Higher earnings visibility amid better clientmix, possible battery price hike

Higher earnings visibility amid better clientmix, possible battery price hike Target PriceHK$18.00Up/Downside103.4%Current PriceHK$8.85 Maintain BUY.We revise up Zenergy’s FY25E net profit forecast by4% toRMB591mn with better product mix than we had expected.Such trend wouldcontinue in FY26E to benefit Zenergy’s revenue and gross margin. We expectGAC Toyota to surpass Leapmotor (9863 HK, BUY) to be Zenergy’s largestrevenue contributor. That, along with possible battery price hike which we didnot factor in before, has made us raise our FY26E net profit forecast by 4% toRMB1.36bn. China Auto Ji SHI, CFA(852) 3761 8728shiji@cmbi.com.hk We expect solid 2H25 earnings with possible beat on revenue.Werevise up our FY25E battery sales volume forecaston Zenergy from18.4GWh to 19.6GWh, as sales volume of the ToyotabZ3XBEV and IMLS6EREV exceeded our prior expectation.We also expect improvedproduct mix, benefited from higher revenue contribution from GAC Toyotaand SAIC GM, to lift its average selling price (ASP) to RMB0.43/Wh in2H25E from RMB0.41/Wh in 1H25. We project gross margin to widen by0.2ppts HoH to 18.1% in 2H25E due to the same reason. Accordingly, weproject Zenergy’s operating margin to widen by 2.2ppts HoH to 6% in 2H25Ewith an operating profit of RMB302mn. With a stable profit contribution fromSTAES joint venture, we estimate Zenergy’s net profit to be RMB591mn inFY25E, or RMB370mn in 2H25E. Wenjing DOU, CFA(852) 6939 4751douwenjing@cmbi.com.hk Austin Liang(852) 3900 0856austinliang@cmbi.com.hk Stock Data FY26E outlook.Recent new models, including the VW ID.ERA 9XEREV,LeapA10EV and HongqiHQ9PHEV have chosen Zenergy as their batterysupplier, according to MIIT’s announcement on new vehicle models.Wemaintain our FY26E sales volume forecast of 30GWh for Zenergy, as werevise up sales volume forecast from VW and cut estimates for SAIC-GM-Wuling. We revise up FY26E revenue forecast by 8% to RMB14.6bn amidbetter client mix and possible battery price hike. We also project FY26Egross margin to widen by 0.5ppts to 18.5% due to the same reasons.Accordingly,we revise up our FY26E net profit forecast by 4%toRMB1.36bn. We maintain our FY27E net profit forecast at RMB1.88bn. Valuation/Key risks.We maintain our BUY rating and target price ofHK$18.00, still based on 22x our FY27E P/E. We believe such valuation isjustified given its peers’ medianFY27E P/E of 15x and Zenergy’s higherprofit growth outlook.Key risks to our rating and target price include lowerNEV sales volume from major clients, slower expansion into new models,lower gross margin than we expect, as well as a sector de-rating. Source: FactSet Related Report“Zenergy(3677 HK)-Minimal legacy burden,operational efficiency,improvingclient mix to drive sales, profit”–12 Sep2025 Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible forthe content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as anofficer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report.CMBIGM or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months. CMBIGM Ratings : Stock with potential return of over 15% over next 12 months: Stock with potential return of +15% to-10% over next 12 months: Stock with potential loss of over 10% over next 12 months: Stock is not rated byCMBIGM BUYHOLDSELLNOT RATED :Industry expected to outperform the relevantbroad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broadmarket benchmark over next 12 monthsCMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly ownedsubsidiary of CMB International Capital Corporation Limited (a wholly ownedsubsidiary of China Merchants Bank) Important DisclosuresThere are risks involved in transacting in any securities. The inform