Brighter sales outlook after strong 2H25 earnings
Zenergy (3677 HK) Brighter sales outlook after strong 2H25 earnings Target PriceHK$18.00Up/Downside113.8%Current PriceHK$8.42 Maintain BUY.Zenergy’s 2H25 earnings beat on GPM and opex, reflecting itsoperational efficiency, improving client mix andminimal legacy burden, as wenoted in our previous reports.We raise our sales volume forecast for bothFY26E and FY27E, following management’s more positive guidance for FY26Eand more aggressive capacity expansion plans in FY26-27E. We revise up ourFY26-27E net profit estimates by 7%/10%, respectively. China Auto Ji SHI, CFA(852) 3761 8728shiji@cmbi.com.hk 2H25 earnings beat on GPM, opex.Zenergy’s 2H25 revenue surged 50%YoY to RMB4.9bn, or 2% lower than our prior forecast. GPM in 2H25reached an all-time high again, at 18.7%, 0.6ppts higher than our projection.SG&A and R&D ratios combined were only9.4%, much lower than ourforecast of 12.9%. Despite an unexpected impairment loss on PP&E ofRMB236mn, Zenergy’s 2H25 profit before tax of RMB396mn was still 5%higher than our forecast. Wenjing DOU, CFA(852) 6939 4751douwenjing@cmbi.com.hk Austin Liang(852) 3900 0856austinliang@cmbi.com.hk New orders could be better than expected.Management turned morepositive on its sales volume in FY26E, with a new guidance of 30+GWh, upfrom 30GWh in Aug 2025, as it secured design wins for 32 new models inFY25.The company also expects energy storage to account for 10-15% oftotal sales volume this year with new capacity available. Therefore, werevise up our FY26E sales volume forecast from 30GWh to 33GWh.Zenergy is likely to further expand its capacity in FY27E after a plannedcapacity increase of 35GWh in FY26E, which probably implies more solidorder backlog than we had expected. We raise our FY27E sales volumeforecast from 45GWh to 50GWh. Stock Data Shareholding Structure Superb opex control to offset possible GPM pressure.We are of theview that battery makers could face more GPM pressure this year amidrising raw-material costs, stiffer competition in China’s NEV market andcurrent geopolitical tension.We believe such possible dent could be offsetby Zenergy’s stringent opex control and greater economies of scale. Weproject GPM to narrow by 1.5ppts YoY to 16.9% in FY26E and SG&A andR&Dcombinedratio to drop by 2.7pptsYoYto 8.5% during the same period. Earnings/Valuation.We revise up our FY26-27E net profit estimates by7%/10% to RMB1.46bn/2.07bn, respectively. We maintain our BUY ratingand target price of HK$18.00, based on 20x (prior 22x) our revised FY27EP/E to reflect GPM uncertainties.Key risks to our rating and target priceinclude lower NEV sales volume from major clients, slower expansion intonew models, lower margins than we expect, as well as a sector de-rating. Source: FactSet Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in this report: (1) allof 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 the date 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 an officer of any of the HongKong listedcompanies 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 RatingsBUY HOLDSELLNOT RATED : 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 :Industry expected to outperform the relevant broad 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 broad market 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 owned subsidiary of CMB International CapitalCorporation Limited (a wholly ownedsubsidiary of China Merchants Bank) Important DisclosuresThere are risks involved in transacting in any securities. The information contained i
