China batteries and new energy Global Markets Research EQUITY: ALTERNATIVE ENERGY Marketing takeaways – Singapore/KL/Europe Interest continues to build around ESS batteries, grid equipment and China IDC market We recently concluded a marketing trip across Singapore, Kuala Lumpur and various European countries over the past two weeks, with discussions primarily centering around the lithium battery supply chain, renewable energy (solar, wind and power grid) and IDC (Internet data center) development in China. ...

Summary of Conference Call Notes Company and Industry Overview - **Company**: Contemporary Amperex Technology Co. Ltd. (CATL) - **Industry**: Energy & Chemicals, specifically focusing on battery manufacturing and energy storage systems (ESS) Key Points and Arguments 1. **Strong Demand for ESS**: CATL has secured an order for 200GWh of ESS batteries from Hyperstrong for the years 2026-2028, which translates to 67GWh per year, representing 50% of the 2025 volume [2][3] 2. **Global Supply Shortage**: The order reflects a global shortage of high-end ESS products, confirming CATL's leading position in the ESS value chain [3] 3. **Price Premium**: Although the battery price is undisclosed, it is anticipated that CATL will receive a price/margin premium due to the current supply shortage [3] 4. **Potential Customer Demand**: Other major customers, including Tesla and Sungrow, may also seek to secure battery supplies from CATL, indicating a broader market demand [3] 5. **Raw Material Resilience**: CATL is expected to effectively manage any potential raw material price hikes, maintaining its profitability [4] 6. **Stock Rating and Valuation**: CATL is rated as "Overweight" with a price target of Rmb490.00, while the current share price is Rmb386.38. The market capitalization stands at Rmb1,763,505.7 million [5] 7. **Valuation Methodology**: The valuation for CATL is based on an EV/EBITDA multiple of 17x for 2026E EBITDA, implying a P/E of 25x and a PEG of 1x, consistent with a projected 25% five-year earnings CAGR [16][21] Additional Important Insights 1. **Market Dynamics**: The battery market is experiencing a favorable supply-demand setup, with expectations of continued growth in EV and ESS penetration [4][18] 2. **Risks**: Potential risks include competition from new entrants, geopolitical risks affecting the supply chain, and market share losses due to price competition [19][25] 3. **Supplier Relationships**: CATL's suppliers, such as Yunnan Energy and Tinci, are also expected to benefit from the strong demand and pricing power in the market [4][16] This summary encapsulates the critical insights from the conference call, highlighting CATL's strategic positioning, market dynamics, and financial outlook.

Group 1 - Samsung SDI is in discussions to supply energy storage system (ESS) batteries to Tesla, with the potential contract valued at approximately Won3 trillion ($2.11 billion) or more [1] - This agreement aligns with Tesla's strategy to reduce reliance on Chinese components, as the company has increasingly sought South Korean suppliers for critical inputs like chips and batteries [1] - Samsung Electronics has previously signed a long-term contract worth $16.5 billion to deliver next-generation AutoPilot "AI6" chipsets to Tesla, indicating a growing partnership between the two companies [2] Group 2 - Samsung SDI reported a significant drop in demand from its joint venture partner Stellantis, prompting a shift in production from electric vehicle (EV) batteries to ESS products [3] - Tesla's recent earnings report showed a 37% year-on-year decline in attributable net income to $1.37 billion, despite achieving record revenue of $28.09 billion, which was a 12% increase year-on-year [4] - The increase in R&D expenses, which rose 56.9% from $1.03 billion in Q3 2024 to $1.63 billion in Q3 2025, has impacted Tesla's profitability [5]

