Summary of the Conference Call on China Battery Materials Industry Overview - The report focuses on the **China Battery Supply Chain**, particularly the **battery materials industry** and **electric vehicle (EV) battery production** [1][3]. Key Insights - **Production Trends**: The production pipeline of the top five battery makers is expected to remain flat month-over-month (MoM) and show a 48% year-over-year (YoY) increase, reaching approximately **148 GWh** in December 2025 [1][3]. - **EV Battery Demand**: There is a noted decline in EV battery production due to: 1. The approach of a traditional slack season. 2. The consumption of front-loading demand as China plans to halve the purchase tax exemption for EVs starting January 1, 2026 [1]. - **Energy Storage Systems (ESS)**: Demand for ESS batteries remains strong, which is helping to offset the downturn in EV battery demand [1]. - **CATL's Production**: CATL, a leading battery manufacturer, is projected to increase its production pipeline by **4% MoM** in December 2025, indicating robust operational capacity [1]. Financial Valuation - **CATL Valuation**: - The target price for CATL's Hong Kong shares is set at **HK$621/share**, based on a **17.3x 2025E EV/EBITDA** multiple, which is 0.15 standard deviations above its historical average [8]. - For CATL's A-shares, the target price is **Rmb571/share**, also based on a **17.3x 2026E EV/EBITDA** multiple [10]. Risks Identified - The report highlights several risks that could impact CATL's stock performance: 1. Lower-than-expected demand for EVs. 2. Increased competition in the EV battery market, potentially reducing CATL's market share. 3. Higher-than-expected raw material costs [9][10]. Production Forecasts - **Cathode Production**: Expected to increase by **1% MoM** [4]. - **Anode Production**: Anticipated to remain flat MoM [5]. Conclusion - The China battery materials industry is currently experiencing a mixed landscape with strong ESS demand counterbalancing the seasonal decline in EV battery production. CATL remains a key player with positive production forecasts and a solid valuation outlook, although it faces significant risks that could affect its market position and stock performance [1][9][10].

Summary of Global Energy Storage Sector Conference Call Industry Overview - The global energy storage sector experienced a robust third quarter, with total demand increasing by 46% year-over-year (y-o-y) despite a 6% decline in average selling prices (ASP) [1][8] - Total battery demand reached 466 GWh in 3Q25, with a cumulative 1,209 GWh for the first nine months of 2025, marking a 50% y-o-y increase [1][17] - Energy Storage System (ESS) batteries saw an impressive growth of 85% y-o-y, contributing nearly 50% of the incremental battery demand, surpassing electric vehicles (EVs) in growth contribution [1][8] Key Companies and Performance CATL - CATL's EV battery installations grew by 17% y-o-y in 3Q25, but its market share declined to 32.2% from 33.8% in the first nine months of 2025 [2][20] - CATL maintained a stable unit profit of US$14/kWh in 3Q25, with a quarterly operating profit margin (OPM) of 17% [3][54] - The company is increasing its capital expenditure (capex) by 40% for 2025, focusing on expanding ESS capacity with a new plant in Shandong exceeding 100 GWh [4][65] - Target price raised to CNY 440, reflecting strong growth potential in ESS demand [5][11] LG Energy Solution (LGES) - LGES reported a 30% y-o-y increase in EV battery installations in 3Q25, but its revenue declined by 17% y-o-y [2][33] - The company’s OPM improved to 11% in 3Q25, but is expected to face challenges in 4Q25 due to reduced high-margin U.S. EV battery products [54][84] - Capex reduced by 30% in 2025, focusing on maximizing existing facilities [65] Samsung SDI - SDI's EV battery installations grew by 25% y-o-y in 3Q25, but revenue fell by 22% y-o-y [2][33] - The company faced continued profit challenges with an OPM of -19% in 3Q25 [54] - Capex decreased by 36% in 2025, with a focus on converting EV plants to ESS production [65] Market Dynamics - The average price of battery packs in China fell to US$93/kWh for NMC and US$69/kWh for LFP, reflecting a decline of 6% and 7% y-o-y, respectively [1][28] - Lithium prices averaged US$10,200 per ton in 3Q25, decreasing 5% y-o-y but increasing 19% quarter-over-quarter [28] - ESS demand is expected to continue growing, driven by market-based pricing and lower battery costs, particularly in China, the U.S., and Europe [8][10] Investment Implications - Battery and battery value chain stocks are rallying globally, primarily due to the surge in demand for ESS rather than EVs [8][11] - Despite the promising ESS outlook, near-term fundamentals for Korean battery makers appear challenging due to weak EV demand in the U.S. [11][81] - Ratings remain Outperform for CATL, Market-Perform for LGES, LG Chem, and SDI, and Underperform for Ecopro and Posco Future M [5][81] Financial Outlook - Revenue forecasts for battery manufacturers have been lowered due to weaker-than-expected ASPs, while earnings estimates for CATL have been raised due to a more positive outlook on unit net profit [84] - Long-term margin outlook remains unchanged, with increased ESS battery demand forecasts for Korean battery cell makers reflected in higher revenue and earnings projections from 2027 onward [84] Conclusion - The global energy storage sector is poised for significant growth, driven by ESS demand, with CATL positioned as a leading player. However, challenges remain for other manufacturers, particularly in the context of EV demand fluctuations and ASP pressures.

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof. Application Proof of Xiamen Hithium Energy Storage Technology Co., Ltd. 廈門海辰儲能科技股份有限公司 (the "C ...