17 October 2025 Global Energy Storage Global Energy Storage: Should investors chase the rally in battery stocks? Neil Beveridge, Ph.D. +852 2123 2648 neil.beveridge@bernsteinsg.com Brian Ho, CFA +852 2123 2615 brian.ho@bernsteinsg.com Hengliang Zhang +852 2123 2629 hengliang.zhang@bernsteinsg.com China's battery value chain has surged on unexpectedly strong demand (+50% y- o-y), sparking a significant rally. In 3Q25, shares across the battery value chain rallied more than 50% for most Chinese companies, wit ...

Summary of China Battery Market Conference Call Industry Overview - The report focuses on the **China battery market**, particularly the export data and price expectations for batteries as of August 2025 [5][66]. Key Points and Arguments Battery Export Data - **Total battery exports** (including consumer batteries and Battery Energy Storage Systems (BESS)) increased by **45% year-over-year (YoY)** in August 2025 and **67% YoY** in the first eight months of 2025 [5][75]. - **Export breakdown**: - **United States**: 21% of total export volume in 8M25, with a **28% YoY** increase, but a **60% month-over-month (MoM)** decline back to May levels [5]. - **Europe**: 36% of total export volume in 8M25, with a **65% YoY** increase and a **24% MoM** increase in August 2025. The growth is attributed to both Electric Vehicle (EV) battery demand and emerging demand for Energy Storage Systems (ESS) [5]. - **Rest of the World (RoW)**: 42% of total export volume in 8M25, with a **99% YoY** increase, contributing approximately **107 GWh** of exports [5]. Price Expectations - There is **caution regarding sustained price increases** in the battery market despite short-term tightness. Seasonal strengths in Q4 2025 may lead to temporary price rebounds, but a sustainable price hike is deemed unlikely due to expected seasonal weakness in Q1 2026 [5]. - A **sensitivity analysis** indicates that a **10% price hike** could result in a **30%-60% earnings upside** in 2026E. Companies like **Gotion, CALB, and EVE Energy** are noted to be more sensitive to battery price hikes [5]. Market Dynamics - The **30%-80% rally** in share prices over the past 60 trading days is believed to have already priced in **2%-5% battery Average Selling Price (ASP)** hikes for 2026E [5]. - The **battery supply chain** shows varied utilization trends across different components, with notable increases in separator and electrolyte prices [8][37]. Company Performance - **CATL, BYD, and CALB** are highlighted as key players in the domestic battery installation market, with varying month-over-month growth rates [54][56]. - **Sales volume** for major companies in August 2025 shows significant YoY growth, with **BTR** at **44.1 kt** (+62% YoY) and **Shanshan** at **46.2 kt** (+40% YoY) [60]. Additional Insights - The **European BEV market** saw a **25% YoY sales growth** in the first half of 2025, which is a significant driver for battery imports from China [5]. - Emerging markets with high solar installation percentages, such as the **Netherlands, Bulgaria, and Greece**, are increasingly importing batteries despite limited EV production [5]. Conclusion - The China battery market is experiencing robust growth in exports, particularly to Europe and the RoW, driven by both EV and ESS demand. However, expectations for sustained price increases are tempered by anticipated seasonal fluctuations and a balanced supply-demand dynamic. Key players are positioned to benefit from potential price hikes, but market conditions will require careful monitoring.

