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.