HangKe Technology(SH:688006)2025-09-28 14:57Summary of Conference Call Notes on China Industrial Tech: Battery Equipment Industry Overview - The conference call discusses the battery equipment industry in China, particularly focusing on companies Lead Intelligent and Hangke, which have seen significant share price increases of +121% and +68% respectively over the past 19 trading days, outperforming the CSI300 index which increased by +2% [1][2]. Key Points and Arguments Market Trends - A strong recovery in domestic battery equipment orders has been observed year-to-date, following a three-year downcycle in battery capital expenditures (capex) from 2022 to 2024 [1]. - Despite the recent surge in orders, the sustainability of this improvement is questioned due to anticipated deceleration in China’s New Energy Vehicle (NEV) sales starting from 2026E [1][6]. Company Performance - Lead Intelligent reported better-than-expected progress in solid-state battery (SSB) research and development, with initial SSB-related equipment orders amounting to Rmb400-500 million, which is a significant increase from Rmb100 million in FY24, although it still represents only 4% of total orders [1][2]. - Hangke's asset impairment loss to net income ratio improved to 22% in 1H25 from 37% in the previous downcycle, leading to a revision of target price-to-earnings (P/E) ratios for both companies [2][39]. Financial Projections - Target prices for Lead Intelligent and Hangke have been revised to Rmb42.2 and Rmb22.9 respectively, reflecting a potential upside of +100% and +34% from previous estimates [2]. - Earnings forecasts for both companies remain unchanged, but Hangke has been downgraded from Neutral to Sell due to lower Tier-1 customer exposure and weaker order sustainability [2][39]. Capacity and Utilization - Battery manufacturing capacity expansion is expected to improve in 2025, but a sustained capex upcycle is not anticipated beyond that year [6]. - The overall battery industry utilization level is projected to be 72%-74% in 2025E-2026E, which is deemed insufficient to drive further capacity expansion [6]. Solid-State Battery (SSB) Insights - SSB technology is still in early stages, with significant challenges in scaling up production. Current orders for SSB equipment are primarily driven by R&D and testing rather than mass production [26][27]. - Lead Intelligent's SSB orders account for 4% of total orders, while Hangke's contribution is only 2% [34][35]. Competitive Landscape - Lead Intelligent has a higher Tier-1 customer exposure (78%) compared to Hangke (29%), which is expected to provide better market share in the solid-state battery equipment market [10][22]. - Hangke's focus on back-end equipment limits its exposure to the growing solid-state battery market, which may hinder its competitive position [45][60]. Additional Important Insights - The NEV industry in China is expected to experience growth moderation, which could impact battery demand forecasts [11][58]. - Upside risks for Hangke include potential increases in Tier-1 customer exposure and better-than-expected SSB R&D progress [58][62]. - The current share prices of both companies reflect optimistic market share expectations in the global battery equipment replacement market, with Lead Intelligent priced for a 50% market share by 2030E [33][37]. Conclusion - The battery equipment industry in China is experiencing a temporary recovery, but long-term sustainability is uncertain due to anticipated market changes and competitive dynamics. Lead Intelligent is positioned more favorably than Hangke, which faces challenges in maintaining order sustainability and market competitiveness.