Zhongjin: Optimistic about the start of a new round of upswing cycle for lithium batteries, energy storage is expected to become the core "driver".

CICC released a research report stating that since 2025, with the gradual stabilization of the industrial chain prices and improvement in supply-demand structure, the trend of lithium battery reaching the bottom has become evident. Looking ahead to 2026, it is optimistic about the start of a new upward cycle for lithium batteries, with energy storage expected to become the core "driver." At the same time, a new cycle of lithium battery technology, mainly focused on solid-state batteries, is accelerating towards industrialization. With the arrival of a new growth cycle, energy storage is expected to become a core growth point. In terms of new energy vehicles, CICC believes that the domestic market will benefit from the increase in electric vehicle range and continued volume expansion in new scenarios, leading to a sustained high growth in demand for lithium batteries. In the European market, with the start of a new vehicle cycle, demand is expected to accelerate. In terms of energy storage, with the introduction of capacity-based electricity pricing policies in various provinces in China, the economic viability of independent energy storage is approaching a turning point, and it is expected that the domestic demand for energy storage will exceed expectations in 2026; in the US market, due to tariff issues, there may be a rush for installations in 2H25, and aftet 2026, AIDC distribution energy storage demand is expected to contribute to new growth, and may also drive demand beyond expectations. With the turning point of supply and demand, the trend of price reversal is established. In 2025, as the demand side driven by energy storage continues to exceed expectations, the supply-demand relationship in the industrial chain further improves, with top manufacturers in the 3Q25 almost reaching full production capacity, leading to price increases in energy storage battery cells, 6F, VC, and other links. Looking ahead to 2026, CICC expects that capital expenditures in the battery sector will remain at high levels, but overall matching with demand growth, with relatively less additional capacity in the material sector, and capacity utilization is expected to further increase. If energy storage demand exceeds expectations, the trend of price reversal is likely to continue. A new technology cycle is starting, and the industrialization of solid-state batteries is accelerating. In 2025, the industrialization of all-solid-state sulfide batteries entered the pilot stage, while the semi-solid-state oxide/polymer composite route accelerated. Looking ahead to 2026, CICC believes that all-solid-state sulfide batteries are expected to enter small-volume production and trial installation, with process routes and material systems also likely to converge. Investment strategy: 1) Mainline one: Optimistic about the energy storage demand exceeding expectations, accelerating the trend of sector reversal. Key recommendations: lithium battery materials (6F, VC, iron-lithium cathode), batteries, general components; 2) Mainline two: Optimistic about new technologies as the high-slope investment direction for the lithium battery sector, with the industrialization expected to continue to break through in 2026, focusing on solid-state batteries, sodium batteries, and their supply chains; 3) Mainline three: Optimistic about the value reassessment brought by policy strengthening and the revival of charging station construction, with the establishment of new scenarios or industrial trends.