Soochow: The sales of power batteries and energy storage are booming, and production and sales are continuing to rise with increasing benefits.

Soochow released a research report stating that the new lithium battery cycle is optimistic overall! It continues to strongly recommend leading battery companies with stable profits and outlook. It also recommends companies in the supply chain that have price elasticity and high-quality lithium battery materials, such as separators, hexafluoride, structural components, and aluminum foil. At the same time, it is optimistic about leading lithium carbonate companies. Soochow's main points are as follows: Electric vehicles: Sales expectations upgraded in China, Europe, and other regions Domestic sales: From January to March of 2026, China's cumulative sales were 2.96 million vehicles, a year-on-year decrease of 3.6%. Exports and electric heavy trucks maintained a high level of prosperity, with new energy vehicle exports totaling 955,000 vehicles from January to March, a 118% increase year-on-year, and electric heavy trucks selling 43,000 vehicles from January to March, a 42% increase year-on-year. The bank predicts global sales of approximately 17.88 million vehicles for the year, an 8% increase year-on-year. Of these, domestic sales are expected to reach 13.95 million vehicles, a 0.6% increase, and exports are expected to reach 3.92 million vehicles, a 50% increase. In addition, from January to February, the average battery capacity of a single vehicle in China was 63.7kWh, a 31% increase year-on-year, with the capacity of passenger vehicles increasing by 24%, offsetting the decline in vehicle sales. In Europe, sales totaled 430,000 vehicles from January to February, a 25% increase year-on-year, in line with market expectations. The bank predicts European sales to reach over 5.1 million vehicles for the year, a 30% increase year-on-year. In the United States, sales have declined since the withdrawal of subsidies in October 2025, with cumulative sales of 155,000 electric vehicles in January and February of 2026, a 33% decrease year-on-year. Overall, the global sales of electric vehicles in 2026 have been revised upwards to 23.3 million vehicles, a 10% increase year-on-year. Taking into account the increase in battery capacity per vehicle, the bank estimates that the demand for power batteries will exceed 1700GWh, maintaining a growth of over 20%. Energy storage: Domestic energy storage demand exceeds expectations, with sustained strong performance overseas, resonating domestically and abroad Energy storage continues to operate at full capacity and the price of lithium carbonate has already been absorbed. Considering a 10% reduction in the cost of large battery systems and an extension of project financing loan terms, the acceptance of lithium carbonate prices for mid-income energy storage projects in China has increased to 180,000/ton. From January to February, energy storage tenders in China increased by 55% year-on-year, and various regions are gradually releasing capacity and electricity price policies, expected to accelerate. The bank maintains its expectation of global energy storage demand in 2026 to exceed 1000+GWh, a 60% increase. Overall lithium battery demand in 2026 has been revised upwards to a growth of 34%, exceeding 2750GWh, leading to a significant improvement in supply-demand dynamics. Production and prices: Production hits a new high, with further increases expected in April and May March production hit a new high, with a further 0-5% increase expected in April. On the battery side, leading companies show strong bargaining power and quick price adjustments, maintaining stable profit levels in the first quarter with high growth certainty. The profit of separators in Q1 continues to improve, with capacity utilization rates in 2026 to 2027 continuing to rise, coupled with an increase in prices, indicating the start of a new round of negotiations. The bank expects price increases in Q2, with leading companies' profits expected to increase to 0.2 yuan/sq.m+. In addition, the adoption of 5m technology will benefit companies such as Foshan Plastics. The processing fees for lithium iron phosphate cathodes increased last week, with impressive performance and the penetration of fifth-generation products starting. Leading companies such as Lishen Power and Fulin Precision benefit greatly. The price adjustment for hexafluoride in Q1 is at a high level, with inventory fully depleted by the end of March, and prices are expected to rebound in Q2. The price of lithium carbonate fluctuates around 150,000, with a potential increase in May to around 200,000/ton. In addition, the profitability of aluminum foil has recovered, and the inflection point for copper foil in Q1 is certain, with room for further increase in processing fees. Overall, the industry is expecting a simultaneous increase in volume and prices. Investment recommendations Continuing to strongly recommend leading battery companies with stable profits and outlook (such as Contemporary Amperex Technology, Eve Energy Co., Ltd., BYD Company Limited, CALB, Sunwoda Electronic), as well as companies in the supply chain that have price elasticity and high-quality lithium battery materials. The bank also recommends investment in separators, hexafluoride, structural components, aluminum foil, etc. It also recommends leading lithium carbonate companies. Risk factors: Price competition exceeds market expectations, instability in raw material prices affecting profit margins, and a decline in investment growth.