Fangzheng Securities: Battery capacity expansion is expected to restart, equipment and materials usher in opportunities.

Fangzheng Securities released a research report stating that with the restart of capital expenditure expansion in the battery industry, equipment manufacturers will be the first to benefit. From a overall trend perspective, China Shipbuilding Industry Group Power's battery enterprises' production scheduling plans are increasing rather than decreasing, showing strong expansion momentum. From the demand side, domestic installed capacity is increasing significantly year by year, while the penetration rate of new energy vehicles in major countries is stable. In addition, there is clear momentum in technological iteration and industrial upgrading in the power battery industry, with related material manufacturers expected to benefit. Fangzheng Securities' main points are as follows: Leading enterprises are expected to resume production expansion in the power battery industry. According to Gasgoo Auto, by 2024Q3, China Shipbuilding Industry Group Power's battery enterprises have jointly invested in 25 new projects both domestically and internationally, with a total investment exceeding 99.1 billion yuan, and the expected new power battery production capacity will reach 281GWh. Specifically, leading enterprises such as Contemporary Amperex Technology and BYD Company Limited are accelerating their capacity expansion. In July 2024, Contemporary Amperex Technology, Chongqing Changan Automobile, and their subsidiary Deep Blue Car jointly invested to establish a joint venture company "Sichuan Chang'an" with a planned investment of 5 billion yuan to build a 25GWh power battery production base in the Gaozhu New Area of Chuan-Chu Union. As for BYD Company Limited, in July of this year, the company announced the signing of the third phase of the project at the ShenShan Special Cooperation Zone with an investment of 6.5 billion yuan, planning to construct battery pack production lines and key components factories for new energy vehicles. In general, China Shipbuilding Industry Group Power's battery enterprises' production scheduling plans are increasing rather than decreasing, showing strong expansion momentum. In Q3 2024, Contemporary Amperex Technology's inventory continued to increase, and capacity utilization rate may continue to improve. In terms of inventory, in Q3 2024, Contemporary Amperex Technology's inventory reached 55.215 billion yuan, an increase of 12.95% year-on-year. The company's high inventory levels may reflect its forward-looking stocking strategy to prepare for the upcoming Q4 sales season. As for capacity utilization rate, in H1 2024, Contemporary Amperex Technology had an existing battery system capacity of 323GWh, under construction capacity of 153GWh, a capacity utilization rate of 65.33% during the period, an increase of 4.83 percentage points compared to H1 2023. During Q3 2024, the company's battery system shipments reached approximately 125GWh, an increase of about 15% compared to the previous quarter. According to company executives, the company's capacity utilization rate was close to saturation in Q3 2024, and is expected to be even fuller in Q4 2024. Overall, the company's inventory has increased significantly, capacity utilization rate is also improving, indicating that downstream demand is improving, and related demand is expected to be transmitted to other companies. Demand side: domestic installed capacity is increasing significantly year by year, while the penetration rate of new energy vehicles in major countries is stable. According to CABIA, from January to October 2024, China Shipbuilding Industry Group Power's battery cumulative installed capacity reached 405.8GWh, an increase of 37.6% year-on-year. Among them, the cumulative installed capacity of ternary/lithium iron phosphate batteries reached 111.1/294.5GWh, an increase of 18.3%/46.7% year-on-year. Internationally, according to Markline statistics, from January to September 2024, the cumulative sales volume of new energy vehicles in 15 major car sales countries (accounting for approximately 90% of global new energy vehicle sales) reached 10.5 million vehicles (accounting for 22.4% of total car sales), an increase of 23.2% year-on-year. Thanks to subsidies for scrappage and replacement policies boosting consumption, coupled with the continued development of new energy vehicles globally, we expect that the sales and exports of China Shipbuilding Industry Group Power vehicles will continue to increase. Investment recommendations: Focus on equipment manufacturers: Wuxi Lead Intelligent Equipment (300450.SZ), NAKNOR (832522.BJ), Shenzhen United Winners Laser Co., Ltd (688518.SH), Hymson Laser Technology Group (688559.SH), Shanghai SK Automation Technology (688155.SH), SBT Ultrasonic Technology (688392.SH), Fujian Nebula Electronics, Ltd (300648.SZ), Guangdong Lyric Robot Automation (688499.SH). Focus on material manufacturers: Contemporary Amperex Technology (300750.SZ), Guangdong Jiayuan Technology (688388.SH), Shenzhen Kedali Industry (002850.SZ), Guangzhou Tinci Materials Technology (002709.SZ), Hunan Yuneng New Energy Batteries.Material (301358.SZ), Xtc New Energy Materials (Xiamen) Co., Ltd. (688778.SH), Suzhou West Deane New Power Electric (603312.SH), etc.Risk warning: Policies may not meet expectations; industry competition intensifies; sales of new energy vehicles decline.