Key takeaway

In 1H26, the company recorded revenue/net profit attributable to shareholders of the parent company/net profit attributable to shareholders of the parent company excluding nonrecurring gains and losses of RMB27.78bn/RMB1.39bn/RMB110mn, up 43%/278%/47% YoY; in 2Q26, the figures were RMB16.07bn/RMB1.36bn/RMB66mn, up 55%/413%/13% YoY and 37%/6,371%/62% QoQ. In 2Q26, the company further increased its market share in power batteries and achieved substantial revenue growth; average operating profit per Wh from power and energy storage batteries remained flat QoQ, mainly because product prices had yet to fully pass through higher raw material costs in 2Q, while financial expenses remained high. The company's construction in progress has increased substantially since the beginning of 2026. With significant capital expenditure in 2026- 2027 bringing substantial capacity online, shipments are expected to continue growing. Profitability is also expected to recover further from 2H26. We forecast net profit attributable to shareholders of the parent company of RMB1.75bn/RMB2.65bn in 2026/2027, corresponding to 2026E/2027E P/E multiples of 26x/17x.

Event

The company released its 1H26 report. In 1H26, it recorded revenue/net profit attributable to shareholders of the parent company/net profit attributable to shareholders of the parent company excluding nonrecurring gains and losses of RMB27.78bn/RMB1.39bn/RMB110mn, up 43%/278%/47% YoY; in 2Q26, the figures were RMB16.07bn/RMB1.36bn/RMB66mn, up 55%/413%/13% YoY and 37%/6,371%/62% QoQ. The company previously issued a results forecast, and actual results were in line with the midpoint of the forecast.

Quick Take

The power lithium-ion battery business achieved steady growth.

The company’s interim report shows that its global market share by power battery installations reached 4.6% in 1H26, up 0.7 pct YoY, ranking fifth worldwide; its domestic market share rose to 6.2%, ranking third nationwide. The company’s global market share by energy storage battery shipments reached 4.5% in 1H26, ranking among the top 10 worldwide. In 1H26, the company generated RMB22.60bn in revenue from power battery system products, up 61% YoY, with a gross margin of 14.02%, down 0.22 pct YoY; revenue from energy storage system products was RMB3.689bn, down 19% YoY, with a gross margin of 19.50%, up 0.15 pct YoY.

Average battery selling prices edged up QoQ in 2Q26, but profitability faced short -term pressure as cost increases had not yet been fully passed through to power battery prices.

The average selling price of the company’s power and energy storage batteries is estimated at approximately RMB0.41/Wh in 2Q26, up approximately RMB0.01/Wh from 1Q26, mainly due to price adjustments linked to higher raw material prices, particularly lithium carbonate; more product price increases are expected to take effect in 3Q26.

On a combined basis, the company’s operating net profit is estimated at approximately RMB0.006/Wh in 2Q26, broadly flat QoQ, mainly due to higher raw material prices, the incomplete pass-through of cost increases to product prices, and persistently high financial expenses.

Financial expense: The company’s financial expense was RMB1.45bn in 1H26, up 131% YoY, with the financial expense ratio rising 2.0 pcts YoY to 5.2%; financial expense in 2Q26 was RMB870mn, up 210% YoY and 49% QoQ, with the expense ratio rising 2.7 pcts YoY and 0.4 pct QoQ to 5.4%. The company’s financial expense has increased sharply since the beginning of 2026, mainly because net FX losses increased by RMB700mn YoY to RMB657mn amid exchange-rate fluctuations in 1H26.

Construction in progress: The company’s construction in progress totaled RMB20.65bn at the end of 1H26, up RMB7.98bn from the end of 2025 and RMB6.50bn from the end of 1Q26. The company’s construction in progress increased substantially in 2Q26; major projects expected to commence production in 2026 include its Morocco, Nanjing, and Wuhu facilities, each adding 20 GWh of capacity, as well as its Jinzhai, Baotou, and Tangshan facilities, each adding 10 GWh of capacity.

Non-recurring gains and losses: The company recorded non-recurring gains of RMB1.279bn in 1H26, including losses of RMB20mn in 1Q26 and gains of RMB1.299bn in 2Q26. The substantial increase in nonrecurring gains and losses in 2Q26 was mainly attributable to fair value changes and disposal gains and losses arising from the company’s financial assets and liabilities, totaling approximately RMB1.459bn.

Investment recommendation and earnings forecast

Amid high capital expenditure in 2026-2027, substantial new capacity is expected to come online and drive continued shipment growth, while profitability is expected to recover further from 2H26; the company’s net profit attributable to shareholders of the parent company is forecast at RMB1.75bn and RMB2.65bn in 2026 and 2027, respectively, implying valuations of 26x and 17x.

Risks:

1) Demand side: Slower-than-expected recovery in overseas household ESS demand and inventory destocking progress.

2) Supply: Higher prices for lithium, copper foil, and other raw materials increase costs. If cost passthrough falls short of expectations, profit per unit will come under pressure.

3) Policy: Future capacity expansion in the industry may be restricted by policy. Restrictions on capacity expansion in raw materials and other segments may further increase raw material costs and drive up overall costs.

4) International environment: Rising international trade barriers may further hinder exports. Stricter local production requirements and the establishment of overseas plants may increase costs. International conflicts may disrupt overseas transportation and raise freight costs. Exchange rate fluctuations may keep foreign exchange losses elevated.

5) Market: Intensifying competition may cause the gross margins and profitability of energy storage battery manufacturers, system integrators, and PCS manufacturers to fall short of expectations. Obstacles to new product development and growing product homogeneity may weaken competitiveness.

6) Financial risks: The company’s high capital expenditure may keep its financial expenses and liability-toasset ratio elevated. If subsequent capital expenditure exceeds the company’s operating expectations, its earnings recovery may be affected.