China Battery Materials_ China Battery Supply Chain on the Ground_ Mar-25 Production Plan Preview

Summary of China Battery Materials Conference Call Industry Overview - The conference call focused on the China Battery Materials industry, particularly the production plans for March 2025 among the top battery manufacturers in China. Key Points 1. Production Surge: The production pipeline of the top five battery makers is expected to surge approximately 80% YoY during 1Q25, with March 2025 production projected to increase by about 9% MoM to 99 GWh [1][3]. 2. CATL's Conservative Approach: CATL is anticipated to have a more conservative production increase of around 4% MoM in March 2025, compared to an 18% MoM increase from other top players. This is attributed to uncertainties in Energy Storage System (ESS) demand in both domestic and US markets, as well as a high base effect from previous production levels [1][3]. 3. ESS Battery Shipments: In 2024, ESS battery shipments accounted for approximately 23% of CATL's total shipments, indicating a significant role in their overall business strategy [1]. 4. Battery Materials Production Growth: Overall production of battery materials is experiencing strong momentum, with increases of 10-20% MoM expected in March 2025 [1]. 5. Top Picks: The near-term top investment picks identified are CATL and Kedali [1]. Company-Specific Insights CATL (Contemporary Amperex Technology Co., Limited) - Valuation: CATL is valued at Rmb 362/share, based on a 17.0x 2024E EV/EBITDA multiple, which aligns with its historical average since listing. This valuation implies a 30.8x 2024E P/E and 23.7x 2025E P/E [7]. - Risks: Potential downside risks for CATL's shares include: - Lower-than-expected demand for electric vehicles (EVs) - Increased competition in the EV battery market, potentially reducing CATL's market share - Higher-than-expected raw material costs [8]. Shenzhen Kedali - Valuation: Shenzhen Kedali is valued at Rmb 92.03/share, based on a 15x 2025E P/E multiple, which is approximately 1 standard deviation below its 5-year average. This valuation reflects the overall low sentiment in the battery sector due to demand slowdowns and policy challenges [9]. - Risks: Risks that could hinder Kedali's share price from reaching the target include: - Slower-than-expected battery demand - Intensified competition leading to price wars - Rising raw material costs, particularly for aluminum and copper [10]. Additional Insights - The overall sentiment in the battery materials sector is cautious, with many companies experiencing de-rating to levels below historical averages due to demand slowdowns and policy headwinds [9]. - The production forecasts and valuations suggest a competitive landscape where companies like CATL and Kedali are navigating both growth opportunities and significant risks in the evolving battery market [1][9].