Guosheng Securities: Consumer battery downstream demand recovers, emerging markets are expected to create marginal opportunities.

Guosheng Securities released a research report stating that lithium batteries can be divided into cylindrical lithium batteries, square lithium batteries, and polymer soft pack lithium batteries according to their packaging forms, with the polymer soft pack form being more suitable for consumer battery scenes. According to EVTank data, smartphones and laptops are the two largest application markets for small soft pack batteries, accounting for nearly 50% of the market. Due to the year-on-year declines of 3.2% and 13.9% in global smartphone and laptop shipments in 2023, the global small soft pack lithium-ion battery shipments in 2023 decreased by 2.6% to 5.48 billion units. With the basic completion of destocking in the downstream of consumer electronics, it is expected that the consumer battery industry will see a recovery. Guosheng Securities' main points are as follows: In 2023, the top three companies in global small soft pack lithium battery shipments are ATL, Zhuhai CosMX Battery, and Ganfeng Electronics, with domestic companies expected to continue to increase their market share in the future. Looking at the competitive landscape of small soft pack lithium-ion batteries in 2023, ATL under TDK ranks first with shipments of over 1.3 billion units, Zhuhai CosMX Battery has risen to the second position globally, and Ganfeng Electronics has rapidly climbed the ranks through large shipments of TWS, e-cigarettes, and smart wearable batteries. In addition, the top ten companies globally also include LGES, Liven, Eve Energy Co., Ltd., Shenzhen Highpower Technology, Chongqing Vdl Electronics, BYD Company Limited, and Zhongshan Tianmao. As Japanese and Korean companies gradually exit the consumer battery market, the market share of domestic manufacturers is expected to continue to rise. It is estimated that the demand for consumer lithium batteries will reach 123GWh in 2024, an increase of 8.8% compared to the previous year. The demand for lithium batteries is expected to reach 165GWh by 2028, with a CAGR of 7.9% from 2023 to 2028. In the traditional consumer electronics sector: annual growth is relatively stable Smartphones: In 24Q2, smartphone shipments increased by 6.5% year-on-year, achieving positive growth for four consecutive quarters. The development of GenAI functions is expected to drive sustained growth in the global smartphone market. IDC predicts that global smartphone shipments will grow by 4% in 2024, with a CAGR of 2.3% from 2024 to 2028; Laptops: After experiencing continuous year-on-year declines for eight consecutive quarters, the first two quarters of 2024 saw year-on-year growth, with a 3.0% increase in shipments in 24Q2. It is expected that AIPC will drive simultaneous increases in sales volume and prices. IDC predicts that global laptop shipments will increase by 2.0% in 2024, with a CAGR of 2.4% from 2024 to 2028; Tablets: Thanks to the arrival of the new product cycle, global tablet shipments increased by 22.1% in 24Q2, with Huawei and Xiaomi both increasing by 40% and 95%, respectively. In the emerging consumer electronics sector: AR/VR, portable energy storage, electric bicycles, and low-altitude economy have great growth potential Wearable devices: In 24Q1, global wearable device shipments reached 113 million units, an 8.8% increase. IDC predicts that wearable device shipments will increase by 10.5% in 2024, with a CAGR of 3.6% from 2024 to 2028. The CAGR for VR and AR shipments are 29.2% and 87.1% respectively; Portable energy storage: From 2016 to 2021, the CAGR of global portable energy shipments and market size was 148% and 184% respectively. With the increase in outdoor participation by residents and the continuous strengthening of disaster preparedness awareness, the portable energy storage market will develop rapidly; Electric bicycles: In 2022, global electric bicycle shipments reached 87 million units, an increase of 13.6%. Due to fluctuations in lithium carbonate prices and the impact of the sharing market, the sales of lithium battery electric bicycles reached 27.35 million units, a decrease of -0.8%. It is expected that the penetration rate of lithium batteries will gradually increase in the future. Electric tools: In 2022, the global shipments of electric tools were 470 million units, a year-on-year decrease of 19.3%, with electric garden tools being the only segment of electric tools that saw an increase in shipments in 2022. EVTank predicts that the shipments and market size of global electric tools will grow at a CAGR of 10.9% and 11.3% from 2022 to 2026. Low-altitude economy: This year, the low-altitude economy was mentioned for the first time in the government work report. As of the end of March 2024, China had a total of 69,000 low-altitude economy-related companies, with more than 1,600 newly added in 24Q1. EVTank predicts that the global eVTOL fleet will reach 26,000 by 2035, with a total market size of $160 billion. Investment recommendations: In the traditional sector: with the basic completion of destocking in the downstream of consumer electronics and the increase in demand for traditional products brought about by AI applications; in the emerging sectors: the rapid development of emerging sectors such as AR/VR, portable energy storage, electric bicycles, drones, etc. will drive consumer battery demand; Increase in market share of domestic companies: as Japanese and Korean companies gradually exit the global consumer battery market, the market share of domestic manufacturers is expected to continue to rise. It is recommended to pay attention to Sunwoda Electronic (300207.SZ), Zhuhai CosMX Battery (688772.SH), Shenzhen Highpower Technology (001283.SZ), and Jiangsu Azure Corporation (002245.SZ). Risk warning: Demand for downstream consumer batteries falls short of expectations, fluctuations in raw material prices, and risks in model calculations.