EVE Energy Earnings Call Summary Company Overview - **Company**: EVE Energy (300014.SZ) - **Industry**: Battery manufacturing, focusing on electric vehicle (EV) and energy storage systems (ESS) Key Financial Highlights - **3Q25 Revenue**: CNY 16.8 billion, a 36% year-on-year (y-y) increase and 9% quarter-on-quarter (q-q) growth driven by a 49% y-y and 20% q-q increase in volume [1][14] - **Gross Profit Margin (GPM)**: Decreased by 5.0 percentage points (pp) y-y and 3.8 pp q-q to 13.7% in 3Q25; adjusted GPM for EV batteries stable at 17-18% and ESS batteries recovered to ~12% [1][2] - **Net Profit**: Increased by 15% y-y and 140% q-q to CNY 1.21 billion; adjusted net profit grew 51% y-y and 30% q-q to CNY 1.46 billion [1][2] Future Outlook - **Margin Recovery**: Management expects sequential margin recovery in 4Q25, projecting a gross margin expansion of around 3 pp q-q to ~15% for the ESS business due to robust demand and high utilization rates [2] - **2026 Expectations**: Stable GPM for the ESS sector at ~15%, influenced by a better sales mix and new product penetration, despite higher material prices and ramp-up of new capacity [2] Investment Recommendation - **Rating**: Reiterated Buy with a target price (TP) raised to CNY 91, implying a 16% upside from the current price of CNY 78.49 [3][5] - **Earnings Forecast**: FY25-27 earnings raised by 3-12% reflecting improved ESS demand and pricing outlook [3][5] Segment Performance - **ESS Contribution**: ESS contributed 60% of non-consumer battery shipment volume in 3Q25, indicating strong demand in the sector [3] - **ASP Hike Opportunities**: Potential for increased earnings from average selling price (ASP) hikes of ESS batteries due to previously depressed margins [3] Capacity Expansion Plans - **Overseas Production**: First production from the Malaysian plant expected in December 2025, with the Hungarian plant set to launch in mid-2027 [2] Financial Metrics - **Revenue Projections**: - FY25F: CNY 69.114 billion - FY26F: CNY 92.576 billion - FY27F: CNY 110.732 billion [4] - **Net Profit Projections**: - FY25F: CNY 4.967 billion - FY26F: CNY 7.497 billion - FY27F: CNY 9.840 billion [4] Risks - **Downside Risks**: - Potential oversupply in the EV battery market due to aggressive capacity expansion - Increased price competition from domestic and global battery manufacturers - Stricter regulations on the e-cigarette market in China [12][17] ESG Considerations - EVE Energy plays a crucial role in promoting electrification in the auto industry and enhancing the utilization of renewable energy through its battery solutions, aligning with global carbon neutrality goals [13] Conclusion EVE Energy is positioned to benefit from strong demand in the ESS market, with expectations of margin recovery and growth in earnings. The company's strategic expansion into overseas markets and focus on product innovation further enhance its investment appeal.

EVE Energy Research Summary Company Overview - **Company Name**: EVE Energy - **Ticker**: 300014.SZ - **Industry**: Technology (Battery Manufacturing) - **Established**: 2001 - **Products**: Lithium primary batteries, lithium polymer batteries, lithium-ion batteries for EV, energy storage, and consumer electronics [12][14] Key Financial Highlights - **2Q25 Revenue**: CNY 15.4 billion, up 25% y-y and 20% q-q, driven by EV and ESS battery volume growth [1][15] - **Gross Profit Margin (GPM)**: Improved by 2.2pp y-y to 17.5%, attributed to better margins in the EV battery segment [1][15] - **Net Profit**: Declined by 53% y-y to CNY 503 million due to one-off expenses including share-based compensation of CNY 579 million and impairment of ~CNY 150 million [1][15] - **1H25 Revenue Growth**: EV batteries up 42% y-y to CNY 12.7 billion; ESS batteries up 32% y-y to CNY 10.3 billion [1] Future Projections - **2025 Shipment Growth**: Expected 65% y-y growth in EV battery shipments to 50GWh and 49% y-y growth in ESS battery shipments to 75GWh [2] - **2026 Shipment Growth**: Anticipated 35% y-y growth for EV batteries to 68GWh and 30% y-y growth for ESS batteries [2] - **Revenue Forecasts**: FY25-27 revenue forecasts raised by 4-11% due to higher battery shipments [3] Valuation and Target Price - **Target Price**: Increased to CNY 62, implying a 29% upside from the current price of CNY 48.07 [5][26] - **Valuation Methodology**: Based on a Sum-of-the-Parts (SoTP) approach, with 20x 2026F P/E for EV and ESS segments and 15x for consumer batteries [3][18] - **Current P/E Ratio**: 14.7x FY26F [3] Risks and Challenges - **Downside Risks**: 1. Potential oversupply in the EV battery market due to aggressive capacity expansion [13][19] 2. Increased price competition from domestic and global battery manufacturers [13][19] 3. Stricter regulations on the e-cigarette market in China [13][19] ESG Considerations - EVE Energy plays a significant role in promoting electrification in the automotive industry and enhancing the utilization of renewable energy through its battery products [14] Additional Financial Metrics - **Market Capitalization**: USD 13.7 billion [6] - **Dividend Yield**: Expected to increase from 1.0% in FY24 to 2.2% in FY27 [4] - **Return on Equity (ROE)**: Projected to improve from 11.3% in FY24 to 17.7% in FY27 [4] Conclusion EVE Energy is positioned for significant growth in the EV and ESS battery markets, supported by strong revenue growth and improved margins. However, the company faces risks related to market competition and regulatory challenges. The revised target price reflects a positive outlook based on anticipated shipment growth and improved financial performance.