Summary of Conference Call on Greater China EV and EV Battery Industry Industry Overview - **Industry**: Greater China Electric Vehicle (EV) and Energy Storage System (ESS) Battery Market - **Key Players**: CATL, CALB, EVE Core Insights 1. **ESS Demand Surge**: - Total ESS order volume in China reached 26GW/69GWh in August, reflecting a year-over-year increase of over 500% [1] - Demand remains strong post "531" rush installation of wind and solar projects, supported by improved returns from independent ESS projects [1] 2. **Future Demand Projections**: - ESS battery demand is expected to remain solid from 2025 to 2030, driven by strong policy support in China and growth in overseas markets [2] - China's NDRC and NEA set a target to increase cumulative installed capacity of new-type energy storage to 180GW by 2027, up from 97GW as of July 2025 [2] 3. **Price Trends**: - ESS battery prices have declined by 45-70% from 2022 to the first half of 2025, but a mild rebound is anticipated due to rising demand and tighter supply [3] - Stable average selling prices (ASP) for EV batteries are expected, with less discounting to auto OEMs amid anti-involution trends [3] 4. **Earnings and Price Objective Adjustments**: - EPS and price objectives for major battery companies have been lifted due to demand growth and supportive policies: - CATL: 2025-27E total battery shipment raised by 3%/3%/2%, EPS increased by 3%/4%/3% [4] - CALB: 2025-27E total battery shipment raised by 9%/14%/17%, EPS forecast increased by 14%/19%/19% [4] - EVE: 2026-27E total battery shipment raised by 7%/6%, EPS forecast increased by 8%/10% [4] 5. **Valuation Changes**: - Price objectives for key companies: - CALB: New PO of 35, up from 24, representing a 27.3% upside [7] - CATL-A: New PO of 467, up from 389, representing a 26.2% upside [7] - EVE: New PO of 85, up from 70, representing an 18.4% upside [7] Additional Insights 1. **Technological Advancements**: - CATL launched the Shenxing Pro battery, a lithium iron phosphate battery designed for the European market, featuring high safety and performance standards [18] - CATL's sodium-ion battery has passed certification and is set for mass production by the end of 2025, offering advantages in energy density and lifecycle costs [19] 2. **Market Share and Production**: - CATL held a 43.2% domestic market share in July, with planned production of 69.5GWh in September, indicating strong demand for ESS batteries [20] 3. **Earnings Revisions**: - Overall earnings for 2025-27E have been revised upwards by 3%/4%/3% due to higher revenue forecasts and improved ASPs for both EV and ESS batteries [21] 4. **Quarterly Earnings Expectations**: - Earnings are expected to rise 34% YoY in 3Q25 and 35% YoY in 4Q25, reflecting strong demand and operational efficiency [24] 5. **Valuation Methodology**: - Valuations for CATL-H were derived from DCF and EV/EBITDA methodologies, with a new fair value of HK$570, up from HK$475 [25][26][27] This summary encapsulates the key points from the conference call regarding the Greater China EV and ESS battery market, highlighting demand trends, pricing dynamics, earnings adjustments, and technological advancements.

Summary of Key Points from the Equity Research Report on China Energy Storage Equities Industry Overview - The report focuses on the **Energy Storage System (ESS)** industry, particularly in **China** and the **US**. - Global ESS installation forecasts for 2026 and 2027 have been raised from **399 GWh** to **401 GWh** and from **483 GWh** to **487 GWh** respectively, reflecting stronger-than-expected battery shipments in the first half of 2025, which increased by **109% year-on-year** [2][15][16]. Core Insights and Arguments - **Policy Impact**: New policies from the **National Development and Reform Commission (NDRC)** in China encourage power users to reduce grid dependence, which is expected to boost ESS demand [2][17]. - **US Market Dynamics**: The **One Big Beautiful Bill Act (OBBBA)** has set a ceiling on the ratio of China-made content in ESS projects eligible for Investment Tax Credit (ITC), but projects started in 2025 are exempt from these restrictions, leading to a projected rush of ESS project starts in the US [2][18]. - **Market Positioning**: - **Sungrow** is a top 3 ESS integrator globally with a **16% market share** in 2024, while **Eve Energy** is the second-largest ESS battery supplier, also with a **16% market share** [3][19]. - The report favors **Eve Energy** over **Sungrow** due to anticipated price increases in ESS batteries, which would benefit Eve but negatively impact Sungrow, which relies on battery procurement [3][19]. Financial Estimates and Valuations - **Sungrow**: Earnings estimates for 2025, 2026, and 2027 have been raised by **30%**, **21%**, and **16%** respectively, with a target price increased to **RMB 168.00** from **RMB 110.00** [4][6]. - **Eve Energy**: Earnings estimates for 2025 have been cut by **26%** due to stock incentive expenses, but estimates for 2026 and 2027 have been raised by **0.2%** and **6.8%** respectively, with a target price increased to **RMB 100.00** from **RMB 70.00** [4][6]. Additional Insights - **Battery Shipment Growth**: Global ESS battery shipments grew by **109% year-on-year** in the first half of 2025, indicating strong demand and restocking in the US due to tariff concerns [16]. - **Cost Competitiveness**: The levelized cost of electricity (LCOE) for solar plus ESS in China is now below peak-hour tariffs, making it an attractive option for solar operators [17][35]. - **Market Trends**: The removal of mandatory installation requirements in China is expected to lead to better pricing for high-quality ESS products, as the market shifts towards quality over quantity [35]. Conclusion - The ESS market is poised for significant growth driven by favorable policies, strong demand, and competitive pricing dynamics. Companies like **Eve Energy** and **Sungrow** are well-positioned to capitalize on these trends, with updated financial estimates reflecting a positive outlook for their respective businesses [19][32][33].

17 September 2025 Analyst, China Autos The Hongkong and Shanghai Banking Corporation Limited li01.yang@hsbc.com.hk +852 2288 6216 Battery and autonomous supply chains in focus. For battery, we see a potential turning point in pricing in 2H25-1H26. Notably, some ESS battery products have already shown modest price improvements. Stronger-than-expected domestic ESS demand after the cancellation of the mandatory storage policy and growing orders from overseas markets (such as Europe, the Middle East, and Austra ...

