Summary of EVE Energy's Conference Call Company and Industry Overview - **Company**: EVE Energy - **Industry**: Battery manufacturing, specifically focusing on Electric Vehicle (EV) and Energy Storage System (ESS) batteries - **Date of Call**: 21 August 2025 Key Points and Arguments 1. **Core Earnings Growth**: EVE Energy reported an 18% growth in core earnings for 1H25, excluding impacts from stock incentives and bad debt provisions [2] 2. **Power Battery Performance**: The average selling price (ASP) and net profit per unit (NP) for EVE's power battery business deteriorated, despite nearly 60% volume growth [2] 3. **Market Ratings**: Among Chinese battery makers, EVE Energy has a Neutral rating, while CATL-A has an Outperform (OW) rating, and Gotion has an Underweight (UW) rating [2] 4. **Impact of Lithium Prices**: EVE management indicated minimal impact from recent lithium price hikes due to cost pass-through contracts and long-term purchasing agreements [5] 5. **Battery Price Improvement**: EVE's EV battery ASP increased by 7% in 2Q25, attributed to a higher mix of overseas customers [5] 6. **US Market Orders**: US ESS customers continued to place orders until 2027 despite tariffs, with EVE planning to switch production lines to ESS batteries [5][6] 7. **Production Growth Outlook**: Management expects a 15-20% production growth in 3Q25 and a 30-40% growth in EV and ESS batteries for 2026 [6] 8. **Capital Expenditure (Capex)**: EVE's capex increased by 104% in 1H25, with guidance of Rmb10 billion per annum from 2025 to 2027, indicating a longer capex cycle than anticipated [6] Financial Performance Highlights 1. **P&L Summary**: - Net Sales for 2Q25: Rmb15.373 billion, a 20% QoQ increase - Gross Profit for 2Q25: Rmb2.685 billion, with a gross margin of 17.5% [7] - Operating Profit for 2Q25: Rmb601 million, a 54% decrease QoQ [7] - Net Profit for 2Q25: Rmb504 million, a 54% decrease QoQ [7] 2. **Battery Shipments**: EVE's total shipments for EV and ESS batteries in 1H25 were 50 GWh, reflecting a 45% year-over-year growth [8] 3. **ASP and Profitability**: EVE's gross profit per unit for power batteries was Rmb0.07 in 1H25, indicating challenges in maintaining profitability [13] Additional Insights 1. **Industry Trends**: The industry is experiencing a capex upcycle led by tier-1 and top tier-2 players, which is beneficial for equipment suppliers [6] 2. **Customer Demand**: Despite potential slowdowns in China EV sales, EVE's management remains optimistic about overseas sales growth [6] 3. **Competitive Landscape**: EVE's performance is compared with other battery makers like CATL, Gotion, and CALB, highlighting varying growth rates and profitability metrics [8][10] This summary encapsulates the critical insights from EVE Energy's conference call, focusing on financial performance, market outlook, and strategic initiatives within the battery manufacturing industry.