BOCOM INTL: Battery demand prosperity remains supported; profit and 2027 demand concerns have been partially reflected in share prices.

BOCOM INTL: Battery demand prosperity remains supported; profit and 2027 demand concerns have been partially reflected in share prices. BOCOM INTL released a research report stating that current battery industry demand and production scheduling remain at a relatively high level of prosperity. Looking ahead to 2027, global new energy installation growth, data center electricity demand, and grid-side energy storage construction are expected to continue supporting energy storage battery demand; for power batteries, rising electrification penetration in Europe and emerging markets is expected to contribute incremental volume, but demand growth in mainland China may slow somewhat, and the North American market still faces uncertainty. On the profit side, starting in September, lithium-ion batteries will officially be subject to a 2% consumption tax, which, combined with the reduction in export tax rebates and industry price competition, means unit profitability of battery companies still faces downward pressure. On the other hand, the battery sector has undergone a relatively large correction since mid-year. The bank believes that the recent share price adjustment not only reflects market concerns about higher taxes and fees and declining unit profitability, but also to some extent reflects investors' cautious expectations for slower power battery demand growth in 2027 and the industry supply-demand landscape, and the current risk-reward ratio has improved somewhat. The main views of BOCOM INTL are as follows: Mainland China: September energy storage sales maintained high year-on-year growth, power battery installations continued to rebound month-on-month According to data from the China Automotive Battery Innovation Alliance, in September China's total output of power and energy storage batteries was 237.8GWh, +57.3% YoY/+0.3% MoM; total sales were 222.7GWh, +52.0% YoY/-0.2% MoM. Among them, power battery sales were 149.2GWh, +35.0% YoY/+1.7% MoM; energy storage battery sales were 73.5GWh, +104.4% YoY/-3.7% MoM, accounting for 33.0% of total sales. From January to September, cumulative sales of power/energy storage batteries reached 1,086.4/595.4GWh, up 38.2%/111.8% year-on-year. On exports, in September total exports of power and energy storage batteries were 44.0GWh, +64.5% YoY/+3.7% MoM, of which energy storage battery exports were 15.6GWh, +71.4% YoY. Mainland China power battery installations were 87.2GWh, +14.7% YoY/+10.4% MoM, with lithium iron phosphate battery installations at 74.5GWh, accounting for 85.5%. Overall, September production and sales were basically flat month-on-month and still maintained relatively rapid year-on-year growth, with energy storage remaining an important DRIVE for industry growth. Overseas: Growth in non-mainland China markets continued to outpace the global market, and the share of Chinese battery companies further increased SNEResearch data show that from January to August 2026, global EV battery installations were 844.2GWh, up 19.7% year-on-year; of which August alone was 116.8GWh, up 14.3% year-on-year, with growth slowing somewhat. Contemporary Amperex Technology installed 333.0GWh from January to August, up 25.2% year-on-year, with global share rising to 39.4%; BYD Company Limited installed 127.9GWh, up 6.2% year-on-year, with a share of 15.1%; CALB and Eve Energy Co.,Ltd. installations grew 32.6%/53.9% year-on-year respectively. Non-mainland China market installations from January to August were 360.5GWh, up 23.7% year-on-year, 4.0 percentage points faster than the global market; Contemporary Amperex Technology/BYD Company Limited grew 43.3%/66.5% year-on-year respectively, with their combined share rising 7.5 percentage points year-on-year to 44.7%, while CALB/Eve Energy Co.,Ltd. grew 77.6%/185.6% year-on-year respectively, and the overseas penetration rate of Chinese battery companies continued to rise. However, in August the single-month year-on-year growth rate in non-mainland China markets slowed to 9.0%, further revealing the impact of weak North American demand. The bank believes that overseas demand overall remains resilient, but regional divergence has intensified somewhat, and Europe and emerging markets remain important growth sources for Chinese battery companies' overseas expansion. October battery production scheduling continued to rise month-on-month, and energy storage project demand maintained relatively high prosperity According to ICC data, sample companies' pre-scheduled battery production for October was 212.5GWh, up 3.8% month-on-month, and production prosperity in the fourth-quarter industry chain remains supported. On the energy storage project side, according to CNESA statistics, September energy storage EPC (including PC) tender capacity was 53.4GWh, exceeding 40GWh for six consecutive months; awarded capacity was 50.7GWh, up 18.9% month-on-month, a new single-month high for the year. Excluding centralized procurement and framework procurement projects, awarded energy storage system capacity was about 15.1GWh, up 43.7% month-on-month, indicating that demand for regular projects remains relatively active. The bank believes that while power battery demand growth is gradually stabilizing, energy storage remains an important growth driver for industry demand. Industrial policy promotes technological upgrading, and the importance of overseas localization layout is further highlighted In September, the Ministry of Industry and Information Technology and six other departments issued the "15th Five-Year Plan for the Development of the New Battery Industry," proposing to promote the initial large-scale application of all-solid-state batteries by 2030, further expand energy storage application scenarios such as data centers, power generation side, and grid side, and emphasizing supply-demand coordination and regulating industry price competition to promote the industry's transition toward technological innovation and high-quality development. Overseas, recent China-EU automotive trade consultations have made phased progress, but European trade policy and local production requirements still face uncertainty, and battery companies with European local production capacity and localized supply chains are expected to form relative advantages in customer supporting and market expansion. In September, Contemporary Amperex Technology's Debrecen plant in Hungary started trial production on its first two cell production lines, laying the foundation for subsequent mass production and localized European supply. The bank believes that as the global trade environment and supply chain requirements continue to change, overseas production capacity layout, localized supporting, and compliance capabilities will become important factors for Chinese battery companies to enhance global competitiveness.