Summary of Contemporary Amperex Technology Co. Ltd. (CATL) Conference Call Industry Overview - The conference call focuses on the battery industry, particularly the energy storage system (ESS) and electric vehicle (EV) battery markets - Small battery manufacturers are struggling to achieve profitability in the ESS sector despite increased volumes, while their margins in the EV battery market are comparatively better but still limited in market share [1][2][10] Key Points on CATL's Performance - CATL has strengthened its position in the European EV battery market during the first half of 2025, gaining significant market share [2][9] - The company is expected to add 150-200 GWh of capacity annually from 2025 to 2027, compared to 150 GWh in 2024, to meet demand growth forecasts [5][10] - CATL's ESS strategy focuses on leveraging cost advantages and superior warranty provisions to pressure competitors into breakeven or loss positions [3][10] Competitive Landscape - Small battery makers are primarily cell/rack suppliers with low margins, while CATL is shifting towards higher-margin system products, including AC-side systems, due to new orders from the Middle East and Australia [10] - The competitive landscape remains challenging for small battery manufacturers, with many facing breakeven or losses despite strong demand [2][10] - The market is witnessing a rally in A-share battery supply chain stocks, driven by liquidity improvements, but the valuation of small battery makers is seen as irrational compared to CATL [4][10] Financial Metrics and Valuation - CATL's current market cap is approximately RMB 1,468.3 billion, with a price target of HK$ 465.00, indicating an 8% upside from the current price of HK$ 428.80 [7][10] - Projected revenue growth for CATL is expected to rise from RMB 362.0 billion in 2024 to RMB 603.8 billion by 2027, with EBITDA increasing correspondingly [7][10] - The company is rated as "Overweight" by Morgan Stanley, reflecting a positive outlook on its stock performance relative to the industry [7][10] Risks and Considerations - Potential risks include slower-than-expected EV penetration, geopolitical risks affecting the battery supply chain, and competition from other battery manufacturers [25][10] - The commercialization of solid-state batteries is viewed as more hype than opportunity, with CATL expected to maintain its leadership in this area [4][10] Conclusion - CATL is positioned strongly within the battery industry, particularly in the EV market, while small battery makers continue to face significant challenges in profitability and market share - The company's strategic focus on cost leadership and high-quality warranties is expected to sustain its competitive advantage in the evolving landscape of battery technology [3][10]

Summary of China Battery Materials Conference Call Industry Overview - The conference call focused on the **China battery materials market**, particularly the **Energy Storage System (ESS)** and **Electric Vehicle (EV)** battery segments [2][3]. Key Takeaways Battery Prices - **ESS Battery Price Increase**: In Q3 2025, the price of ESS batteries rose due to strong demand and previously low prices after years of surplus supply and competition. Current prices are above **Rmb0.30/wh**, compared to a previous low of **Rmb0.24-0.25/wh** [2]. - **EV Battery Price**: The price of EV batteries remains higher than that of ESS batteries, with no notable increase yet. However, an increase is expected if supply remains tight [2]. Production and Demand - **Utilization Rates**: Current utilization rates for China battery producers are nearly **80%**, with strong year-over-year growth anticipated in battery production targets for 2026 [2]. - **ESS Battery Output**: Global ESS battery output is projected to reach approximately **600 GWh** in 2025, representing a **66% year-over-year increase**. The strong demand is attributed to attractive Internal Rate of Return (IRR) of **11-15%** for ESS projects in China [3]. Battery Materials - **Utilization Ratio**: The utilization ratio for battery materials is around **70%** in 2025, which is a **10% increase year-over-year**. This ratio is expected to rise by an additional **7-8%** in 2026 due to strong battery output [4]. - **Price Stability**: There has not been a significant price increase for battery materials yet [4]. Specific Material Insights - **LFP Cathode Supply**: The supply of 4th generation Lithium Iron Phosphate (LFP) cathodes is expected to remain tight due to limited suppliers and technological barriers. Demand for these high-end products is increasing as battery producers shift focus [5]. - **Lithium Production**: CATL's lithium lepidolite mine, currently suspended, is expected to resume production after the renewal of mining licenses, which may take **5-6 months** [5]. Additional Insights - The demand for ESS batteries is expected to remain strong into 2026, with visibility on demand growth becoming clearer by November 2025 [3]. - The overall sentiment in the battery materials market indicates a positive outlook, driven by increasing demand and production capabilities [2][3][4].

