BOCOM INTL: The performance of the lithium battery sector in the first quarter is impressive, and we are optimistic about the industry concentration increasing after the implementation of the new tax rebate policy.

BOCOM INTL released a research report stating that due to strong downstream demand and price increases, profits of upstream material companies (lithium mines, iron lithium cathodes, electrolytes, separators, solvents, etc.) have significantly improved. In the first quarter, the overall revenue of the battery sector increased by 47% year-on-year, and net profit increased by 83%; among them, revenue and net profit of lithium batteries increased by 48%/49%, and revenue and net profit of battery chemicals increased by 58%/379%. Starting from April 1, 2026, the export tax rebate rate for batteries will be reduced from 9% to 6%. The bank believes that this will help accelerate the elimination of backward production capacity in the medium to long term, and the industry concentration is expected to further increase. In terms of individual stocks, it is recommended to focus on the industry leader Contemporary Amperex Technology (300750.SZ/Buy), which has cost advantages, technological barriers, and leading overseas layout. BOCOM INTL's main points are as follows: China: Power battery sales in April maintained an upward trend, while exports declined due to the new tax policy According to data from the China Automotive Power Battery Industry Innovation Alliance, in April, the installed capacity of power batteries in mainland China reached 62.4GWh, an increase of 10.4% month-on-month and 15.2% year-on-year; lithium iron phosphate batteries dominated, with an installed capacity of 50.8GWh, accounting for 81.5% of the total installed capacity, an increase of 11.0% month-on-month and 13.4% year-on-year. From January to April, the cumulative installed capacity of power batteries in mainland China reached 187.2GWh, a cumulative year-on-year increase of 1.6%. Due to the impact of the new export tax policy, the total export of power and energy storage batteries in mainland China was 31.7GWh, a decrease of 12.3% month-on-month but an increase of 42.0% year-on-year, accounting for 19.3% of the monthly sales volume; of which, the export volume of energy storage batteries was 11.4GWh, accounting for 36.1% of the total export volume, a decrease of 17.4% month-on-month. Overseas: Power battery installations in the first quarter declined, while the market share of Chinese companies increased According to SNE Research data, the installed capacity of power batteries in the overseas market in the first quarter reached 117GWh, an increase of 17.4% year-on-year (1Q25: an increase of 26.5%), with a slower growth rate, mainly due to a double-digit decline in North America, while Europe and Asia (excluding China) continued to rise. In terms of competitive landscape, the combined market share of the three major Korean companies (LG Energy Solution, Samsung SDI, SK Innovation) declined by 8.4ppts to 29.5% year-on-year, with Samsung SDI experiencing a significant year-on-year decline of 27.7%. Panasonic from Japan showed steady performance with a year-on-year growth of 4% to 9.1GWh, and a market share decrease of 1ppts to 7.7%. The combined market share of Chinese companies significantly increased by 10.5ppts year-on-year to 54.2% Among them, the market share of Contemporary Amperex Technology and BYD Company Limited increased by 3.8/2.6ppts year-on-year to 33.8%/9.6%, respectively. Contemporary Amperex Technology plans to expand its production capacity of 40GWh of sodium batteries with an investment of 5 billion RMB, accelerating the industrialization of sodium batteries. On May 7, 2026, the environmental impact assessment report of the "Fuding Era New Energy Battery Green Intelligent Manufacturing Base Project Phase VI Expansion Project" was publicly released, with a total investment of 5 billion RMB, and after completion, it can add an additional 40GWh production capacity of sodium ion power batteries. The capacity of the sodium ion power batteries produced by this project is 180mAh/g, with a cycling life of 2000 times not lower than 80% of the initial discharge capacity, and the product technology route is layered oxygen + hard carbon. On April 27, Contemporary Amperex Technology signed a strategic cooperation agreement on energy storage sodium ion batteries with Beijing HyperStrong Technology. The disclosure of the Contemporary Amperex Technology 40GWh sodium ion battery project indicates that the progress of industrialization of sodium batteries is accelerating, reflecting the company's determination in the industrialization of sodium batteries.