9096 million shares, representing 3% of the company's total share capital. This reduced Gansu Tuozhen's stake from 6.98% to 3.98%.

The reduction began in early June, coinciding with Defu Technology's share price surging to an all-time high of 169.63 yuan per share. Since then, the stock has steadily declined, halving to 85.05 yuan per share as of September 4. Notably, the market's expectations for high-end AI copper foil remain intact, but the company's profitability is still in a recovery phase, and the real test of its ability to deliver on earnings has just begun. On September 4, we reached out to Defu Technology via letter regarding these matters, but had not received a response by the time of publication.

Where the former second-largest shareholder exited at the top

Looking at the reduction pace, Gansu Tuozhen's exit appeared well-timed to catch Defu Technology's share price at a phase high. According to Wind data, Gansu Tuozhen reduced 500,000 shares on June 4, when the stock closed at 122.31 yuan per share; between June 5 and June 24, it sold 6.5 million shares, during which the share price rose from approximately 119.5 yuan to 144 yuan; from June 25 to July 14, it reduced 5.8969 million shares, with the price falling from about 152.55 yuan to 115 yuan; and from July 15 to September 2, it offloaded another 6.0127 million shares as the stock continued to decline. The 6.5 million-share tranche was the largest in this round, accounting for roughly 34% of the total reduction, and was executed while the share price traded in the high range of 120 yuan to 170 yuan.

In 2026, Defu Technology's share price became highly volatile, driven by its entry into Nvidia's supply chain and the AI PCB electronic copper foil narrative. The stock started the year at 36.63 yuan per share, spiked to 169.63 yuan on June 16, then reversed course, dipping to around 63 yuan in early August. As of September 4, it closed at 85.05 yuan, down nearly 50% from the peak. Given the investment cost and current market price, Gansu Tuozhen's investment has yielded substantial returns.

For Gansu Tuozhen, this has been a nearly nine-year hold. In 2017, Baiyin Nonferrous Group, together with Gansu Guotou Group, established the Gansu Tuozhen fund with a total scale of 1 billion yuan. In July 2017, the fund invested 180 million yuan as a strategic investment in Jiujiang Defu to support the construction of a battery-grade high-end electrolytic copper foil project. At that time, Defu Technology was approaching its IPO, and during the shareholding reform, Gansu Tuozhen held 34.566991 million shares, corresponding to a 17.4757% stake, at an implied cost of approximately 5.21 yuan per share.

Based on trading data from Wind, the estimated cash-out amounts for Gansu Tuozhen across phases are as follows: using the June 4 closing price of 122.31 yuan per share, an average price of about 130 yuan per share for June 5-24, an average of around 130 yuan per share for June 25-July 14, and an average of approximately 100 yuan per share for July 15-September 2, the total reduction proceeds could exceed 2.2 billion yuan. Even at 100 yuan per share, the return would be more than 19 times the entry price. Prior to this reduction round, Gansu Tuozhen still held 6.98% of Defu Technology, ranking as the second-largest shareholder. After the reduction, its stake fell to 3.98%, no longer qualifying as a shareholder with more than 5%. According to Tianyancha, Gansu Tuozhen was established in 2015, with an operating period ending in September 2028.

Bai Wenxi, chief economist at the China Enterprise Capital Alliance, told us that Gansu Tuozhen is highly likely to continue reducing its stake, though whether it will fully exit remains uncertain. As an early strategic investor in Defu Technology, Gansu Tuozhen faces the fund's operating period expiration and limited partners' redemption demands. With roughly two years remaining, continuing to reduce in batches is a reasonable expectation within the fund's lifecycle. It is also worth noting that Defu Technology has previously seen reductions by its controlling shareholder and executives. Between October and December 2025, the controlling shareholder and actual controller, Ma Ke, along with some senior executives, collectively reduced 816,100 shares at an average trading price of about 35 to 39 yuan per share.

AI copper foil earnings still await validation

While the former second-largest shareholder was reducing its stake, Defu Technology has also been conducting share buybacks. In January this year, the company approved a buyback plan to repurchase shares through centralized bidding, using self-owned funds and special loan facilities for stock buybacks, to fund employee stock ownership plans or equity incentives. The total buyback amount was set at no less than 75 million yuan and no more than 150 million yuan. On September 2, Defu Technology announced the buyback results. A total of 2.7473 million shares were repurchased, representing 0.44% of total share capital, with a payment of approximately 91.11 million yuan. The average repurchase price was 33.16 yuan per share, with a maximum transaction price of 40 yuan and a minimum of 28.5 yuan. The company also announced that, as the repurchased shares were sufficient to meet incentive needs, it terminated the buyback plan early.

Bai Wenxi further noted that Gansu Tuozhen, as a financial investor, cashing out in batches after a sharp share price rally is essentially a normal fund exit. As the share price retreats, the momentum for high-position selling also weakens. If the company's subsequent orders, profits, and cash flows continue to materialize, venture capital exits will only cause temporary disruption. However, if earnings fall short of expectations after the reduction, the market may form a negative interpretation that shareholders exited before the market. Medium- to long-term pricing power rests with fundamentals, not the reduction itself.

This year's dramatic swings in Defu Technology's share price are closely tied to AI enthusiasm. As early as the beginning of 2025, the company disclosed that its ultra-high-end carrier copper foil had been sent to substrate manufacturers for verification, and the relevant products had passed the validation and factory manufacturing audits of a leading memory chip company, with plans to gradually replace imported products. In the high-frequency communication and high-speed server sector, the company's products have passed verification by PCB manufacturers such as Shennan Circuits and Victory Giant Technology, and have been applied in Nvidia projects. Subsequently, as the AI server supply chain boom accelerated, Defu Technology was tagged with AI-related concepts, driving its share price higher.

Brokerages are also optimistic about the company's future earnings. China Securities Construction Investment believes Defu Technology's net profit for 2026 to 2028 could reach 778 million yuan, 1.674 billion yuan, and 2.671 billion yuan, respectively. With AI ramping up, Chinese companies are expected to gain share in the high-end electronic foil sector and improve profitability. However, based on current financial performance, the profits from AI copper foil remain limited.

In Defu Technology's revenue structure, lithium battery copper foil still dominates. In the first half of this year, lithium battery copper foil revenue was 7.661 billion yuan, accounting for about 83%, with a gross margin of 9.47%; electronic circuit copper foil revenue was 1.308 billion yuan, accounting for approximately 14%, with a gross margin of only 4.85%. As a result, although Defu Technology's net profit for the first half of the year grew 580% year-over-year, revenue stood at 9.197 billion yuan, with a profit of 263 million yuan and an overall gross margin of just 9.12%. In other words, the high-end electronic circuit copper foil that the market is most focused on has not yet become the main source of Defu Technology's revenue and profit. Whether high-end products can translate into higher processing fees, better gross margins, and stable cash flows to significantly improve profitability remains to be tested by the market.