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Battery & Materials - **Key Trends**: The battery value chain stocks in China experienced a rally of 4-20% on August 29, driven by positive comments from a leading battery equipment maker regarding a high capital expenditure cycle and a quadrupling of order intake for solid-state batteries [2][5] Core Insights - **Production Growth**: - Year-to-date production growth for the top six battery suppliers is above expectations at over 50% year-on-year [5] - September production plans indicate a 7% month-on-month increase, contributing to a robust 53% year-on-year growth in battery production for the first nine months of 2025 [5][19] - **Demand Drivers**: - Strong demand for electric vehicles (EVs) in China, with a 29% increase in demand from January to July 2025, and a significant rise in new energy vehicle (NEV) exports by 85% during the same period [5] - Exports of energy storage system (ESS) batteries surged by approximately 150-230% year-on-year in July 2025, driven by rush purchases in the US market ahead of tariff hikes [5] - **BYD Performance**: - BYD's battery production declined by 4% month-on-month in September, marking it as the only major battery maker to experience production cuts from May to July 2025 [5] - BYD's Q2 2025 earnings were 30% below expectations due to intense price competition affecting gross profit margins [5] - **Lithium Production**: - Lithium carbonate output slightly increased to approximately 19,000 tons (61% utilization) despite the suspension of CATL's lepidolite mine due to license renewal issues [5][6] - The lithium price is expected to stabilize around 70,000-80,000 CNY per ton until further clarity on mining license renewals is achieved [6] Price Trends - **Battery Prices**: - EV battery prices have remained stable in Q3 2025 after a high-single-digit decline in Q2 2025 [7] - ESS battery prices have shown signs of recovery, with some manufacturers expecting further price increases in Q3 2025 [7] - **Material Prices**: - Most battery material prices have remained stable, with lithium carbonate and lithium hydroxide prices experiencing fluctuations [7] Capacity Utilization and Capital Expenditure - **Capacity Utilization**: - Improved capacity utilization among top battery manufacturers, exceeding 80% in the second half of 2024, has led to a new round of capital expenditure [7] - The intensity of this capital expenditure cycle may surpass that of 2022, focusing on top-tier players [7] Recommendations - **Investment Ratings**: - CATL-A and Hunan Yuneng are rated as "Overweight," while other battery and material companies have neutral or underweight ratings [7] Additional Insights - **Market Dynamics**: - The risk of further mine suspensions in Jiangxi province remains, potentially impacting lithium supply for 3 to 12 months [6] - Speculation is expected to drive lithium prices more than actual demand/supply dynamics in the near term [6] This summary encapsulates the key points discussed in the conference call, highlighting the current state and future outlook of the battery and materials industry in China.

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.

Summary of Key Points from ICCSINO Expert Call on Energy Storage Systems (ESS) Industry Overview - **Industry**: Energy Storage Systems (ESS) - **Company**: ICCSINO Core Insights 1. **Global ESS Battery Shipment**: - In the first half of 2025, global ESS battery shipments reached **258 GWh**, representing a **106% year-over-year increase**. - Projections for global ESS battery shipments are **550 GWh** in 2025 and **650 GWh** in 2026, indicating growth rates of **57%** and **18%** respectively [2][3]. 2. **ESS Battery Demand**: - Demand for ESS batteries has been revised upward for 2025 due to strong orders in **Northwest China** and lower battery prices. - Emerging markets, particularly **Australia** and **Southeast Asia**, are experiencing robust demand, with shorter delivery times of approximately **6-8 months** compared to **1 year** in traditional markets like the US and Europe [3]. 3. **China ESS Battery Pricing**: - The price of ESS batteries in China has increased by approximately **Rmb 0.02/wh** for leading producers during June to July 2025, driven by high utilization rates and strong orders [4]. 4. **Overseas ESS Battery Pricing**: - The price disparity between Chinese and overseas ESS battery cells is primarily due to higher warranty fees in overseas markets. - Prices in the US, Europe, and Australia range from **Rmb 0.9-1.0/wh**, yielding gross profit margins of over **40%**, while prices in the Middle East and Southeast Asia are lower at **Rmb 0.5-0.6/wh**, resulting in **10-20%** gross profit margins. - Expectations indicate a potential decrease in overseas ESS battery system prices, particularly in Europe and Australia, due to increased competition and lower entry barriers [5]. 5. **US Market Dynamics**: - With capacity additions from Korean battery producers, it is anticipated that the market share of Chinese ESS battery producers in the US may decline starting in **2026** [6]. 6. **Sodium-Ion Battery Outlook**: - The adoption of sodium-ion batteries in the ESS market is expected to be slower than previously anticipated due to high costs [6]. Additional Important Insights - The strong demand in emerging markets and the upward revision of demand forecasts highlight significant growth potential in the ESS sector, particularly in regions with favorable pricing and shorter delivery timelines. - The competitive landscape is evolving, with potential pricing pressures in overseas markets that could impact profit margins for producers. - The anticipated decline in market share for Chinese producers in the US market underscores the importance of monitoring competitive dynamics and technological advancements in the battery sector.