Summary of Key Takeaways from ZE Conference on Battery Value Chain Industry Overview - **Industry Focus**: Battery materials, specifically related to Energy Storage Systems (ESS) and Electric Vehicle (EV) batteries - **Key Participants**: ZE Consulting, China Futures, and various industry contacts Core Insights - **ESS Demand Growth**: - Industry consensus indicates a rising demand for ESS batteries to compensate for slowing EV battery demand in 2026 - Demand growth forecasts for 2026 vary significantly among experts, ranging from **18% YoY** (China Futures) to **40% YoY** (ZE) [1][2] - ZE predicts global ESS production will reach **1000 GWh** in 2026, up from **600 GWh** in 2025, representing a **60%+ YoY growth** [1][2] - **Lithium Carbonate Demand**: - If ZE's forecast holds, it implies an incremental demand of **500 kt+** for lithium carbonate, potentially leading to a quicker turnaround in lithium supply-demand dynamics [2] - Experts see limited downside risk for lithium average selling prices (ASP), although policy uncertainties regarding mining licenses may introduce volatility [2] - **LFP Cathode Utilization**: - Expected increase in utilization rates for LFP cathodes by **8 percentage points YoY** in 2026, with a range of **70%-80%** [3] - Current loss-making status among LFP cathode manufacturers is deemed unsustainable, with potential for a deficit in 2027 if demand growth continues to outpace supply [5] Investment Implications - **Positive Outlook**: The overall positive sentiment from the ZE Conference aligns with a bullish outlook on the upcoming battery price up-cycle [6] - **Investment Recommendations**: - Continued support for companies such as **CATL**, **EVE**, **CALB**, and **Hunan Yuneng** is suggested based on strong demand forecasts and production pipelines [6] Risks to Consider - **Key Risks**: - Weaker-than-expected battery demand - Research and development challenges - Strong competition and operational execution issues - Customer concentration and litigation risks [8][10][14][16] Company Valuations - **CALB Group Co Ltd**: Target price set at **HK$33.40**, based on a **2026E P/E of 20.6x** [7] - **CATL**: Valued at **HK$621/share** based on a **17.3x 2025E EV/EBITDA** [9][11] - **Eve Energy**: Target price of **Rmb93.9/share**, using a sum-of-the-parts approach [12] - **Hunan Yuneng**: Valued at **Rmb57.9/share** based on a **14.4x 2026E EV/EBITDA** [15] Conclusion - The battery materials industry is poised for significant growth, particularly in the ESS segment, with varying demand forecasts indicating a robust market. However, potential risks and challenges remain that could impact the overall outlook and company valuations.