Soochow: Equipment commercial performance & orders significantly improved, optimistic about overseas expansion of power and energy storage batteries, and accelerated industrialization of solid-state batteries 0~1.

Soochow released a research report stating that AI servers and automotive electronics are becoming incremental sources for MLCC structures. The domestic replacement path is expected to evolve step by step along the lines of "mature specification replacement in consumer electronics, entry into the domestic automotive electronic supply chain, and cooperation between AI servers and domestic computing power chains from 1 to N." It is recommended to focus on local MLCC industry chain companies that have core material/technology/equipment barriers, deeply integrate with high-growth downstream sectors such as AI servers and automotive electronics, and whose products have entered the customer introduction or volume expansion stage. Key points from Soochow are as follows: There are various types of equipment for the front, middle, and back stages of lithium batteries, with a high concentration of downstream customers. The manufacturing process is divided into the front end (electrode manufacturing), middle end (battery assembly), and back end (battery packaging and testing). The manufacturing process has strict requirements for precision and stability, and even slight deviations may lead to substandard product performance or safety. The high concentration of customers of lithium battery equipment manufacturers gives downstream customers greater bargaining power and influence when working with equipment manufacturers. However, the high customer concentration also has positive aspects for lithium battery equipment manufacturers, helping them establish long-term cooperative relationships with customers, thereby raising the entry barrier for the lithium battery equipment industry. Equipment business performance is recovering, with continuous high growth in new signed orders. In terms of gross profit margin, the industry average gross profit margin is expected to be around 28% in 2025, an increase of +0.8 percentage points compared to the previous year, and about 28.1% in Q1 2026. The industry's net profit margin is mainly affected by the reversal of credit impairment losses and the reduction in inventory write-down losses, with the industry average rebounding to 4.4% in 2025, an increase of +5.3 percentage points year-on-year, further rising to 7.2% in Q1 2026. Since 2025, downstream battery factories have entered a new cycle of growth, with a continuous increase in orders for lithium battery equipment manufacturers, a significant year-on-year increase in contractual liabilities, and full order books. Overall order growth is expected to maintain a rate of 20%-30% in 2026, mainly benefiting from the continuous overseas expansion of power battery factories and high growth in energy storage demand. High-caliber domestic customers are expected to resume bidding, while overseas attention is focused on the expansion of vehicle manufacturers. (1) Overseas: A major focus in the future is the large-scale expansion of overseas battery factories. In the past, overseas battery factories experienced delays in expansion due to the impact of the pandemic. With the gradual improvement in the situation, these battery factories have started to resume expansion, while vehicle manufacturers such as Volkswagen have also begun to build their own production capacity, so the overseas layout of lithium battery equipment manufacturers is expected to benefit fully. (2) Domestic: Leading companies like Contemporary Amperex Technology and BYD Company Limited are actively expanding their production, while second-tier battery factories such as Eve Energy Co., Ltd. are also expanding. Risk Warning: New energy vehicle sales are lower than expected, and downstream battery factory expansion is lower than expected.