Core Viewpoint - Zenergy is positioned as a competitive player in the lithium-ion battery manufacturing sector, benefiting from a lower legacy burden and a focus on manufacturing efficiency through standardized cells and platform-based packs [1] Industry Outlook - The battery sales outlook remains strong, with a projected 5-year CAGR of 29% for China's EV battery installation from 2024 to 2029, indicating significant growth potential for Zenergy given its low base [2] - Despite the dominance of CATL and BYD, which together hold about 70% of China's EV battery market, Zenergy's current market share of approximately 2% allows for growth without immediate concern from the competitive landscape [3] Company Performance - Zenergy has achieved profitability since the second half of 2024, with gross margins reaching 17.2% in 2H24 and 17.9% in 1H25, supported by a client mix where the top 5 clients contribute over 80% of revenue [4][5] - The company is expected to see revenue growth of 50% in FY25, 76% in FY26, and 48% in FY27, with gross margins projected to improve to 18.2%, 18.9%, and 19.0% respectively during the same period [5] Client Diversification - Zenergy's client base is diversifying, with new clients such as GAC Toyota, VW, and SAIC Motor expected to enhance sales and margins, while foreign brands are projected to account for about half of Zenergy's revenue by FY27 [4][5] Financial Projections - Net profits are projected to reach RMB 569 million in FY25, RMB 1,307 million in FY26, and RMB 1,880 million in FY27, reflecting a strong growth trajectory [5] - The company has been initiated with a BUY rating and a target price of HK$18.00, based on a P/E ratio of 22x for FY27, which is justified by its higher profit growth outlook compared to peers [5]