ZENERGY (03677): Goldman Sachs sees 139% upside potential behind the value logic - lean manufacturing lays the foundation, dual-wheel drive of investment and inventory, A + H platform accelerates.

ZENERGY (03677) is currently at a critical juncture where the industrial cycle and capital cycle are resonating. Recently, the company signed a listing guidance agreement with Guotai Junan Haitong and officially launched the A-share IPO process. Just as Goldman Sachs released a research report, giving ZENERGY a "buy" rating with a 12-month target price of HK$13 based on SoTP, corresponding to a 139% upside potential. Goldman Sachs clearly pointed out that ZENERGY is expected to be the fastest-growing Chinese battery company in its coverage universe, and one of the few targets that can achieve an ROIC consistently higher than the WACC during rapid expansion. At the current 2026E EV/EBITDA multiple of about 5.2 times, it is more than 50% discounted to the industry average of 12.3 times, with ample valuation safety margin and significant revaluation potential. It is believed that lean manufacturing creates a cost moat, positioning in a high-cycle favorable track, orderly release of capacity to match high certainty orders - ZENERGY is accelerating along a clear value chain. When Goldman Sachs' "buy" rating and the start of the A-share IPO resonate, this lithium battery "dark horse," which was once underestimated by the market, may be at a new starting point for value discovery and realization. Genetic Bottoming: Lean manufacturing builds a cost moat, high ROIC over WACC validates sustainable value creation ZENERGY's underlying competitiveness lies in its lean manufacturing genes. Established in 2019, although starting late, the core management team has inherited deep accumulations in lean manufacturing, quality control, and cost control in the automotive components field, giving it a rare foundation in precision manufacturing in the lithium battery industry. In a track that focuses on economies of scale and yield competition, ZENERGY has formed the deepest moat and core competitive barrier. The lean manufacturing gene is continuously translating into strong operational results on the financial side. With the release of economies of scale, the company's unit labor costs continue to decrease, and the overhead rate has narrowed significantly from 19% in 2022 to 11% in 2025; the gross profit margin of power batteries showed a trend of year-on-year increase, reaching 13%, 16%, and 19% in 2023, 2024, and 2025 respectively, indicating a continuous positive resonance of cost control and product structure upgrade during rapid production expansion, consolidating the cost moat. More crucially, Goldman Sachs pointed out that ZENERGY is the fastest-growing company in its coverage universe and is one of the only three battery companies with sustained ROIC above WACC, fully confirming the company's ability to create sustainable value during rapid expansion. This metric is highly valuable in capital-intensive industries - it means that for every capital input, a return exceeding the cost of capital can be generated, validating the rarity of its profit quality and resource allocation efficiency. Despite leading industry growth and profitability levels, ZENERGY's current valuation shows a significant discount, with substantial potential for revaluation. Dual-Wheel Expansion: Power laying the foundation, customer matrix advancing continuously, energy storage with low base and high growth opening the second growth curve ZENERGY's underlying capability in lean manufacturing has been fully verified on the financial side, and this cost and efficiency advantage is accelerating from "internal strength" to "external expansion" market competitiveness - the customer matrix based on power batteries is advancing continuously, and the second growth curve of energy storage is accelerating forming. The pattern of revenue growth driven by dual wheels is already clear. In 2025, the company achieved total revenue of RMB 8.101 billion, a year-on-year increase of 57.9%, with power batteries contributing RMB 7.68 billion to the revenue, accounting for 94.8% of the total revenue, being the core pillar of current performance. More importantly, the power battery business is not simply expanding its scale - during the same period, the gross profit margin increased from 15.2% in 2024 to 18.9% in 2025, a 3.7 percentage point increase, which is quite impressive in the deepening price wars in the lithium battery industry in 2025, reflecting a clear upward trend in both volume and profit, verifying the structural improvement of customer base and product premium ability. The continuous advancement of the customer matrix is the core drive behind the volume and profit growth of the power business. The company has built a diversified customer matrix consisting of "international brands + joint ventures + domestic mainstream brands + new car forces." The customer structure is shifting from being dominated by independent brands and new forces to deepening partnerships with joint venture and international brands, with a significant increase in revenue share from joint venture clients. This upgrade in customer structure helps enhance profitability visibility and stability as joint venture brands have longer certification periods for battery suppliers, high switching costs, better price linkage mechanisms, and superior profitability. In 2025, the company's designated projects increased from 4 in 2021 to 47, production models increased from 1 to 21, and the customer retention rate reached as high as 95%, confirming the depth of customer relationships and efficient realization of orders conversion. While laying a solid foundation in power batteries, the energy storage business is accelerating to form the second growth