中国电池材料：旺季将至，ZE锂业研讨会喜忧参半

China Battery Materials Peak Season Ahead - Mixed Takeaways from ZE Lithium Seminar CITI'S TAKE We attended ZE Consulting's Lithium Seminar in Hangzhou on Aug 14thand met with multiple industry participants. Key takeaways: 1) most tendto agree on the near-term upside in lithium carbonate price in Aug-Octperiod; 2) views are mixed on the sustainability of the rebound as manyexpect the market would turn into a surplus in 27E; 3) Most participantsare aware of the bullish 27E demand guidance given by CATL and otherbattery makers, however, they tend to take a more cautious stancequoting a slowdown in domestic ESS and still weak EV sales. We maintainour near-term bullish view on lithium. We believe battery production willrise sequentially in Aug/Sep/Oct and we see tightness in lithium andcathode materials. Our battery chain top picks: Ganfeng, Hunan Yunengand CATL. Jack Shang, CFAAC+852-2501-2441jack.shang@citi.com Anna Wang+852-2501-2739anna.d.wang@citi.com Jimmy Feng+852-2501-7588jimmy.feng@citi.com Cynthia Wu+852-2868-7813cynthia.d.wu@citi.com Key takeaways: Peak season unfolding- ZE expects 26E global battery production to reach 3100-3200Gwh, up 42+% YoY. They acknowledge that battery companies are very bullishon 27E outlook and planned production could reach 4200Gwh in 27E, up 30% YoY.ZE expects CATL's 2H battery production will be 700Gwh vs 500Gwh in 1H. Theupcoming peak season (Aug-Oct) will be the key period for ramp-up. ZE expects Augproduction to reach 107Gwh (see note: China Battery Materials: China BatterySupply Chain on the Ground: Another round of new capacities unfolds ), up from100Gwh in July and Sep/Oct/Nov production will reach 115/122/122Gwh. Theyexpect LFP cathode production in China to reach 6.2mt in 26E, up 56% YoY and that27E production will rise to 8.2mt, up 32% YoY. Battery companies have been more bullish and have been right in the past 2 years- As we mentioned in our trip takeaway note last month (see note: China ESS andBattery Materials: Soft Sentiment vs Strong Reality; We Remain Bullish into 3Q),battery companies are very bullish on 27E demand outlook. As a result, theirproduction plans are stronger than market consensus. ZE expects CATL's 27Eproduction could reach 1500Gwh vs 1200Gwh in 26E, BYD's production could reach500Gwh in 27E vs 400Gwh in 26E, and CALB would be an outlier with plan doubledto reach 400Gwh in 27E vs 200Gwh in 26E. One thing to notice - market consensushas been weak for the past 2 years and the battery companies have been morebullish vs market consensus, and battery companies have been proved right. 27E outlook for debate- Despite consensus having been proved wrong for the past2 years, most people (lithium traders, commodity sell side analysts, etc.) remain See Appendix A-1 for Analyst Certification, Important Disclosures and Research Analyst Affiliations Not for distribution in the People's Republic of China, excluding the Hong Kong Special Administrative Region and QualifiedForeign Institutional Investors. cautious on 27E outlook. They tend to quote demand weakness due to weak EV sales in China and the US and the risk of ESSdemand slowdown in China in 27E. We believe there is upside risk to the consensus demand growth expectations (15-20%growth in 27E lithium demand). We are also aware that consensus expectation of 500kt+ LCE supply growth in 27E could alsobe subject to some disruption risks (Jiangxi lepidolite mining license renewals, Zimbabwe export policy, logistics bottlenecksin Africa, etc.) CATL (3750.HK; HK$641.5; 1; 14 Aug 26; 16:10) Valuation We value CATL-H at HK$888/share, based on 28% premium, the historical H/A premium for CATL, on our A-share TP ofRmb603/sh. Our TP for the A-share is based on 17.5x 2026E EV/EBITDA, 0.25x SD above the stock's historical average sincethe listing of the A-share. We opt for an EV/EBITDA approach as it eliminates changes in capital structure. Our target price forH share implies 34.3x 26E P/E and 8.7x 26E P/B. Risks Our Quant model rates the CATL-H stock High Risk for its short trading history, which we believe is unwarranted given thecompany's established history as an operating company and given the A-share's long history. Downside risks that could meanthe CATL-H shares fail to achieve our target price include: 1) lower-than-expected EV demand; 2) competition in the EV batterymarket turns fierce, resulting in a market share for CATL that is lower than our expectations; and 3) higher-than-expected rawmaterial costs. CATL (300750.SZ; Rmb393.93; 1; 14 Aug 26; 15:00) Valuation We value CATL-A at Rmb603/share based on 17.5x 2026E EV/EBITDA, 0.25xSD above the stock's historical average sincelisting. We opt for an EV/EBITDA approach as it eliminates changes in capital structure. Our target price implies 26.8x 26E P/Eand 6.8x 26E P/B. Risks Downside risks that could mean the CATL-A shares fail to achieve our target price include: 1) lower-than-expected EV demand;2) competition in the EV battery marke