The company's recent situation

On November 29, the company announced the signing of a strategic cooperation agreement with Ningde Times for a period of 3 years. This is another time that the company signed a strategic cooperation agreement with Ningde after September 2020, which shows the depth and continuity of cooperation between the two parties. We believe that after 2 years of silence, domestic lithium battery production expansion is expected to enter a new round of expansion cycle. Driven by new technology, the company is expected to reverse the pressure on performance and begin a new upward period.

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The scope of cooperation has been further expanded, and the number of core equipment has increased. According to the announcement, under the premise that the company is competitive, Ningde will prioritize procurement of the company's core cell production equipment (including coating, rolling, die-cutting, winding, lamination, logistics, chemical conversion capacity, etc.), while actively expanding related cooperation in the fields of module PACK. Compared with the previous round of cooperation, the scope of this cooperation has been further expanded, showing the company's advantages in overall line development and delivery capabilities. In the past, the company's automated module PACK production line was mainly aimed at automakers. In this cooperation, the company expanded the equipment delivery process for the Ningde era. Currently, the company's winding and chemical processes have a high share in Ningde, and we expect that the coating process still has room to increase.

Cooperation in the field of new technologies is emphasized. Currently, new technologies such as solid-state batteries, perovskite, and composite fluid collectors are constantly emerging. In particular, domestic and foreign battery manufacturers are vigorously targeting solid-state battery technology and putting forward relevant plans for mass production in 2026-2027. In the past, technological progress in the lithium battery industry mainly reflected technological changes in the material sector, and the lack of quality-level changes on the equipment side. Since solid-state batteries are very different from traditional liquids, new production lines need to be built, and there are many newly developed process links, the promotion of new solid-state battery technology will help expand a new round of capital expenses for equipment. At present, the company has launched a complete solid-state battery line solution. Coupled with close cooperation with leading battery manufacturers, we are optimistic about the company's breakthroughs in new technology and industry position.

Internationalization continues to advance, and the regional structure is diversified. The profit level of overseas business is superior to that of domestic business, and the share of the company's overseas business revenue and orders has increased rapidly in the past two years. In the early days, overseas business was mainly concentrated in Europe. Currently, North America and South Asia regions are also beginning to show a trend of expanding production, and overseas business sources are further diversified. Since overseas battery manufacturers or automakers have accumulated less experience in battery technology, the whole line solution is more respected, and leading equipment manufacturers can achieve a higher market share.

With a new round of production expansion, the scale of impairment is expected to decrease. Currently, leading battery manufacturers, represented by Ningde, have a high operating rate. After being quiet for 2 years, there is a new round of demand to expand production. The company's accounts receivable and bad debt impairment have increased a lot in the past 2 years. Along with the new round of production expansion cycle, we believe that the recovery and impairment of corporate accounts is expected to be optimized, which will help optimize statements.

Profit forecasting and valuation

Maintain outperforming industry ratings and profit forecasts. Currently trading at 17x 2025 P/E. Considering the deepening cooperation with leading battery manufacturers and opportunities for a new round of downstream production expansion, the target price was raised by 25% to 28.8 yuan, corresponding 21x 2025 P/E, with 22% upward space.

risks

The expansion of new technology fell short of expectations, and the recovery in downstream demand fell short of expectations.