curve, potentially becoming the most resilient growth engine for the company in the next three years. This business is currently small in size, mainly constrained by production capacity bottlenecks - not due to lack of demand, but rather capacity waiting to be unleashed. Shenwan Hongyuan Group expects energy storage sales to be 1.5/3.0/5.0GWh in 2025-2027, on the eve of a surge from 0 to 1. Goldman Sachs believes that the ESS business has achieved rapid growth from a low base. Looking ahead, it is expected that revenue will maintain strong growth in FY2027, with a year-on-year increase of 67%; and a stable growth rate of 20%-30% is expected from FY2028 to FY2030, thanks to the continuous increase in market share in the power battery market. The resonance of demand-side prosperity in both power and energy storage provides ample industry support for ZENERGY's shipment growth. Global sales of new energy vehicles are expected to increase from 20.94 million units in 2025 to 33.36 million units in 2028, with a CAGR of about 17%; global shipments of energy storage batteries are expected to jump from 530GWh in 2025 to 1,343GWh in 2028, with a CAGR of about 36%. The company is positioning itself in both high-prosperity tracks, combined with the continuous advancement of the customer matrix and the acceleration of energy storage's second curve, shipments are entering an accelerated release period, and economies of scale are expected to continue to drive profitability upward. Capacity Realization: Step-by-step expansion to match high certainty orders, supply and demand positive feedback driving sustained profit release The continuous advancement of the customer matrix has opened up broad growth space on the revenue side, and translating this space into actual performance depends on the orderly release and efficient realization of capacity. This is where ZENERGY's core advantage lies, differing from many second-tier battery companies - high certainty orders provide sufficient guarantee for capacity expansion, and the gradual increase in capacity, in turn, strengthens customers' confidence and stickiness, forming a continuous positive resonance between supply and demand. The orderly release of capacity is the core link for ZENERGY to convert manufacturing capacity and market demand into performance realization. By the end of 2024, the company's total capacity was 25.5GWh, with a capacity utilization rate of 63%; by the end of 2025, it increased to 35.5GWh, mainly from the 10GWh in Galaxy B area put into production in the fourth quarter; by the end of 2026, it is expected to further expand to 50.5GWh, with an additional 15GWh put into production at the end of the year. Goldman Sachs expects the company's capacity CAGR from 2025 to 2028E to reach 55%, with the pace of capacity expansion highly matching customer order volume, providing sufficient capacity reserves to meet downstream demand growth. The step-by-step expansion of capacity is built on highly certain order visibility. From 2025 to 2026, various strategic models such as Zhiji LS6, FAW Hongqi, and SAIC-GM will be launched one after another, and Toyota Blizzard 7, SAIC Volkswagen extended-range SUV, and Zero Run's next-generation platform-based models will also be introduced to the market. The deep binding of existing customers coupled with the orderly expansion of new customers ensures the continued enhancement of shipment growth certainty. The positive cycle of capacity expansion and order delivery resonates with the evolving supply and demand situation in the industry. Goldman Sachs assesses that the lithium battery industry is in a new cycle of upward profitability, with the expansion of battery links tending to be rational, and the main expansion focused on first and second-tier companies with order guarantees. The company's current customer orders are full, mainstream models are continuing to increase in production, and the resonance between added capacity and order volume is already forming a self-reinforcing positive feedback loop. Shenwan Hongyuan Group predicts a revenue CAGR of about 54% for the company from 2025 to 2027, with net profit attributable to the parent company rising from RMB 540 million to RMB 1.21 billion and then RMB 1.84 billion. Multiple institutions' profit forecasts are highly consistent, further validating the visibility of capacity release and profit realization. With the continuous upgrading of the customer structure to joint venture brands, the acceleration of the energy storage second curve, the supply-demand positive feedback is expected to continue to drive the company's high-quality profit release. Conclusion: Clear value chain, revaluation path in sight From the manufacturing cost moat formed by lean manufacturing, to the revenue growth driven by dual wheels of power and energy storage, and to the performance realization path of step-by-step capacity expansion to match high certainty orders. ZENERGY has built a self-reinforcing positive value cycle. In a turning point stage where the lithium battery industry's supply-demand situation is gradually clearing up and profit differentiation is significantly intensifying, an enterprise with rare manufacturing pedigree, high certainty order visibility, and sustainable capital return ability should have a reasonable valuation premium. Goldman Sachs also clearly pointed out that the current EV/EBITDA valuation multiple of about 5.2 times severely undervalues its scarce value of high-quality growth. Standing at the starting point of resonance between the industry cycle and capital cycle, as the A+H dual capital platform gradually takes shape, and energy storage's second curve accelerates its volume, ZENERGY is steadily evolving from "undervalued" to "revalued," and the subsequent market value recovery space is worth continued attention.