Soochow: Energy storage injection balances supply and demand, double benefits in terms of quantity and profit, value reevaluation imminent.

Soochow releases research report stating that the production and sales of lithium battery energy storage are both strong, leading the market expectations by a large margin in 2026, with significant differences in expectations. The profitability of first-tier battery companies continues to improve, with second-tier companies reaching a turning point, recommending the battery sector. At the same time, the turning points in material prices are clear, with prices for materials such as hexafluoride and lithium iron rising more than expected, showing strong profit elasticity, and optimistic about the leading materials companies. Also optimistic about the price rebound of lithium carbonate, and strongly recommend the solid-state sector where Q4 catalysts are expected to have a significant impact. Soochow's main points are as follows: Strong demand in the peak season for batteries, with monthly production increasing, and high sales growth. From the production side, current battery factories benefit from the demand for energy storage, with capacity unable to meet demand. Production in September increased by 10% compared to the previous month, and further increased by 10% in October, with a year-on-year increase of over 35%, exceeding expectations. The total demand for the year is expected to increase by 40%, and major battery factories have optimistic orders for 2026, with expected shipment growth of over 25%, significantly better than the previous expectation of 15-20%. European power demand and global energy storage demand exceed expectations, with high growth expected in 2026. Following the cancellation of mandatory energy storage in China, independent energy storage is booming, with a sustained growth of 30-40% throughout the year. Pre-project installations in the US are expected to increase by 40%. Europe and emerging markets are expected to maintain 1-2 times growth, with an estimated annual demand for energy storage batteries of 550 GWh, a 70% year-on-year increase, and sustainable growth in Europe and emerging markets in 2026, with global energy storage demand expected to increase by 40% to 770 GWh. European power demand is expected to increase by over 30% in 2025, with an additional 30% growth in 2026 due to new vehicle models and policy incentives. Overall lithium battery demand for 2025 has been revised upwards to 40%, with an expected increase of over 25% in 2026, significantly improving the supply-demand landscape. Leading materials companies are now at full capacity, with tight supply in mainstream segments, indicating that a price turning point is imminent. In terms of materials, the expectations for price increases in hexafluoride and lithium iron are the strongest. By Q4 2025, the supply-demand situation in the hexafluoride industry has already tightened, with a capacity utilization rate of around 90% expected in 2026. The top five companies are at full capacity with supply exceeding demand, and prices for hexafluoride have already increased from 45,000 to 100,000, well above expectations. It is expected that long-term contract prices will follow suit in 2026, reaching an average price of around 80,000 for the year. Leading lithium iron companies have already begun full-scale negotiations, with price increases of 1-2,000 per ton, with some customers already agreeing to these increases. In addition, there is a potential for adjustments in the prices of separators and negative electrodes, with a 10% price increase for small customers already in place, and mild price recoveries expected for major customers, with price increases expected to be realized in 2026. Risk warning: Price competition exceeds market expectations, raw material prices remain unstable.