Key takeaway

The company's operations remain steady. In terms of volume, the sales volume of power and energy ESS batteries totaled 121.2GWh in 2025, +50% YoY; in the ESS sector, the company's shipment of ESS cells maintained the 2nd position globally in 2025; in the power sector, the company's market share of domestic power battery installed capacity was 4.1% in 2025, +0.7 pct YoY. The company's GPM of power batteries improved YoY, and that of ESS recovered rapidly after being under pressure. In terms of profitability, the company's power business benefited from increased capacity utilization with GPM improving YoY, and that of the ESS business recovered rapidly through customer structure adjustments after facing pressure in the first half of the year. Benefiting from strong ESS demand, the company's performance is expected to maintain steady growth.

Event

The company released its 25 and 1Q26 earnings results.

In 2025, the company achieved a revenue of RMB61.47bn, up 26% YoY, a net profit attributable to the parent company of RMB4.134bn, up 1% YoY, and a net profit excluding nonrecurring items of RMB3.096bn, down 2% YoY; in 4Q25, it achieved a revenue of RMB16.468bn, up 13% YoY and down 2% QoQ, a net profit attributable to the parent company of RMB1.319bn, up 49% YoY and up 9% QoQ, and a net profit excluding non-recurring items of RMB1.158bn, up 75% YoY and up 0.6% QoQ.

In 1Q26, the company achieved a revenue of RMB20.68bn, up 62% YoY and 26% QoQ; net profit attributable to the parent company was RMB1.446bn, up 31% YoY and 10% QoQ; net profit excluding non-recurring items was RMB1.115bn, up 36% YoY and down 4% QoQ.

Thesis

Power and ESS business: Shipments increased significantly YoY, and profitability recovered somewhat. In 2025, the company's sales volume of power and ESS batteries reached 121.2 GWh, up 50% YoY.

On quarterly basis: : shipments in 4Q25/1Q26 reached 38.2GWh/34.72GWh respectively, +57%/52% YoY;

By product:In 2025, the company's power battery shipments were 50.15GWh, +66% YoY, and ESS battery shipments were 71.05GWh, +41% YoY, with ESS accounting for 59%; in 1Q26, power/ESS battery shipments were 14.23GWh/20.38GWh respectively.

In terms of market share, in the ESS sector, the company's ESS cell shipments in 2025 maintained the 2nd position globally; in the power sector, the company's market share of domestic power battery installed capacity in 2025 was 4.1%, +0.7 pct YoY.

In terms of the consumer battery business, downstream demand grew steadily. In 2025, the company's consumer battery business revenue reached RMB11.07bn, +7% YoY. The small cylindrical battery business is expected to cover over 80% of the global top ten power tool companies; the primary lithium battery business also maintained a leading global market share.

In terms of profitability, the company's GPM in power battery improved YoY, and the ESS battery GPM recovered rapidly after being under pressure. In 2025, the company's GPM was 16.2%, down 1.2 pcts YoY, of which:

The GPM of the power battery business was 15.50%, +1.29 pcts YoY. Benefiting from the increased share among existing customers and the volume growth of new customers acquired in earlier stage, the capacity utilization rate of the company's power business increased significantly YoY, driving the improvement of profitability.

The GPM of the ESS business was 12.28%, down 2.44 pcts YoY, mainly due to a lower average price caused by a higher proportion of long-term contract customers in the first half of the year, but it recovered in the second half of the year as the company adjusted its customer structure and actively passed on the rising raw material prices.

The GPM of the consumer business was 25.65%, down 1.93 pcts YoY. In the second half of the year, affected by the rise in lithium prices and transmission lag, the GPM declined slightly, but it remained at a high level overall.

In 1Q26, the company's GPM was 14.0%, down 2.8 pcts QoQ, and the QoQ decline was mainly because the price increase of lithium carbonate had not been fully passed on to downstream customers, but the company maintained a stable NPM through forward-looking hedging strategies.

In 2025, the company's NPM attributable to the parent company and NPM after deducting non-recurring profit or loss were 6.7% and 5.0% respectively, down 1.7 pcts and 1.5 pcts YoY. The main reasons are: 1) in 2025, the company accrued equity incentive expenses of nearly RMB1bn, an increase of RMB700mn YoY, affecting the NPM by about 1.6 pcts; 2) the profitability of the ESS business was slightly dragged down in the first half of the year, but the overall impact was not significant. In 1Q26, the company's NPM attributable to the parent company was 7.0%, remaining at a good level overall.

We estimate the company's net profit attributable to the parent company for 2026-2028 to be RMB7.0bn, RMB9.68bn, and RMB11.85bn, implying 20.7x, 14.9x, and 12.2x PE.

Risks

1) Lower-than-expected production and sales of downstream new energy vehicles: Lower-than-expected sales due to impacts like sluggish demand; lower-than-expected production due to sharp fluctuations in upstream raw material prices, power cuts, etc., which will further affect the shipment and profitability the company's related business.

2) The raw material prices may rise faster than expected: Since 2021, the prices of raw materials have shown high periodical volatility. The high upstream prices, combined with its volatility will affect terminal demand, and disrupt companies' performance in the short run.

3) Slower-than-expected progress of the company's key projects: For the company as a participant in the new energy sector, the progress of major projects is the key to supporting the revenue and profits, and is also a reflection of the company's growth potential. The slower-than-expected progress of major projects will affect its current and long-term performance.